By Niels Kroner
'A Blueprint for greater Banking' takes a clean examine the monetary challenge. It units out to respond to particularly what the error have been that banks made and the way this might were kept away from. what's distinct approximately this ebook is an in depth description of a big financial institution that operates very otherwise from its friends and that has, consequently, advised away from the parts that experience introduced many different banks into hassle. this gives a couple of insights into how a extra resilient, post-credit crunch banking process should still look.
the 1st part starts off with an outline of present causes of the challenge and why they continue to be partially unsatisfactory. It then units out an alternate framework dependent round seven behavioural styles of imprudent banking. those 'Seven lethal Sins' have triggered so much banking crises, together with the present one, and whereas they arrive in several shapes and varieties they continue to be basically an identical. This booklet examines why they continue to be super tempting to bankers, frequently with the enthusiastic help in their shareholders and no significant objection by way of 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 best 25 banks in Europe. It not just survived the Swedish banking hindrance within the Nineties with out soliciting for aid, however it has additionally remained reliable throughout the newest main issue. Handelsbanken didn't have to elevate capital or ask for presidency aid and its stocks were the easiest appearing ecu financial institution inventory by way of a large margin.
The financial institution has often been run through administration practices which are diametrically against so-called 'best practice' within the undefined. The e-book investigates how Handelsbanken operates with no bonuses and examines their particular employer, process dialogue, possibility administration and capital markets verbal exchange. In influence, the e-book describes how Handelsbanken guarantees that it doesn't fall for any of the Seven lethal Sins. Niels Kroner has carried out over fifty interviews with Handelsbanken executives and rivals, and likewise attracts on his within adventure of many different associations to carry out the real variations among the 'Handelsbanken way' and customary practices at different banks.
the ultimate half summarises what different banks and fiscal associations can study from Handelsbanken and the way its version may well provide an answer that different strength regulatory adjustments may perhaps not.
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Extra resources for A Blueprint for Better Banking: Svenska Handelsbanken and a proven model for more stable and profitable banking
E. loans that have no or low interest payments for a certain period before they reset to a higher level of interest payments. This is a widespread phenomenon in the US mortgage market and in consumer lending such as credit cards or auto loans (those “0% for 24 months” offers). Of course this is never matched by a corresponding increase in the borrower’s income, which leads us to the third deadly sin. 39 A Blueprint for Better Banking 3. Lending to Over-Indebted Customers A related but slightly different imprudent stance is to lend to customers who cannot afford the loan.
28 For financial institutions, on the other hand, the income statement does not distinguish the two: the balance sheet gives little or no information about the speculative risk incurred. For instance, income attributable to asset and liability mismatches – the first of the seven deadly sins – is reported as net interest income just like customer related income. 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”.
Shareholders are more than happy to go along while things go well and indulging in one or more of the seven deadly sins is very profitable. Nor do regulators think in these categories. Some of the seven deadly sins are outside their field of vision altogether (for instance, the second sin of pushing balance sheet mismatches to customers), or regulators are at best colour blind to others (for instance, a rather rudimentary differentiation between loans to creditworthy and over-indebted customers).
A Blueprint for Better Banking: Svenska Handelsbanken and a proven model for more stable and profitable banking by Niels Kroner