By Niels Kroner
'A Blueprint for greater Banking' takes a clean examine the monetary problem. It units out to reply to particularly what the error have been that banks made and the way this might were shunned. what's detailed approximately this publication is an in depth description of a big financial institution that operates very otherwise from its friends and that has, hence, urged away from the parts that experience introduced many different banks into hassle. this offers a couple of insights into how a extra resilient, post-credit crunch banking process may still look.
the 1st part starts off with an summary of latest reasons of the main issue and why they continue to be in part unsatisfactory. It then units out another framework established round seven behavioural styles of imprudent banking. those 'Seven lethal Sins' have triggered such a lot banking crises, together with the present one, and whereas they arrive in numerous shapes and varieties they continue to be primarily an analogous. This e-book examines why they continue to be tremendous tempting to bankers, frequently with the enthusiastic help in their shareholders and no significant objection by way of regulators.
the second one and major a part of the e-book is a brand new and vast description of the administration practices at Svenska Handelsbanken, one of many best 25 banks in Europe. It not just survived the Swedish banking challenge within the Nineties with out inquiring for aid, however it has additionally remained strong in the course of the most recent concern. Handelsbanken didn't have to elevate capital or ask for presidency help and its stocks were the easiest acting ecu financial institution inventory via a large margin.
The financial institution has commonly been run by means of administration practices which are diametrically against so-called 'best practice' within the undefined. The ebook investigates how Handelsbanken operates with out bonuses and examines their particular agency, method dialogue, chance administration and capital markets conversation. In impact, the publication describes how Handelsbanken guarantees that it doesn't fall for any of the Seven lethal Sins. Niels Kroner has carried out over fifty interviews with Handelsbanken executives and opponents, and likewise attracts on his within adventure of many different associations to carry out the $64000 changes among the 'Handelsbanken way' and customary practices at different banks.
the ultimate half summarises what different banks and monetary associations can research from Handelsbanken and the way its version may perhaps supply an answer that different power regulatory alterations could not.
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Additional info for A Blueprint for Better Banking: Svenska Handelsbanken and a proven model for more stable and profitable banking
Minsky 1986, p. 42). 21 A fate that Handelsbanken in its early days did not avoid. Via a closely related company, Svenska Emissionsaktiebolaget, Handelsbanken started speculating on international trade connections with Russia, Latin America and others around WWI. ‘A notable lightheartedness was evident in the handling of some of these affairs. The profits were dazzling at first, but when they dried up the ensuing loss was a very heavy one’ (Hildebrand 1971, p. 29). 45 A Blueprint for Better Banking Unsurprisingly, this whole self-reinforcing cycle can just as easily go into reverse.
Similarly, Dexia’s problems may have come from its wholesale banking side, but it was a credit insurer and also very like a utility bank. On the other hand, Merrill Lynch, Bear Stearns and Lehman were pure investment banks that did not have a commercial bank and its promise of implicit government support to rely on. In fact, Lehman’s insolvency unveiled how many pure commercial banks had exposure to Lehman as interbank lenders or swap counterparties. This makes it difficult to argue that with a clear separation of utility banking from casino banking one could simply let failed casino banks go under.
22 Citicorp’s chairman Walter Wriston is still famous for his quote, ‘countries don’t go bust’. Well, until they did, partly because they had borrowed in foreign currencies which they could not print – see deadly sin number two. 46 Explanations for the Financial Crisis: Banks’ Seven Deadly Sins Real estate or emerging markets banking becomes problematic only because the activity of banks creates what everybody believes to be the underlying fundamentals. The reason is that credit and credit growth are a more important driver for the development of housing and emerging markets than for many others.
A Blueprint for Better Banking: Svenska Handelsbanken and a proven model for more stable and profitable banking by Niels Kroner