Stock markets, unsurprisingly, have not reacted well to the recent decision by Moody’s to downgrade, by between 1 and 3 notches, the ratings of 15 major global banks or financial firms including Bank of America, Barclays, Citigroup, Credit Suisse, Goldman Sachs, HSBC, J.P. Morgan Chase, Morgan Stanley, Royal Bank of Scotland, Credit Agricole, BNP Paribas, Deutsche Bank, Royal Bank of Canada, Societe Generale and UBS.
Some people might regard the above list of institutions as the vanguard of global investment banking. We see it more as the list of prime suspects in the “who dunnit?” drama in which the worldwide economy was the murder victim. Greg Bauer, Moody’s global-banking managing director, explained that, “All of the banks affected by today’s actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities.”
My business partner, Paul Gambles, was a banker in the UK and has been outspoken on many occasions about the activities of the industry that he used to work in. He was recently interviewed about this and told Bangkok Business Brief his thoughts:
“Very little surprises me about banks anymore. Ian Hislop (of Private Eye and Have I Got News For You fame) recently made a film called, “When Bankers Were Good.” It was about the 19th century, predominantly Quaker British bankers, who were bound by a strong ethical belief to support the society that they served. Hislop saw this banking tradition as a stark contrast with today. This sense of modern banking having lost its moral compass seems to be one of the most enduring and widely held beliefs that have emerged in the last decade…
“After all that Goldman has done to some of its clients – the famous case with John Paulson in 2008 when it set up its clients deliberately to lose money and further back when it ran a fund akin to a Ponzi scheme – I don’t suppose that all the stories about Goldman directors instructing employees to ‘rip the eyes’ out of ‘Muppet’ clients should have come as a shock. But sadly it did.
“You have a sense that some of these investment banks have lost their compass but you really hope that it isn’t true. After all, I spent seven years in corporate banking. I worked with some exceptional people and I still stay in touch even now, 20 years later, with many of the people who I helped to fund, set up or expand their businesses. Back in the days when I worked for the Bank of Scotland Group, the vast majority of bankers were good. I like to believe that they still are today. But I wonder if somehow the message that filters down from the top of Goldmans infects the culture there and perhaps in a few other organizations too…
“In the UK, government-owned RBS ran an ad campaign about banking closures, implying that if it were the last bank in town, it wouldn’t close but would stay on to serve the community. Now that is a great sentiment and much more in line with the community banking values I remember from my time in the industry. Sadly, the ad was shown to be misleading. Viewers complained that they lived in locations where RBS Group had operated the last bank in town and had then proceeded to close it. I’m not sure whether the ad was careless or tactless but it certainly got people’s back up!”
People may be Muppets some of the time but not all of the time. It is time for the banks to remember how they got to where they are now, i.e. via Mr. and Mrs. Smith going to the High Street branch and depositing some of their monthly wages into the bank account.
How times have changed and not for the better!
|The above data and research was compiled from sources believed to be reliable. However, neither MBMG International Ltd nor its officers can accept any liability for any errors or omissions in the above article nor bear any responsibility for any losses achieved as a result of any actions taken or not taken as a consequence of reading the above article. For more information please contact Graham Macdonald on [email protected]|