For some time now I have been asking myself why the world’s leading bankers have still been unable to talk directly to the masses in order to apologise for their role in creating a financial crisis in which so many people suffered and commit to doing their best in order to avoid the same thing happening again. Continue reading
Posted in Banking, Business, People
Tagged ABN AMRO, Anglo Saxon, Banks, Controls, Culture, Employees, Goldman Sachs, Governance, Human, Investment Banking, managers, people, strategy, UBS
The following is the third in a series of articles on bank risk culture. The previous articles can be accessed on the blog here.
In the previous articles we argued that it is futile if not impossible to separate the risk culture of an institution from the other aspects of culture within it. This article further develops this assertion by looking at some very specific examples of how banks got into trouble during the subprime crisis and why, in each case, only focusing on risk culture would have been totally inadequate.
In a January 2009, The Economist wrote an article on Citigroup entitled “A House Built on Sandy”, a less than veiled reference to the bank’s former CEO Sandy Weill and its troubles during the financial crisis. The article did not pull any punches and here are just a few of the statements it made: Continue reading
Posted in Banking, Business
Tagged bank, Citigroup, Culture, Financial Crisis, institution, Investment Banking, Merrill Lynch, Organisation, RBS, Risk, Risk Management, Subprime, TBTF, Too Big To Fail, UBS, Wall Street
Banks that are too big to fail or TBTF are by definition also too big to manage or TBTM. In Part III of the series we look at the role played by customers in this phenomenon. The link for Parts I is here and for Part II here.
In Part II of TBTF Means TBTM we looked at how the belief that the markets are a zero sum game has created a banking culture obsessed with the size of a bank’s market presence and to what extent it can exert dominance. Allied to this philosophy and in many ways intrinsic to it, has been an approach where banks have strived to become all things to all customers.
All things to all customers by definition imposes a requirement on banks to offer all products or at the very least as many products as possible. For a number of different reasons this does not make any sense. Foremost amongst these reasons is the fact that it is highly unlikely that a single institution can be proficient in all products.
The following anecdote illustrates the point. Continue reading
Posted in Banking, Business
Tagged ABN AMRO, asset management, Banks, Business, Customers, economy, Financial Crisis, Investment Banking, markets, Risk, TBTF, UBS, Values
We can never legislate or regulate our way to sustainable banking—the industry needs to adopt a new strategic business model
Déjà vu All Over Again
“They came on in the same old way and we sent then back in the same old way”.
They were the words the Duke of Wellington used to describe the repeated and futile attempts by Napoleon’s Grand Armée to break through the British defenses at Waterloo.
They can equally be used to describe the current prescriptions for the subprime crisis.
We remain mired in the unenviable position where those who know about banking are firmly wedded to the same old solutions, while those who don’t know about banking i.e. some in the mass media and certain politicians, resort to populist rhetoric. Sadly, the debate on the subprime crisis has generated more heat than light.
It is time for something different. However, before we move forward with a new prescription we need to better define the problem.
Posted in Banking
Tagged Audit, Bank of England, banking, Clearing The Bull, Credit, Dick Fuld, Federal Reserve, Finance, Financial Crisis, Fred Goodwin, FSA, Investment Banking, Junk Bonds, LDC Debt, Legislation, Regulations, Risk, Risk Management, SEC, SOX, Subprime
Western society is now facing economic challenges that, until recently, were almost inconceivable. Budget deficits, austerity measures and overall economic decline, in both relative and absolute terms, all appear to be the order of the day.
As a consequence, the liberal democracy which the west has held aloft like a prized-possession for so long, is also now under threat. Greece and Italy are being run by appointed technocratic governments, the EU suffers from political gridlock and the US political system is in rigor mortis.
Most people will either think or want to believe that all this has been triggered by the banks and the subprime crisis which they brought about. However, this is not entirely true. As a matter of fact that would be putting the cart before the horse.
History tells us a slightly different story—and that is that almost every major banking or financial crisis of the past 40 years has been accompanied by great economic and political issues and events that in many instances have had a global impact. The subprime crisis was no different.
This is just one example of what Clearing The Bull is all about. The book looks beyond the conventional rhetoric and belief systems to not only better understand the nature of financial crises, but also why banks need to do a much better job at managing both their internal and external environment.
Available for pre-order!
Posted in Banking
Tagged Banks, Business, Central Banks, Clearing The Bull, Controls, Credit, Deregulation, Derivatives, Economics, Federal Reserve, Finance, Financial Crisis, Governance, Government, Hedge Funds, Human, Human Assets, Investment Banking, Leadership, Management, Regulators, Risk, Securitization, Subprime, Subprime Mortgages, TBTF, Too Big To Fail, Transformation, Values