Banks at Risk E-Book

Peter Hoflich

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 406

Veröffentlichungsjahr: 2012

Beschreibung

Ideas on how to reform the financial services industry, from experts on the inside

In the wake of the financial crisis of 2008 the practices of the entire global financial services industry have been called into question. From the government, to the media, to the general public, everyone is re-thinking the way forward for the financial sector, but the stakes are high. Should negative trends in the industry continue and financial innovations allow fallout from the next crisis to grow exponentially, the endgame could be the sort of mutually assured destruction that topples entire economies. Charting the way forward for financial services reform requires a fundamental reappraisal of how things are done in order to avert disaster in the near future, and Banks at Risk: Global Best Practices in an Age of Turbulence explores what the future holds, by talking to experts in the know.

Compiling the insights of ten key figures in the financial services industry—regulators, commercial bankers, risk managers, and infrastructure specialists—who look at both strategic and operational issues in their assessments of how to clean up the industry and move towards a system of properly-managed risk, the book explores exactly what we need to do to prevent another crisis.

Sharing their thoughts for the first time are Liu Mingkang, the Chairman of the China Banking Regulatory Commission; Eric Rosengren, President of the Federal Reserve Bank of Boston; Joel Werkama, Assistant Vice President of the Federal Reserve Bank of Boston; Jane Diplock, former chairperson of the International Organization of Securities Commissions and the former head of New Zealand’s securities commission; Jose Maria Roldan, head of the banking supervision at the Bank of Spain; Jesus Saurina, Director of the Financial Stability Department at the Bank of Spain; Dick Kovacevich, former chairman and CEO of Wells Fargo Bank; Mike Smith, CEO of ANZ Group and former head of HSBC’s Asia Pacific operations; Shan Weijian, Chairman and CEO of Pacific Alliance Group and former senior partner of TPG Capital; Rob Close, former CEO of CLS Group; Tham Ming Soong, Chief Risk Officer at the United Overseas Bank in Singapore; and Tsuyoshi Oyama, former head of the risk assessment division in the international affairs division of the Bank of Japan.

• Takes a unique look at the problems with the financial services industry and what can be done to fix them
• Brings together ideas for reform from numerous internationally respected figures working in the industry, many of them writing about their solutions for the first time
• Offers a remarkable insight into how to build a more sustainable future

Eminently thought provoking, Banks at Risk presents real solutions to reforming the financial services industry, from the men and women who know it best.

Leseprobe

CONTENTS

ACKNOWLEDGMENTS

INTRODUCTION

ASHES OF THE HEROES

BANKS, REST, AND MOTION

DANGER!

AROUND THE WORLD TO FIND ANSWERS

Part One: The Regulators

Chapter 1 Effective Supervision of Systemically Important Banks

THE MORAL HAZARD FACING LARGE BANKS

SUGGESTED MEASURES

SOME THOUGHTS ON THE SOLUTION TO THE TBTF BANK PROBLEM

CHINA’S PRACTICES IN THE SUPERVISION OF LARGE BANKS

CONCLUSION

Chapter 2 Implications of the Financial Crisis for Risk Management and Macroprudential Supervision

OBSERVATIONS ON THE FINANCIAL CRISIS

EXPLORING THE PROMISE OF MACROPRUDENTIAL SUPERVISION

REDUCING THE LIKELIHOOD OF FUTURE PROBLEMS BY HOLDING MORE CAPITAL

ALTERNATIVE CRISIS MITIGATION STRATEGIES

CONCLUDING OBSERVATIONS

Chapter 3 Entering an Era of Global Regulatory Oversight

LESSONS OF THE GLOBAL FINANCIAL CRISIS

COORDINATING SECURITIES REGULATION

THE IMPORTANCE OF SETTING PRINCIPLES AND MULTILATERAL MEMORANDA OF UNDERSTANDING

IDENTIFYING AND ADDRESSING SYSTEMIC RISK

IOSCO’S POST-CRISIS RECOMMENDATIONS

POST-CRISIS ACCOUNTING ISSUES

THE FUTURE GLOBAL REGULATORY FRAMEWORK

CONCLUSION

Chapter 4 Old and New Lessons of the Financial Crisis for Risk Management

INTRODUCTION

OLD LESSONS DRAWN FROM THE CRISIS

NEW LESSONS TO BE DRAWN FROM THE CRISIS

CONCLUSION

Part Two: The Practitioners

Chapter 5 Observations from the Epicenter

THE SAFETY VALVES FAILED

PASSING THE BUCK

A CONSPIRACY OF SILENCE

STRESS TESTING

OPPORTUNITIES FOR POSITIVE CHANGE

COMPENSATION AND THE ROLE OF RISK MANAGEMENT

RISK MANAGEMENT IS IN A BANK’S DNA

Chapter 6 The Financial Crisis: Epicenters and Antipodes

CALLING THE CRISIS

MANAGING CRISES

GOVERNMENT INVOLVEMENT

REGULATION

SUPERVISION

GOOD SOLUTIONS IN THE PAST

PART OF A SYSTEM

Chapter 7 The Trouble With Troubled Banks

BANKS LED ASTRAY

RESTRUCTURING BANKS: MANAGEMENT

RESTRUCTURING BANKS: CAPITAL

CONCLUSION

Part Three: The Risk Managers

Chapter 8 Global Risk Management in Action

THE FOREIGN EXCHANGE MARKET

SETTLEMENT RISK

WHAT IS CLS?

HOW CLS WORKS

FAILURE MANAGEMENT

SUPERVISORS AND RISK

REGULATORY ENGAGEMENT

DELIVERING EFFICIENCIES AND GROWING BUSINESS OPPORTUNITIES

EXPANDING THE RISK MANAGEMENT ROLE WITH CHANGING NEEDS

LOOKING TO THE FUTURE

Chapter 9 The Credit Crisis and Its Implications for Asian Financial Institutions

THE BEGINNING OF THE END

HIGHER STANDARDS

HOLDING CAPITAL: EAST VERSUS WEST

TESTING THE SYSTEM

PREPARING SYSTEMS

Chapter 10 Missing Viewpoints of Current Global Regulatory Discussions

CAUSES OF THE NORTH ATLANTIC FINANCIAL CRISIS: THE EPICENTER VIEW

ANATOMY OF THE NORTH ATLANTIC FINANCIAL CRISIS: THE EPICENTER PERSPECTIVE

ANATOMY OF THE NORTH ATLANTIC FINANCIAL CRISIS: THE NON-EPICENTER PERSPECTIVE

ASSESSING THE CURRENT GLOBAL REGULATORY REACTIONS

CONCLUSION

INDEX

Copyright © 2011 John Wiley & Sons (Asia) Pte. Ltd.

Published in 2011 by John Wiley & Sons (Asia) Pte. Ltd.

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Library of Congress Cataloging-in-Publication Data

ISBN 978–0–470–82719–2 (Hardback)

ISBN 978–0–470–82721–5 (ePDF)

ISBN 978–0–470–82720–8 (Mobi)

ISBN 978–0–470–82722–2 (ePub)

Typeset in 11/14 point Minion by MPS Limited, a Macmillan Company, Chennai.

10 9 8 7 6 5 4 3 2 1

To Bruno and Renate, Naoko and Zen, and Ralph, Nicole, Evan and Lauren

ACKNOWLEDGMENTS

I owe the opportunity to work on this book to a great many people, but primarily to Emmanuel Daniel, President and CEO of The Asian Banker, who brought me into the industry and opened up countless opportunities to me. He’s the real reason this book even exists.

I also want to thank the many wonderful contributors to this book, who took time out of their busy schedules to commit their thought leadership to the project. The incidents that they have encapsulated are part of something that is so much bigger than any of us, but affects us all, and the insights provided by their cumulative wisdom is invaluable.

Many others have offered their indispensible support; there are my wonderful colleagues at The Asian Banker, including my direct co-workers Valen, Aldo, Arush and Lalitha, who are always there for me; there are my associates Antonio, James and Val, who keep everything in perspective; there is my great friend Nick Wallwork, my publisher, and all of the wonderful people at Wiley & Sons like Joel Balbin, who have tirelessly assisted me on putting this wonderful work together; and finally, there is Philippe Paillart, who has always shown me the most incredible and inspiring support.

INTRODUCTION

ASHES OF THE HEROES

Financial crises are not easy to come by—and a good thing this is. The great financial crisis that began in 2007 and never truly ended has cost the world trillions of dollars in productivity lost as a result of the massive downturn precipitated by the credit crisis, during which walking wounded and zombie banks were mistrusted by their healthy (or otherwise) counterparts. The resulting confidence crisis made financing hard to come by for any but the safest, most well-run, and highest-rated institutions.

According to the International Monetary Fund (IMF), by 2009 the crisis had already cost the world US$11.9 trillion (U.S. dollars used from here on)—the equivalent of 20 percent of the world’s annual economic output. This sum comprised capital injections pumped into banks to prevent them from collapsing, the soaking up of toxic assets, debt guarantees, and central bank liquidity support.1 While much of these funds is actually liquidity that was provided for but may never be called upon (that is, the funds have been set aside not lost forever), until the funds are reallocated they represent finance that is not being used to build schools, repair roads, fund social projects, or hire government workers.

More than $10 trillion of the money in the IMF’s calculations comes from developed markets, with the United States the largest single contributor to the pool. (The U.S. gross domestic product [GDP] is currently more than $14 trillion.) Mervyn King, governor of the Bank of England, notes that output from the countries most affected by the crisis is “5 percent to 10 percent below what it would have been had there not been a crisis,” and that “the direct and indirect costs to the taxpayer have resulted in fiscal deficits in several countries of over 10 percent of GDP—the largest peacetime deficits ever.”2 Indeed, when comparing the cost of the financial crisis bailout to the Marshall Plan, a plan for rebuilding a shattered Europe after World War II, it is clear how bloated the scale of repairing significant disasters has become and how ineffective as well: the cost of the Marshall Plan from 1948 to 1952, which succeeded in bringing the GDP of the 17 recipient countries back to pre-war levels, was a mere $13 billion, or 5 percent of the U.S. GDP at the time.

The IMF also reports in its summary of an April 2010 meeting of G-20 leaders that the impact of the global financial crisis is cutting deep into national budgets. Net of amounts recovered so far, the fiscal cost of direct support has averaged 2.7 percent of GDP for advanced G-20 countries. In those countries most affected by the crisis, however, unrecovered costs are on the order of 4–5 percent of GDP. Amounts pledged, including guarantees and other contingent liabilities, averaged 25 percent of GDP during the crisis. Furthermore, reflecting to a large extent the effect of the crisis, government debt in advanced G-20 countries is projected to rise by almost 40 percentage points of GDP during 2008–2015.