Comments on: Bank governance datapoint of the day http://blogs.reuters.com/felix-salmon/2009/05/20/bank-governance-datapoint-of-the-day/ A slice of lime in the soda Wed, 22 May 2013 21:45:25 +0000 hourly 1 http://wordpress.org/?v=3.4.2 By: Mark Wolfinger http://blogs.reuters.com/felix-salmon/2009/05/20/bank-governance-datapoint-of-the-day/comment-page-1/#comment-1773 Mark Wolfinger Thu, 21 May 2009 03:13:21 +0000 http://blogs.reuters.com/felix-salmon/2009/05/20/bank-governance-datapoint-of-the-day/#comment-1773 "bankers have proven themselves, over the past couple of years, to be just as oblivious as everybody else when it comes to complex products and systemic risks." I'm not so sure. This worked out pretty well for the banks - considering what happened. They gave themselves the opportunity to earn huge fortunes - and failure didn't cost them all that much. There banks should be in bankruptcy and these guys and few gals should have been fired sans parachutes or pensions. If you and I take those risks, there is no bailout. “bankers have proven themselves, over the past couple of years, to be just as oblivious as everybody else when it comes to complex products and systemic risks.”

I’m not so sure. This worked out pretty well for the banks – considering what happened. They gave themselves the opportunity to earn huge fortunes – and failure didn’t cost them all that much. There banks should be in bankruptcy and these guys and few gals should have been fired sans parachutes or pensions.

If you and I take those risks, there is no bailout.

]]> By: Wendell http://blogs.reuters.com/felix-salmon/2009/05/20/bank-governance-datapoint-of-the-day/comment-page-1/#comment-1759 Wendell Wed, 20 May 2009 20:17:09 +0000 http://blogs.reuters.com/felix-salmon/2009/05/20/bank-governance-datapoint-of-the-day/#comment-1759 As of July, 2007, I had never heard of CMBS, conduits, SIV's, synthetic CDS's, you get the picture. By that Labor Day, I'd learned a whole bunch, really fast. A leader of a horticultural society may not be a natural pick for a bank board, but that isn't to say that they couldn't ascend a learning curve. As of July, 2007, I had never heard of CMBS, conduits, SIV’s, synthetic CDS’s, you get the picture. By that Labor Day, I’d learned a whole bunch, really fast. A leader of a horticultural society may not be a natural pick for a bank board, but that isn’t to say that they couldn’t ascend a learning curve.

]]> By: OneEyedMan http://blogs.reuters.com/felix-salmon/2009/05/20/bank-governance-datapoint-of-the-day/comment-page-1/#comment-1757 OneEyedMan Wed, 20 May 2009 20:11:43 +0000 http://blogs.reuters.com/felix-salmon/2009/05/20/bank-governance-datapoint-of-the-day/#comment-1757 They may not fully understand everything being discussed, but they contribute independence, which also has value. For example, if you pack the boards with people with bank experience you'll fill the boards with insiders that will tow the CEO's line on pay and risk taking. They may not fully understand everything being discussed, but they contribute independence, which also has value.

For example, if you pack the boards with people with bank experience you’ll fill the boards with insiders that will tow the CEO’s line on pay and risk taking.

]]> By: Griff http://blogs.reuters.com/felix-salmon/2009/05/20/bank-governance-datapoint-of-the-day/comment-page-1/#comment-1736 Griff Wed, 20 May 2009 14:51:36 +0000 http://blogs.reuters.com/felix-salmon/2009/05/20/bank-governance-datapoint-of-the-day/#comment-1736 Changing the selection process for boards may be one solution, but the real problem had become poor risk management. Boards, by design, meet 10-12x per year; how in the heck can 10-15 people understand what Citigroup had been or is doing? Board governance is an issue...but it's broader than just banking / financials. It is risk management that has to fundamentally change. Risk management, empowered to inform a top trader his VAR is too high; or that yes, the CDO machinery needs to diminish; or that yes (Citigroup) all these SIV entities do require posting some risk capital . Compensation would be the 3rd leg on this stool...short-term incentives for longer-dated risk? what ever could go wrong... Changing the selection process for boards may be one solution, but the real problem had become poor risk management. Boards, by design, meet 10-12x per year; how in the heck can 10-15 people understand what Citigroup had been or is doing? Board governance is an issue…but it’s broader than just banking / financials.

It is risk management that has to fundamentally change. Risk management, empowered to inform a top trader his VAR is too high; or that yes, the CDO machinery needs to diminish; or that yes (Citigroup) all these SIV entities do require posting some risk capital . Compensation would be the 3rd leg on this stool…short-term incentives for longer-dated risk? what ever could go wrong…

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