Getting back to basics

Although the world's financial system is still in dire straits, together with the economies that have been dragged down with them, there seems to be an element of optimism in the air. Perhaps it is the coming of spring that seems to engender new feelings of rebirth and of hope.

What is disturbing however is the notion that the worst is behind us and that now we can get back to where-we-were, doing exactly what-we-were doing when the whole financial structure imploded.  To my mind this seems particularly true of the banks, many of whom were responsible for this financial mess in the first place.

The problem is that we have a whole generation of bankers who were raised on the wrong diet. The whole concept of prudence and risk was tossed into the garbage can while they were still toddlers. Everything was based on "profits". The idea of a downturn was just not acceptable, just like corporations always HAD to have better quarterly results this quarter than they had in the last quarter. One cannot go up forever!

This applies basically to anyone who came into the industry since probably the early 1980s. Now these guys are still around, and regrettably they don't seem to have learned anything from the events of the past two years. Just because the dust has settled - for the present - they seem to think that soon it will be business as usual. 

Well please think again! The damage done is enormous and the effects are going to be with us for a long time to come. The contagion of the crisis from Wall Street to Main Street is going to affect the lives of millions of people for at least the decade, if not beyond that.  

I am all for getting back to normal, but there have to be some provisos. So far regulators have had their hands full trying to contain the crisis and minimize the damage (if this is indeed possible). The banks have been busy tiring to ensure their own survival even though this meant sacrificing many of their commercial and corporate customers along the way.

In my view getting back to normal means getting back to basics.

Step number one - get your risk management house back in order. And it's not only your credit and market risks but your operational risks as well.

Step number two - please remember that a bank is a financial intermediary, not a casino that is just there for the benefit of its executive staff.

Step number three - there are things called Ethics and Governance and Social Responsibility. If you are in a position of public trust you really need to understand and practice these.  

Step number four - stop waiting for the regulators to "fix" things.  Get out there and fix it yourself - but please remember steps one, two and three in the process.