Comments on: Bankers’ bonuses – wrong target http://blog.voxsapiens.com/2010/01/25/bankers-bonuses-wrong-target/ Intelligent Commentary on Society and Business Wed, 23 Jun 2010 12:21:47 +0000 http://wordpress.org/?v=abc hourly 1 By: TheVoice http://blog.voxsapiens.com/2010/01/25/bankers-bonuses-wrong-target/comment-page-1/#comment-328 TheVoice Tue, 23 Feb 2010 08:20:52 +0000 http://blog.voxsapiens.com/?p=405#comment-328 Well I think there are shades of grey here. There was a dearth of knowledge of the banking business and financial markets in many of the failed businesses. Adam Applegarth, chief executive at Northern Rock, was not a banker. Nor was Andy Hornby, chief executive at HBOS. Maybe bankers are not required to keep a steady ship, maybe the ship can steer itself with a poorly-directed crew. But when the seas get rough? And when keeping a steady ship, can non-bankers scan the horizon for signs of storms brewing? Northern Rock was destroyed by a liquidity crunch, not a profitability problem - it did not make huge losses, it had the problem that it had lent money to homeowners for many years but was borrowing a large proportion of that money on a short term basis. So when it was not possible to borrow ... For me, the argument that the tripartite authorities did not require liquidity stress tests just does not hold water - that is exactly the response of somebody who is not embedded in the industry. Every risk consulting firm presents (potential) clients with a business risk model that includes liquidity risk. Everybody in the industry knows that it exists. Well I think there are shades of grey here. There was a dearth of knowledge of the banking business and financial markets in many of the failed businesses. Adam Applegarth, chief executive at Northern Rock, was not a banker. Nor was Andy Hornby, chief executive at HBOS. Maybe bankers are not required to keep a steady ship, maybe the ship can steer itself with a poorly-directed crew. But when the seas get rough? And when keeping a steady ship, can non-bankers scan the horizon for signs of storms brewing? Northern Rock was destroyed by a liquidity crunch, not a profitability problem – it did not make huge losses, it had the problem that it had lent money to homeowners for many years but was borrowing a large proportion of that money on a short term basis. So when it was not possible to borrow …

For me, the argument that the tripartite authorities did not require liquidity stress tests just does not hold water – that is exactly the response of somebody who is not embedded in the industry. Every risk consulting firm presents (potential) clients with a business risk model that includes liquidity risk. Everybody in the industry knows that it exists.

]]> By: Stuart http://blog.voxsapiens.com/2010/01/25/bankers-bonuses-wrong-target/comment-page-1/#comment-327 Stuart Mon, 22 Feb 2010 23:08:28 +0000 http://blog.voxsapiens.com/?p=405#comment-327 And what about the "exit bonuses" (i.e. golden parachutes)? Shouldn't people get upset about them? I am angry that the people at the top completely failed but were rewarded for it. And what about the “exit bonuses” (i.e. golden parachutes)? Shouldn’t people get upset about them? I am angry that the people at the top completely failed but were rewarded for it.

]]>