At 10-43 this is the crucial point what is the purpose of the banks, what are the end goals or objectives of Banking or the wider financial system and how do we best regulate with those stated aims in the forefront. Excellent Video.
I have been trying to make a point regarding the opportunity cost of energy available for investment
this is the same point as applied to Basel 2 and Basel 3.
FEBRUARY 26, 2020
Do we need bankers, as in good loan officers, or bankers, as in creative financial engineers?
Sir, I refer to your “Europe’s banks are losing the global race for talent” February 25. In general terms, and most especially with “Banks, like the best football clubs, should nurture their young talent”, I agree completely. That said my concern with respect to all banks, not just European, is about what banks would benefit us the most.
For around 600 years banks allocated their credit to what bankers thought would produce the highest risk adjusted net profit margins, something which required them to consider interest rates and operation costs. In those days good loan officers were of utmost importance.
After the introduction of risk weighted bank capital requirements, banks now allocate their credit to what bankers think will produce them the highest risk adjusted net profit margins adjusted to capital requirements, something which now, besides interest rates and operation costs requires them to consider leverage possibilities. In this new kind of banking creative financial engineers have an important role to play.
I am convinced traditional banking not only satisfied much more efficiently the credit needs of our economies but was also much less dangerous in terms of financial stability than “modern” banking.
But Sir, you don’t have to take my non-PhD opinion on that. In his 2018 autobiography “Keeping at It” late Paul Volcker wrote: “Over time, the inherent problems with the risk weighted bank capital-based approach became apparent. The assets assigned the lowest risk, for which capital requirements were therefore low or nonexistent, were those that had the most political support: sovereign credits and home mortgages. Ironically, losses on those two types of assets would fuel the global crisis in 2008 and a subsequent European crisis in 2011.”
Yes, Europe and the world, of course needs a new generation of bankers, but before that, for our own good, let’s make sure they have the right type of banks to lead.
Hi Per, are you still in Sweden We should hook up for a Jam.https://t.co/scV9TnoZJ7
— GrubStreetJournal (@GrubStreetJorno) February 28, 2020
Jonathan Sugarman versus UniCredit – an update
WhistleblowerIRL, AKA Jonathan Sugarman continues to fight UniCredit. One rather impecunious man fighting a trillion euro bank. But Jonathan is nothing if not …well I leave you to fill in the blank.
The update comes via a very good 12th Nov. editorial in Village Magazine in Ireland, “Blowing the whistle so hard it hurts”.
In December 2010 a risk-manager in the Irish unit of UniCredit, Italy’s largest bank, described in Village how in 2007 the Financial Regulator failed to intervene after he first alleged he falsified liquidity-ratio figures. The risk-manager maintained he was specifically warned by senior personnel at the Irish subsidiary not to report the matter to the Financial Regulator
Jonathan Sugarman blew the whistle on the massive repeated breaches. This magazine received aggressive threats from McCann FitzGerald solicitors on behalf of UniCredit not to publish the information.
To the credit of its publisher and owner, Michael Smith, the magazine has stood by the story and refused to be cowed. I recommend reading the whole story. You can follow any further developments at Jonathan’s blog.