Dear,
An interesting point, when we look at the transition to the new Financial System, it is the role played by the US General Attorney office. As Mr. Eric Holder made very clear some months ago, we've moved in six years, from a Financial System in which some corporates were too big to fail, to a new model in which no banks are too big to jail.
Since the starting of the Financial Crisis in 2008, Wall Street has been fined with more than 100 billion dollars.
Bank of America, Wells Fargo, JP Morgan, BNP Paribas, Citigroup, Goldman Sachs and Morgan Stanley have received severe fines, impacting their results and reputation.
This week, we read in the media, that the New York Federal Reserve send last December, a letter to the executives of Deutsche Bank, accusing some of its US arms of releasing low quality, inaccurate and unreliable financial reports, and supporting its processes with inadequate auditing and oversight and weak technology.
What’s going on here?
Was everything perfect before, or the regulator has just discovered how to audit a Bank’s processes?
Not really, this is just a sign of the Systemic Change; for the last 30 years, the financial system has been deregulated and oriented to grow in volume, without looking at the capital consumed in the process. The objective was growth, no matter the resources, including solvency (main Financial System resource), consumed in the process.
But today, global debt and natural resources scarcity are limiting global growth, making the Financial System severely under-capitalized.
We’re in a highly leveraged, fractional reserve, Financial System; which multiplies growth when growth is robust, but becomes insolvent with limited growth rates.
In the new scenario, we need a technology oriented to control; and new paradigms like Risk Adjusted Performance Management become the drivers.
Organizations, and particularly banks, objective cant't be selling and growing, but offering the best financial performance, weighted by risk (or what’s the same, capital consumption).
Regulators fines, which are going to be more frequent in the oncoming years, will be one of the incentives used, for “convincing” bank’s executives that they must align with the systemic change.
Regulators fines, which are going to be more frequent in the oncoming years, will be one of the incentives used, for “convincing” bank’s executives that they must align with the systemic change.
SAP Banking has the answer in terms of technology to the requirements of the new paradigm; it has been built with the objective of capital control and efficient management of resources, particularly with the Integrated Financial and Risk Architecture of Bank Analyzer.
But implementing SAP Banking is not an easy task; SAP Banking has a holistic data model, which makes it challenging to integrate with the current obsolete and over-simplified, Financial Information Systems.
Anyway, what’s the alternative for a bank’s executive; suffering fine after fine, till he aligns with the new paradigm?
Remember this; from now on, no Bank is too big to jail.
Looking forward to read your opinions.
K. Regards,
Ferran.
Ferran.
No comments:
Post a Comment