Category: Financials

Stress Testing Was Supposed to Work For All Banks

At the height of the financial crisis, in February 2009, US authorities announced an innovative policy designed to restore confidence in the financial system: the Supervisory Capital Assessment Program, better known as the stress test.

Taking their supervisory duties unprecedented step further, regulators would reveal to the public detailed bank-by-bank results of a thorough inspection of balance sheets – outing weak banks as such and endorsing the strength of sound ones.

Where Does Money Come From?

The phrase “banks create money” forms part of the popular discourse, but it conveys an erroneous representation of the banks’ role in the money creation process.

The role of banks is primarily that of an intermediary between buyers and sellers in, for example, a transaction involving the purchase of a house.

The UK’s Osborne and Carney Offer More Financial Market Cleansers

“The age of irresponsibility is over,” declared the governor of the Bank of England at the annual Mansion House dinner to the great and the good of the financial world. Along with the Chancellor of the Exchequer, George Osborne, Mark Carney unveiled a host of new sanctions and procedures designed to clean up financial markets.

Failed Corporate Governance? Look No Further than RBS

Financial power brokers are invited by the Lord Mayor of the City of London to an annual dinner where they can hear the Chancellor of the Exchequer give a speech on the state of the UK economy. The Mansion House Speech is where the political elite reassure the financial elite that all is well with the economy over a lavish meal.

Banks’ Unethical Behavior and Punishment Leads to Unethical Behavior and Punishment

Large banks had long been trusted by many and their connection to many of the world’s largest financial institutions seemed to be an attraction for depositors and borrowers. This was probably one reason that the ‘too big to fail’ (TBTF) problem was born. Big banks have been subject to a lot of scrutiny after the global financial meltdown in 2008. During the crisis, banks remained huge and posed systemic risks that were large enough to take down the entire financial system and eventually the economy.

Swiss Banking Remains a Secret, Expensive Cost

Switzerland remains one of the most stable economies across the world and has not been in conflict with another country since 1505. With strong political stability and high per capita income across the world, it has also managed to keep its unemployment rate low. With Basel having headquarters of Bank of International Settlements (facilitates cooperation among the world’s central banks), Switzerland is considered one of the biggest tax havens in the world.

Wall Street is Getting Smaller, but Will the Trend Continue?

The New York Times recently reported on sluggish growth in the financial industry.  It described a nascent trend of business students and executives opting for jobs in the manufacturing and service sectors rather than on Wall Street.

The Biggest Banks Seem “Too Big to Jail”

Ordinarily, people face far greater punishment each time they commit another crime. Federal sentences for recidivists go up dramatically.

But like green-shaded teflon dons – mobster John Gotti’s nickname for managing to stay out of jail – the largest banks have been repeatedly prosecuted over the past decade and yet have so far avoided any harsher consequences. Instead, they have received “deferred prosecutions” or non-prosecutions that trade criminal charges for promised reforms and criminal fines.