Several years ago when they lured me out of the serene world of academia to take this job, I was given several promises. They promised me it would be regular hours, nine to five, Monday through Friday, no weekends. They promised me trips to the Swiss Alps to talk about global capital standards. And they said my only headache would be whether Wal-Mart should own a bank. So much for promises backed by the full-faith and credibility of the United States government!
C’mon, you had to expect a few gags from Sheila Bair – she of FDIC fame. This is the keynote speech of American Banker’s Banker of the Year Awards ’08, after all. Humour is a great tonic.
Speech in full here.
And the winner? Ken Lewis, who as the now proud owner of some of American banking’s most egregious (near) failures, would probably do well to listen to some of Sheila’s timely advice.
Highlights:
A strong deposit base is a source of stability, and is the reason bankers can take the long view when it comes to managing risks. And most of all, core deposit funding is the anchor that holds fast in a crisis …
The regulatory system also needs to make certain that the right people have skin in the game and get paid not for short-term gains, but for taking the long view.
Regulation also needs to promote transparency and control complexity. As financial instruments have become ever more complex, the analysis that supports them has become less well-grounded in experience.
Complex instruments in many cases have become a tool for inflating leverage, which as you know is a time-honored recipe for financial instability. That is why we need to have meaningful constraints on leverage — not just on bank balance sheets, but across the financial system.
Look at it from the industry’s perspective. The future of banking will depend a great deal on how bankers embrace their role in maintaining the public’s trust, and by how you respond to the current crisis. This is an opportunity for bankers to demonstrate that the public’s trust in them, is well-placed. In many ways it means the industry must return to the fundamentals of banking.
Related link:
The failed bank list – FDIC
The bull in the china shop – Bronte Capital
World’s worst banker award, 2008 - Long Room