Re: The toxic culture of investment banking : Fri Mar 16, 2012 12:18 pm  

Homer wrote:

The increased lip service paid to customer services in terms of SLA's and slidepack reporting only masks the fact that the customers are worse served than at any time I can remember. You then get the operations support side of the business facing more and more pressure and stress to place sticking plasters over issues directly relating to the miss sale of the products in the first instance, and yet the highest earners are the "blue sky thinkers" who continue to "conseptualise" newer and better products that in reality are no better than vapourwear.

Why do I find myself nodding in agreement right to the end of that para ?

Oh yes, I know, you're describing the company I work for aren't you ?

Yours, at the customer service desk.

Re: The toxic culture of investment banking : Wed Mar 28, 2012 7:54 am  

Diavolo Rosso wrote: I think it's a much more complicated issue than most people think, and I can't say I have one simple suggestion. These have been mentioned in various forms but my suggestions would be: -> there needs to be a cap on bonuses in IB. I have no issue whatsoever with what most people would deem "excessive" bonuses of £1m pa+ because ultimately there are people working in Banks who directly generate £30/40m+ worth of profit a year. I've got no issue with being rewarded for that but we need to find a way to structure it so there is a natural limit to bonuses, such that it's not just about how much money you make. -> Banks should employ more women in management positions. It's in no way a coincidence for me that most of the women who work on my trading floor are very attractive and in PA or Sales roles. I doubt the correlation between being very attractive and very intelligent is that much different from the correlation between offensively ugly and highly intelligent. This is an issue for the private sector in general, but it could have much bigger effect in Banking due to the macho culture which although vastly exaggerated in the general press, does exist. -> just as there has been an industry wide review of the role of rating agencies, there needs to be a review of the major client surveys, eg. the Euromoney FX Survey. Regulators should repurpose these and link them to bonus payouts IMO. -> we need to find a hybrid ownership structure. It can't be a coincidence IMO that Banking culture changed from being client focused as the Partnership structure faded out to be replaced by one of public listing. The best way to implement a client focus has to be to ensure senior management are completely tied in to the future of the company. -> Banks should have to explain to any non Financial Institution client how they are making profit from any trade and give scenario analysis of what can go wrong. You can explain the structure clearly of even the most complicated instrument, but it's only when you know how a trader or structurer is making money from it that you really get what the risks are and whether it's a suitable investment. For me society needs to stop focusing so much on what bonus Bankers get paid and concentrate on what they have contributed to society to earn them. What certainly doesn't help is the various unwashed hippies, trust fund warriors and Occupy smackheads who we regularly get parading around the City, nor the wailing reporting from the press. It all distracts from meaningful debate. This might also add some good ideas.

Diavolo Rosso wrote: I think it's a much more complicated issue than most people think, and I can't say I have one simple suggestion. These have been mentioned in various forms but my suggestions would be: -> there needs to be a cap on bonuses in IB. I have no issue whatsoever with what most people would deem "excessive" bonuses of £1m pa+ because ultimately there are people working in Banks who directly generate £30/40m+ worth of profit a year. I've got no issue with being rewarded for that but we need to find a way to structure it so there is a natural limit to bonuses, such that it's not just about how much money you make. -> Banks should employ more women in management positions. It's in no way a coincidence for me that most of the women who work on my trading floor are very attractive and in PA or Sales roles. I doubt the correlation between being very attractive and very intelligent is that much different from the correlation between offensively ugly and highly intelligent. This is an issue for the private sector in general, but it could have much bigger effect in Banking due to the macho culture which although vastly exaggerated in the general press, does exist. -> just as there has been an industry wide review of the role of rating agencies, there needs to be a review of the major client surveys, eg. the Euromoney FX Survey. Regulators should repurpose these and link them to bonus payouts IMO. -> we need to find a hybrid ownership structure. It can't be a coincidence IMO that Banking culture changed from being client focused as the Partnership structure faded out to be replaced by one of public listing. The best way to implement a client focus has to be to ensure senior management are completely tied in to the future of the company. -> Banks should have to explain to any non Financial Institution client how they are making profit from any trade and give scenario analysis of what can go wrong. You can explain the structure clearly of even the most complicated instrument, but it's only when you know how a trader or structurer is making money from it that you really get what the risks are and whether it's a suitable investment. For me society needs to stop focusing so much on what bonus Bankers get paid and concentrate on what they have contributed to society to earn them. What certainly doesn't help is the various unwashed hippies, trust fund warriors and Occupy smackheads who we regularly get parading around the City, nor the wailing reporting from the press. It all distracts from meaningful debate. This might also add some good ideas.

Re: The toxic culture of investment banking : Wed Mar 28, 2012 9:53 pm  

sally cinnamon wrote:

Exactly.

These days a lot of people see banking as something that is inherently evil but the banking sector exists to perform a very useful and important function in society. There are always people wanting to save (for pensions, household savings etc) and always people wanting to borrow (businesses looking to start up/expand, people looking to get mortgages for houses). The most efficient way for savers to save is not to stick their wealth under their mattress but to lend it to people wanting to borrow now, the idea being that if the borrowers are getting some productive use out of the access to those funds now, they can repay the savers with interest so the savers gain. The banking sector exists to bring those two aims together, to take funds from those who want to save and make them available to those who want to borrow.

Well, that's certainly your conception of an ideal bank. Whether it bears any resemblance to a real world bank is another question entirely. The idea that banks function as an intermediary between savers and borrowers was thoroughly debunked by no lesser light than Joseph Schumpeter in his History of Economic Analysis (1954) (although Karl Marx made a pretty decent stab at the same in Das Kapital). Schumpeter's critique has subsequently been affirmed by many other economists such as Charles Goodhart, Richard Werner & Tony Greenham.

Banks DO NOT need savings deposits to make loans.

"Subject, only, but crucially, to confidence in their soundness, banks extend credit by simply increasing the borrowing in the customer's current account, which can be paid away to wherever the borrower wants by the bank 'writing a cheque on itself'" -- Paul Tucker, Deputy Governor, Bank of England.

Re: The toxic culture of investment banking : Thu Mar 29, 2012 12:26 pm  

Mugwump wrote:

Well, that's certainly your conception of an ideal bank. Whether it bears any resemblance to a real world bank is another question entirely. The idea that banks function as an intermediary between savers and borrowers was thoroughly debunked by no lesser light than Joseph Schumpeter in his History of Economic Analysis (1954) (although Karl Marx made a pretty decent stab at the same in Das Kapital). Schumpeter's critique has subsequently been affirmed by many other economists such as Charles Goodhart, Richard Werner & Tony Greenham.

Banks DO NOT need savings deposits to make loans.

"Subject, only, but crucially, to confidence in their soundness, banks extend credit by simply increasing the borrowing in the customer's current account, which can be paid away to wherever the borrower wants by the bank 'writing a cheque on itself'" -- Paul Tucker, Deputy Governor, Bank of England.

However given that the perception that very few banks are sound at present, it becomes a relevant point again. Just look at the change in loan-to-deposit ratios lately at the major retail and universal banks.

Re: The toxic culture of investment banking : Fri Mar 30, 2012 4:31 pm  

Diavolo Rosso wrote:

However given that the perception that very few banks are sound at present, it becomes a relevant point again. Just look at the change in loan-to-deposit ratios lately at the major retail and universal banks.

Whilst some banks are undoubtedly teetering on the edge of oblivion there are many more that are simply awash with money. The problem is they aren't willing to lend it to anyone (for a variety of reasons).