By Niels Kroner
'A Blueprint for greater Banking' takes a clean examine the monetary predicament. It units out to reply to particularly what the blunders have been that banks made and the way this may were shunned. what's exact approximately this e-book is an in depth description of a giant financial institution that operates very in a different way from its friends and that has, for that reason, urged away from the components that experience introduced many different banks into difficulty. this gives a couple of insights into how a extra resilient, post-credit crunch banking approach should still look.
the 1st part starts off with an outline of latest motives of the obstacle and why they continue to be partially unsatisfactory. It then units out an alternate framework established round seven behavioural styles of imprudent banking. those 'Seven lethal Sins' have prompted so much banking crises, together with the present one, and whereas they arrive in numerous shapes and varieties they continue to be primarily an analogous. This publication examines why they continue to be super tempting to bankers, usually with the enthusiastic aid in their shareholders and no significant objection through regulators.
the second one and major a part of the ebook is a brand new and broad description of the administration practices at Svenska Handelsbanken, one of many most sensible 25 banks in Europe. It not just survived the Swedish banking concern within the Nineties with no inquiring for help, however it has additionally remained solid throughout the most modern quandary. Handelsbanken didn't have to elevate capital or ask for presidency help and its stocks were the simplest acting ecu financial institution inventory via a large margin.
The financial institution has normally been run by means of administration practices which are diametrically against so-called 'best practice' within the undefined. The e-book investigates how Handelsbanken operates with out bonuses and examines their special business enterprise, process dialogue, probability administration and capital markets communique. In impression, the e-book describes how Handelsbanken guarantees that it doesn't fall for any of the Seven lethal Sins. Niels Kroner has performed over fifty interviews with Handelsbanken executives and opponents, and likewise attracts on his inside of event of many different associations to carry out the real alterations among the 'Handelsbanken way' and customary practices at different banks.
the ultimate half summarises what different banks and monetary associations can research from Handelsbanken and the way its version may perhaps provide an answer that different capability regulatory alterations might not.
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Additional resources for A Blueprint for Better Banking: Svenska Handelsbanken and a proven model for more stable and profitable banking
As long as there is enough risk appetite to transfer funds on a large scale to emerging markets, these funds lead to strong economic growth. How can a country such as Ukraine not grow its economy very strongly during a period where lending increases by more than 50% per year from 2004 to 2008? In these years when banks are happy to lend to emerging markets everything looks benign: banks make large profits, asset quality is good, the country is growing strongly. 21 19 Also see Taylor (2008) for empirical data on the relationship of house prices and defaults.
On the balance sheet, loans to customers that are mismatched or over-indebted are indistinguishable from others since they are all aggregated into one line: “customer loans”. Similarly, risky non-core assets such as structured credit instruments are often not distinguished from risk-free instruments. 29 Often banks facing pressure in their core operations are tempted to enter imprudent activities to offset an underlying decline in profits, and the speculative results are amalgamated with the underlying performance into a reported profit figure.
Many of them (liquidity risks, holding “toxic securities” or large-scale writing of credit default swaps) had no meaningful capital requirements in the first place, so pro-cyclical requirements would not have changed much. And one should not forget that, prior to US GAAP and IFRS9 clamp-downs on discretionary loan loss provisioning, banks did by and large build counter-cyclical loan loss reserves. This did not prevent the many previous banking crises. In my opinion it is similarly a stretch to blame the Basel II regulation for leaving banks weakly capitalised in a downturn.
A Blueprint for Better Banking: Svenska Handelsbanken and a proven model for more stable and profitable banking by Niels Kroner