I must say that entering into the minefield of today's commentary on banks and bankers, might not be the wisest thing I have ever done. But ... let me start with a quotation from one of my favourite text books:
"If it be asked how such evils arise and are developed...they arise from transactions entered upon, either in sheer ignorance or in reckless violation of the fundamental principles of banking; and once entered upon, they develop themselves with fatal swiftness of growth."
George Rae "The Country Banker" - Published 1885.
It was many years ago I entered the profession of banking, albeit initially as a filing clerk and through a series of roles at the "roll your sleeves up" end of banking, which eventually led into management I ended up 40 years later retiring with a somewhat better title than the one with which I had started.
When I was growing up (alright then, learning to behave in public), banking was a generally respected profession. But in fairness it was not complicated in those days either, just so long as you knew your customer and could provide - or perhaps refuse when necessary - the services they wanted. When I went on to a career in international banking, it was often to countries where banking was of the more traditional kind. Financing traders, manufacturers, small businesses and keeping safe the money that was entrusted to your care.
But times have changed, and although the excrement has now made physical contact with an electrically- powered oscillating air current distribution device, the current revelations of impropriety are sadly not a phenomenon that has happened overnight.
Like the rapid development of modern devices that have delivered more services to more customers more quickly than ever before, product development on its own was not really going to give you a market lead. Products could be copied quickly enough.
Meantime, shareholders were demanding bigger yields in the face of good results from other industries, analysts were focusing on the quarterly results and penalising those financial institutions that in their view were not delivering - choosing to ignore commentaries from banks who said they were focusing more on, and investing in, the long term. At the same time the financial services industry was being praised by Prime Ministers - Labour's Gordon Brown in particular with a 2007 speech where he told an audience of bankers that Labour aspired to replicate "their success" for the whole UK economy. The same man who said in 2005 that the better model for financial regulation was "not just a light touch, but a limited touch". So even the regulators were complicit in this unravelling.
In fact, if you look at it, everyone has had some sort of hand in either implicitly encouraging or taking a "Lord Nelson approach" (putting the telescope to the blind eye, for those unfamiliar with the story). But with all the opprobrium now being conveniently heaped on banks, bank boards, and bankers - you can bet that there will be many others covering their backsides as fast as they can.
Since the GFC I have been at pains to point the finger mainly at the unethical behaviour of certain financial institutions - particularly the investment banks. (Interestingly by the way that no heads have rolled in that community). But clearly there have been less desirable elements at work in the commercial banking world as well, and I shall certainly have to be more even-handed in my comments on that score in future.
But while I can understand the rationale for the banks to try and live up to even unrealistic expectations, I cannot condone unethical and underhand behaviour of this nature. Is it criminal? - I am not a lawyer and cannot say, but even unethical people should be expected to bear accountability for their actions.
Of course with the benefit of hindsight, in the comfort of "retirement", it is easy for me to sit here and make condemning noises. I will say though, hand on heart, that if I had come across this sort of behaviour on my watch there would have been some searching questions asked.
I may have been a boring banker, (I always preferred to say "conservative"), but for my own peace of mind and an ability to sleep at night, I preferred it that way.
How the banks are going to restore the public's faith in their activities, I have no idea. Over time, I guess. But I also think you need to keep this in perspective. The reaction in Britain today is to call for "blood". So it was in the USA 2 or 3 years ago, but nothing has happened there. But why just get at the bankers. Has business always been clean and ethical? Have our politicians - not just in Britain always been the pillars of society we would expect them to be - and if caught out were they always punished? Indeed, there is a big campaign going on in Britain at present I believe to try and stamp out the abuse of the welfare system.
Yes, punish appropriately those who deserve it, but were the Banks to blame on their own? I think not, somehow.
Really interesting stuff David and fully agree with your sentiments.
We actually have a mutual acquaintance believe it or not - a gentlemen by the name of Simon Donohoe, who you took out for lunch circa 2001 in hong kong. Simon is my hero/role model/ close family friend.
FYI - I am hsbc too, currently on secondment at Saudi British bank.
Have added your blog to my bookmarks!
Regards
Richard
Posted by: Richard barker | 12 July 2012 at 12:20 AM
On the subject of bankers and discipline, what do you think of senior regulators who take up banking jobs (sinecures?).
Greenspan from the Fed to Deutsche Bank and Paulson & Co.
Greenspan's deputy Mullins from the Fed to Long Term Capital.
Crockett from BIS to JP Morgan Chase.
Malcolm Knight from BIS to DeutschBank.
Way to disseminate best practices or just a little too cosy for comfort.
Whatever happened to the Steady Eddies?
Posted by: Xiaolong | 13 July 2012 at 08:57 AM
I see little harm in banks utilizing the knowledge of former senior regulators if it is designed to provide sound advice and background knowledge to their organisations. But they need to choose their regulators carefully - and not just take them because they have a "name" on which they hope they can trade. The transition from regulator to banker has been even less successful, I fear, as has happened in the past - but I believe lessons have been well learned.
Posted by: David Eldon | 14 July 2012 at 02:47 PM
how about paying regulators more like HK and Singapore.
think you will like this article in the Economist.
http://www.economist.com/node/21558584
The golden rules of banking
They make the rules, and get the gold
THE crisis has taught people a lot about the banking industry and the thought processes of its leaders. These lessons can be distilled into four golden rules.
1. The laws of supply and demand do not apply.
2. Success is down to my genius; failure is caused by someone else.
3. What is lucky for an individual trader may be unlucky for the bank as a whole.This is a variant of the Peter principle, which holds that managers get promoted to their level of incompetence. The trader-cum-executive will make the biggest mistake when he is in charge of the whole bank. By this stage, he will be personally rich and will remain so even if the entire bank fails, not least because:
4. Resigning can be a retirement plan.
Posted by: sally mclaren | 14 July 2012 at 06:22 PM
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Posted by: banking jobs | 23 October 2012 at 02:00 PM