datum 28.10.2008 faculteit economie en bedrijfskunde accountancy 1 do banks have a future? jaap van...
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Datum 28.10.2008
faculteit economie
en bedrijfskunde
accountancy
1
Do banks have a future?
Jaap van Manen
28 October 2008
Datum 28.10.2008
faculteit economie
en bedrijfskunde
accountancy
2
Topics:
• The mission of financial institutions• Ownership and control• Board responsibilities• Board structures• Management compensation• Risk management• Oversight
Datum 28.10.2008
faculteit economie
en bedrijfskunde
accountancy
3
• Credit crunch• Banking crisis• Financial disaster
• Lack of prudence:
Risk underpriced• Too much prudence
Risk overpriced
Datum 28.10.2008
faculteit economie
en bedrijfskunde
accountancy
4
Decrease of prudence asset inflationIncrease of prudence asset deflation
Asset deflation + leverage equity disaster
Datum 28.10.2008
faculteit economie
en bedrijfskunde
accountancy
5
Datum 28.10.2008
faculteit economie
en bedrijfskunde
accountancy
6
Salesmen dressed as advisorsServices
MortgagesLife insuranceInvestments
Actors• Employees• “independent” intermediaries
Remuneration• Bonuses• Fees• Discounts
Transaction driven
b2b vs b2c
Datum 28.10.2008
faculteit economie
en bedrijfskunde
accountancy
7
Managers dressed as bankersShareholder valueBankassuranceMultichannelOne stop shop
Remuneration:• Complicated• Value driven• Upward potential• Downward risk restricted
transaction driven
risk management: a matter of compliance
Datum 28.10.2008
faculteit economie
en bedrijfskunde
accountancy
8
Rating agents:Businessmen dressed as professionals
• Requested rating• Unrequested rating• History as benchmark• Mathematics overrated• Lazy clients
Remember:• b2b and b2c• We knew• Spectacular growth of the business
Datum 28.10.2008
faculteit economie
en bedrijfskunde
accountancy
9
Non-executive directorsSupervisors of the executives• Less upward potential • Many don’t have banking experience• Independence paradox• Freeriding with authorities?
authorities monitor prudence authorities monitor behaviour Authorities are better equipped:
Staff available Access to information Direction of research
• The board as a galley of hotshots
Datum 28.10.2008
faculteit economie
en bedrijfskunde
accountancy
10
Government as Banker
• Financial Institution too big to fail• Politicians overestimate themselves• Monitoring:
Central bank, government, super non-executives• Culture shock for bankers• House-prices down?:
New rescues needed• Funds needed:
The sky is the limit?• Credit rating of government
Datum 28.10.2008
faculteit economie
en bedrijfskunde
accountancy
11
Banks as utilities• Payment systems • Personals savings• Cash
Banks restricted in services?The end of bankassuranceSeparation of investment banking
Listed banks protectedThe end of one share one voteMore power for directors
Datum 28.10.2008
faculteit economie
en bedrijfskunde
accountancy
12
Next Open Lecture Credit Crisis
Thursday 6 November, 10.00am
Speaker: Professor Robert Lensink Title: The effects of the credit crisis on developing countries
Place: Lecture hall 0015, Zernike Building