Comments on: When investment banks hire risk-takers http://blogs.reuters.com/felix-salmon/2011/09/15/when-investment-banks-hire-risk-takers/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: traduceri daneza romana http://blogs.reuters.com/felix-salmon/2011/09/15/when-investment-banks-hire-risk-takers/comment-page-1/#comment-53494 Mon, 29 Sep 2014 13:56:26 +0000 http://blogs.reuters.com/felix-salmon/?p=9928#comment-53494 Which means that, Game master Jari Kurri, You never know a tiny little somethin in regards to playing golf some of the most important send align, Would be the actual other hand seat because within your click box and can run the ahead long run along with even when an additional admin functions safety the. The 4th guide this standard may possibly be the goalkeeper. Finland was being the on the innovative feeling goalkeeper motor coachs for everybody clubhouse competitors so this is smart.

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By: Danny_Black http://blogs.reuters.com/felix-salmon/2011/09/15/when-investment-banks-hire-risk-takers/comment-page-1/#comment-31024 Sun, 18 Sep 2011 19:37:01 +0000 http://blogs.reuters.com/felix-salmon/?p=9928#comment-31024 FifthDecade, LloydsTSB didn’t have a US boss either in the sense of a company in the US or an american CEO or chairman.

NRK and HBOS and B&B got into trouble over vanilla commercial and retail banking loans that went bad. HBOS was a “victim” of a massive fraud – and i mean actual fraud, not a lazy rubber stamper not ticking all the boxes – that costs it billions of pounds in its SME loans operation. Absolutely sweet FA to do with investment banking.

Frannie were always what people seem to think IBs are, that is government back-stopped hedge funds where the profits went to the shareholders and management and the massive losses were socialised, yet weirdly they are the “victim”.

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By: puzzled http://blogs.reuters.com/felix-salmon/2011/09/15/when-investment-banks-hire-risk-takers/comment-page-1/#comment-31006 Sat, 17 Sep 2011 04:30:45 +0000 http://blogs.reuters.com/felix-salmon/?p=9928#comment-31006 Hi Felix – I am usually a fan but really think this article is all over the place and that your opinions are quite wrong in many places – investment bankers (the corporate finance guys that work on M&A advisory, LBO’s, financings, etc) are actually the most risk averse people you will meet in finance. they all hope to rise the ranks from analyst or associate to managing director and end up managing internal politics than doing a good job for their clients. Traders are quite a different breed altogether. Investment bankers work for commercial banks (citi, bofa, barclays, ubs) – those investment bankers commit their balance sheets every day. when kkr calls and is looking to finance a $25bn LBO – the corp fin bankers get a call and have to package a financing deal that can earn up to $200mm in fees (just on the debt financing, let alone “advisory fees”, etc). The bankers do committ capital – regardless, I think that the key point is that UBS failed to simply measure their net eposure. Internally falsified records should be figured out immediately through a standard reconciliation of a book closing at the end of the trade. A trade was executed and cleared. the accounting for that trade cannot be frabicated against an appropriate reconciliation – UBS risk management and internal controls team needs to be terminated. senior heads should roll without hesitation. people worried about flying first class and what new hermes tie to buy on Bond Street or fifth avenue for the next meeting and forgetting they have a business to run – mediocrity and hubris is inherently embedded into the banker psyche.

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By: CompactCar http://blogs.reuters.com/felix-salmon/2011/09/15/when-investment-banks-hire-risk-takers/comment-page-1/#comment-31000 Fri, 16 Sep 2011 21:47:03 +0000 http://blogs.reuters.com/felix-salmon/?p=9928#comment-31000 Excellent post, Felix.
Welcome to “The Devil’s Derivatives” fan club.
When you get to author Nicholas Dunbar’s illuminating analysis of the role of derivatives in triggering the financial crisis, you should share a summary with your readers.
Perhaps you could do a Lego presentation about the difference between financial life on planet Earth vs. what happened on “planet Derivative,” as described in “The Devil’s Derivatives.”

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By: FifthDecade http://blogs.reuters.com/felix-salmon/2011/09/15/when-investment-banks-hire-risk-takers/comment-page-1/#comment-30997 Fri, 16 Sep 2011 20:53:05 +0000 http://blogs.reuters.com/felix-salmon/?p=9928#comment-30997 In the UK the banks got into trouble because of the lack of liquidity following the sub-prime crash. Northern Rock pretty much only ever raised money to lend as mortgages through the money markets, while LloydsTSB was solvent until after the crisis when its US boss merged it with HBOS which had got into problems in the same way as Northern Rock. The majority of the mortgage market in the UK is still mostly under private control, unlike the US where it seems the two main movers both had to be Nationalised.

The over-riding fact is, Danny, that whichever way you look at it, sub-prime is the cause of nearly all of today’s financial problems, and we’ll be saying that for the next ten years at least.

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By: Worsel http://blogs.reuters.com/felix-salmon/2011/09/15/when-investment-banks-hire-risk-takers/comment-page-1/#comment-30992 Fri, 16 Sep 2011 18:58:01 +0000 http://blogs.reuters.com/felix-salmon/?p=9928#comment-30992 “the big money in finance has always been where the balance sheet is” – eh? commercial bankers (we agree here) use lots of balance sheet and are incentivised to do so. m&a, corp fin ib’s use as LITTLE balance sheet as possible. tell me again who earns the bigger bonus – commercial or investment bankers?

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By: Curmudgeon http://blogs.reuters.com/felix-salmon/2011/09/15/when-investment-banks-hire-risk-takers/comment-page-1/#comment-30985 Fri, 16 Sep 2011 15:12:48 +0000 http://blogs.reuters.com/felix-salmon/?p=9928#comment-30985 >>”The pain of dropping $10 at the casino craps table far outweighs the pleasure of winning $10 on a throw of the dice.”

Say what you will about psychology theory (and I have a couple of degrees in the subject), this runs counter to theory and is demonstrably not true.

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By: Danny_Black http://blogs.reuters.com/felix-salmon/2011/09/15/when-investment-banks-hire-risk-takers/comment-page-1/#comment-30984 Fri, 16 Sep 2011 15:05:51 +0000 http://blogs.reuters.com/felix-salmon/?p=9928#comment-30984 Except in the UK it was the commercial and retail bankers that destroyed their banks but hey who cares about facts?

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By: FifthDecade http://blogs.reuters.com/felix-salmon/2011/09/15/when-investment-banks-hire-risk-takers/comment-page-1/#comment-30970 Fri, 16 Sep 2011 02:05:25 +0000 http://blogs.reuters.com/felix-salmon/?p=9928#comment-30970 There is a fair bit of speculation over here in Switzerland where UBS is the largest domestic bank that this trader was betting against the Swiss Franc and got caught by the sudden intervention of the SNB. It wouldn’t surprise me if he had been betting on a steadily strengthening CHF and on a steadily falling USD. There will be more bruised traders as a result of that intervention I imagine but did they try to do anything illegal? Probably not.

Politicians are pretty angry because it wasn’t long ago that UBS was bailed out by some $60 billion or so from the public purse and it wouldn’t surprise me at all to see more moves towards ring fencing of domestic banking as in the UK. The feeling seems to be that they were assured that UBS had new and improved risk management structures in place – and then this happens.

As for your argument that the remuneration structures attract risk takers, of course that’s true – but the lack of any financial consequence for their actions if they get things wrong only magnifies the problem. It seems to me they get paid a big bonus if they do well, and a big salary if they don’t.

Back in 2008 I suggested an alternative remuneration setup for traders and the bankers who profit from their activities:
http://fifthdecade.wordpress.com/2008/09  /24/reforming-bonus-pay-for-long-termis m/

This would have built-in long-termism and included financial penalties for failure but it seems old habits die hard and nothing has really changed.

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By: KidDynamite http://blogs.reuters.com/felix-salmon/2011/09/15/when-investment-banks-hire-risk-takers/comment-page-1/#comment-30956 Thu, 15 Sep 2011 23:13:47 +0000 http://blogs.reuters.com/felix-salmon/?p=9928#comment-30956 @KenG_CA nails it: “The problem isn’t that the trader (he’s not a banker) lost $2 billion, it’s that the bank didn’t know about his trades. There is no excuse for that level of incompetence. ”

read my post today for more on that…

http://kiddynamitesworld.com/losing-2b-w ithout-anyone-knowing-about-it-is-much-h arder-than-you-think/

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