Investment banks

Where angels fear to trade

Separating good old-fashioned utility banking from its riskier cousins is not as simple as it seems

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Readers' comments




I hate the old canard about having to 'pay for talent'. The whole point about banking today is to reduce greed as the main motivator. You want at least SOME people that do it because they are proud to be highly trained professionals, like surgeons, dentists or lawyers (or even craftsmen, writers teachers and artists - not everybody is greedy and banking needs to tap them!). You don't want to exclusively employ psychos who hate their jobs but love to drive around in Maseratis and bed impressionable young girls...


You don't have to separate them, just make the bankers personally accountable... here's how:

The worlds banking system will remain intrinsically unsafe and unstable, until BIG bankers, BIG business CEOs and BIG business management teams, are required (by law) to personally bet their home(s) on them EARNING their bonus; they should be required by law to put their house up as collateral, for them to EARN their bonus. They should also not be allowed (by law) to accept a bonus any higher than they are prepared to lose. This is the way small business operates, and is the essential difference between big business and small business (Wall St / Main St syndrome). This unsymmetrical state of business consequences is the root cause of the anger that people feel when the word “bonus” is mentioned. This is the intrinsic unfairness in our western economic system, which enables the rich to get richer. Small business is NATURALLY regulated, whereas big business is “regulated” by the collusion of BIG government, BIG banks, and BIG business! Introduce NATURAL regulation to the BIG monsters (described here), then the banking system will become more fair, slimmer and safer. See more: [a silver bullet does exist!]


I like Neil's core idea:

To make the bankers personally accountable ...

this makes me refreshing about the mail problems I see in how China middle and low level officials in dealing with the things that they suppose to serve: somehow they are not accountable for so many things. There are so many "grey areas".

Too dangerous.

Sorry for stray from the main subject. We are talking on the bankings here.

Bankers, especially investment banks, are always bet using other people's assets, aren't they? When time is good, they win every investor win. But when bad times come, seems they just lose some bonus but the investor lose their main investing.

This is a big problem. However, their investor do not do too much works by lending out their capital. So less efforts, less win, this is the rule.

It seems to me, that, the investors and the bankers are partners. So they should share their profits and lose. That's it. Maybe bankers worth getting the good share of the profit they gain by achieving profit.

But they should also bearing some part of the lose through direct money lose.

So dose many other types of finance org, I guess. like hedge funds.

But I am not so sure, maybe there are better ideas and practices out there... Let's just wait and read and learn and observe.

Alistair N

As Neil said, banking culture is fundamental problem. Don't sell one of either Lloyds or RBS; keep one as a publicly owned, state run, boring bank, run at min cost on relatively low wages/incentives. Use it to change banking culture. (Others have to change to compete in some areas)

EU will not like it but other countries do it (Turkey, Ziraat bank if I remember correctly).

As Neil says, problem is actually wider than just banking culture. Govt culture been pleased to live off banking culture too. Govts far too keen to raise extra income using dodgy tactics whenever possible.



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