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Friday, 29 June 2012

A few rogue traders

According to Bob Diamond, it was a big boy wot dunnit and he ran away. The trouble is it is always somebody else's fault and they are too far down the organisation for it to be the responsibility of the CEO. But if Mr Diamond is not responsible for their actions, why does he trouser part of the profits they generate as his bonus. The problem, as many are beginning to realise is not just one of risk, but also of culture.

Three years ago I wrote a blog blaming the entire financial crisis on Tie Rack. OK, it was a bit tongue in cheek, but the underlying message, that traders (who like to call themselves investment bankers) have taken over the previously sleepy and conservative banks and get to play all day with your government guaranteed deposits.  The solution is to change the banks by separating out trading activities and to remove CEO's like Mr Diamond who in their entire banking lives have not lent a penny to a corner shop or engineering start up (unless their loans were wrapped up in securitised packaged of bankers acceptances and short term receivables), and replace them with honest lenders who at a minimum don't try to mess with regulators, statutory reporting, tax avoidance or rate reporting and fixings.

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