Friday, 17 July 2009

Stupid bankers

Dumb reaction to the Walker Review so far:
One senior British banker at an American investment bank equated proposals in the Walker Review, published on Thursday, to the provisions of Sarbanes-Oxley legislation in the US, which imposed strict new governance requirements on listed companies in the wake of the Enron scandal and the era of dotcom excess.

“There are real echoes of the Sarbox syndrome here,” he said.
“This is the dead hand of bureaucracy.”

I can only assume this senior British banker hasn't read the report properly - it's nothing like Sarbox.

Similarly -
“What purpose does this actually serve?” the CEO asked. “It is fundamentally wrong to whip up this hatred of bankers.”

Eh? What planet are you living on if you think this report is some kind of populist assault on bankers? Higgs was arguably more radical than this.


Nick Drew said...

Have drilled down into Chapt 6 - Governance of Risk, which is what I know about.

It's very thin & there's literally nothing of substance that wasn't best practice 15 years ago: I can produce the textbooks to prove it.

Given the (correct) scene-setting in 6.1: "financial risks are the principal risks of any BOFI business", he can't then go on to allow the NEDs to be amateurs:

"The NEDs on the [risk] committee cannot be expected to be able to replicate the industry expertise of the executive team"

If that's the case they will be bamboozled every time.

You gotta love "there may be merit for the board risk committee in having an open and wide-ranging discussion without the sometimes dominating presence of the CEO" !
(see also my little anecdote for how the world really operates)

He favours publication of more risk metrics: why not just follow existing US practice ? and the penalties that attach to inadequate risk-reporting there, too !!

Finally, I find this revealing:

"the social cost in the event of failure is likely to exceed the downside risk for shareholders, on recent experience by a very large margin"

this is only really true when retail banking / deposit-taking is allowed to be contaminated by 'investment' banking / proprietary trading etc. Obviously Walker is taking this as a given ...

Tom P said...

It does make you wonder to what extent these types of reports are seen as lightning rods to disperse public pressure.

By pitching the recommendations just ahead of where things are heading anyway a review can appear to be pushing the industry (and thus create a few grumpy headlines the give it a bit of legitimacy) without really changing anything