Tag Archives: financial crises

Why Customer Culture Is Far More Important Than Risk Culture

This is a follow up to an earlier series of articles on risk culture in banks the last of which can be accessed here.

The best institutions and organisations are those which define themselves in terms of how they have they can best serve their customers (and the wider community) and not how they intend to manage risks.

This is a lesson that bankers, regulators and governments all need to learn—the future success of the banking industry depends not on more rules and regulations but how well banks transform their customer culture. As we shall see, that has very little to do with how they measure risk. Continue reading

TBTF Means TBTM (Too Big To Manage) Part II

Banks that are too big to fail or TBTF are by definition also too big to manage or TBTM. In Part II of the series we look at the role played by the growth of products and markets in this phenomenon. Part I can be found here.

What is it about the industry that makes banks so susceptible to becoming TBTM or too big to manage? As noted in Part I, egos and megalomania do play a significant part. However, they are definitely not the whole story.

For many bankers, performance is synonymous with size. Bankers take it as gospel that the greater their share of a particular product market, the greater the profits to be earned from that market. It is obvious that such a proposition does not necessarily hold true.

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The Change that Banks Need Can Only Come From Within

Since its inception, this blog has consistently maintained that the idea that more legislation, more regulation, more governance and more controls could forestall another financial crisis was at best ridiculous—that strategy has already been tried and has failed too many times.

Well, it appears that at least US Treasury Secretary Geithner has seen the light on that subject. Speaking at an event in Oregon, Reuters reported Geithner as stating that:

“Most financial crises are caused by a mix of stupidity and greed and recklessness and risk-taking and hope,”…

In the article Geithner then goes on to say that:

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