Jail Reckless Bankers?

chewmylegoff

ILW wrote: »

I was just going on what I read in Robert Pestons book about the first duty of any bank was to protect depositors money. Not sure where he got it from though.

You may be referring to the CASS regime which requires client assets to be segregated from the firm's own assets the idea being that if the firm goes bust the clients get their money back.

It doesn't apply to deposit taking business though. Retail deposits are protected by the firm being required to hold capital.

chewmylegoff

C_Mababejive wrote: »

Well if you can jail a gasman then you can jail anyone i guess...

http://www.hse.gov.uk/press/2012/coi-e-65.htm

A fine example of a strict liability regime - I.e. if you don't hold a licence you automatically commit an offence when carrying out licence work.

It is in no way comparable to what you need to prove to demonstrate that someone was reckless in their management of a multinational company where most duties are delegated then delegated again then delegated again...

ILW

chewmylegoff wrote: »

You may be referring to the CASS regime which requires client assets to be segregated from the firm's own assets the idea being that if the firm goes bust the clients get their money back.

It doesn't apply to deposit taking business though. Retail deposits are protected by the firm being required to hold capital.

That could be it,
I think part of the problem was that banks such as RBS managed to redefine what was meant by capital.

antrobus

ILW wrote: »

That could be it,
I think part of the problem was that banks such as RBS managed to redefine what was meant by capital.

I think it was more the case that part of the problem was that banks such as RBS managed to redefine what was meant by assets at risk, in that large chunks of lending were routed through offshore special purpose vehicles and were allowed to pretend that it had nothing to do with them and so were not obliged to hold any capital at all in respect of such lending.

ILW

antrobus wrote: »

I think it was more the case that part of the problem was that banks such as RBS managed to redefine what was meant by assets at risk, in that large chunks of lending were routed through offshore special purpose vehicles and were allowed to pretend that it had nothing to do with them and so were not obliged to hold any capital at all in respect of such lending.

I think they also managed to define some of the derivatives they were sitting on as capital assets, many turned out to be worthless.

antrobus

ILW wrote: »

I think they also managed to define some of the derivatives they were sitting on as capital assets, many turned out to be worthless.

If by that you mean that some of the lending that was routed through offshore special purpose vehicles was bundled up and resold in such an opaque manner that it obscured the fact that the underlying lending wasn't what people thought it was then, yes.

But that would be the point; it's never a problem lending people money if they pay it back. The problems always arise when they don't.

TruckerT

antrobus wrote: »

it's never a problem lending people money if they pay it back. The problems always arise when they don't.

I haven't read the whole thread (it would have got me over-excited), but I couldn't resist clicking on the last response.

Please check your answer against my new signature...

TruckerT

CLAPTON

antrobus wrote: »

If by that you mean that some of the lending that was routed through offshore special purpose vehicles was bundled up and resold in such an opaque manner that it obscured the fact that the underlying lending wasn't what people thought it was then, yes.

But that would be the point; it's never a problem lending people money if they pay it back. The problems always arise when they don't.

Point well made

but of course waiting for the loan to be paid back or to default is leaving it too.

We must move to a cultural of rapid enforcement of the rules with prison sentences if appliable.

Liar loans were well acknowedged but neither the banks or the liar appliants were prosecuted or sent to prison.

John1993_2

CLAPTON wrote: »

What is the difference between reckless and highly successful except the outcome?

I don't know if you are aware of how risk is assessed and allowed in investment banking, but it's very, very far from cavalier. Traders have strict limits on how much they can take on, monitored daily, and management get very upset if the limits are breached. It nearl always leads to disciplinary matters.

I've traded in big name banks for a great many years, trough all manner of crises, and just don't recognize the categorization of what most of us do as reckless.

If we take Northern Rock as an example, it was probably only a handful of people there who decided to try to increase profitability by lending long-term and covering it in the short-term cash markets. With hindsight it was foolish, but was it really criminal? Do you think that anyone doing it knew it would end in disaster but just went ahead?

People who'd never dream of generalizing about other groups have seemed very keen to do so about people working in banks in recent years. I just wish that the criticism was at least informed.

TruckerT

John1993 wrote: »

I don't know if you are aware of how risk is assessed and allowed in investment banking, but it's very, very far from cavalier. Traders have strict limits on how much they can take on, monitored daily, and management get very upset if the limits are breached. It nearl always leads to disciplinary matters.

I've traded in big name banks for a great many years, trough all manner of crises, and just don't recognize the categorization of what most of us do as reckless.

If we take Northern Rock as an example, it was probably only a handful of people there who decided to try to increase profitability by lending long-term and covering it in the short-term cash markets. With hindsight it was foolish, but was it really criminal? Do you think that anyone doing it knew it would end in disaster but just went ahead?

People who'd never dream of generalizing about other groups have seemed very keen to do so about people working in banks in recent years. I just wish that the criticism was at least informed.

I'm sorry to be unsympathetic, but it was the banks which (without any credible dispute) brought us down.

The 'handful' of people in Northern Rock clearly dominated the bank's activities.

TruckerT