Tougher restrictions on job duties, zero tolerance from senior management and compensation structured around long-term incentives, among other things, will prevent the wrong people ending up in banking for the wrong reasons.
We can talk all we want about policies, process and technology, but in the end, financial services remains a people-based business. Having the right people in key risk management roles will yield the strong institutions of tomorrow.
In its next round of stress tests, the Federal Reserve revisits conditions similar to those of the Great Recession. But booms are far more dangerous for bank stability than recessions, since the seeds of failure are invariably sown during them.
Industry-accepted standards would reduce friction and costs in satisfying compliance requirements during a time of heightened scrutiny for banks and their vendors.
Traditional risk management works well when only profits are at stake. To protect against the dangers that can sink an institution, a new approach is needed.
Banks must generate higher earnings to cover the cost of capital they raise. Higher earnings require taking more risk, creating the need for more capital. There is a better way.
Debt buyers should make a copy available to the court and to the defendant at the time of filing the lawsuit. This should help relieve our congested court dockets and prevent lawsuits against the wrong people in the wrong amount.
Its not enough to manage liquidity risk, credit risk, market risk, reputation risk, regulatory risk, and legal risk. Banks must understand how these risks interact with and affect one another.
Using return on equity as a performance measure without a risk adjustment is like trying to fly a plane without an altimeter. Sooner or later you will hit something.
