Banks acknowledge role in credit crisis
10 Apr 08
While publicly accepting much of the blame for the credit crisis, the world’s leading banks have said that further regulation of the industry would be wrong
The Institute of International Finance, which represents more than 375 of the world’s largest financial companies, has acknowledged “major points of weaknesses in business practices”, including bankers’ pay and the management of risk.
But it said it would be “completely wrong” for the authorities to impose much greater regulation on the industry.
In its interim report on the causes and consequences of the credit crisis, the IIF promised a code of conduct for better self-regulation of the industry.
“We think it would be completely wrong to jump to some premature regulatory measures,” Josef Ackermann, chief executive of Deutsche Bank and chairman of the IIF board, said. “We want to demonstrate we can do a better job within the industry.”
The IIF report detailed a series of failings on the part of the banks, including managing risks; conflicts of interest over bankers’ pay; the over-reliance on models and inadequate protection against shortages of liquidity.
It said that while pay should be left to individual banks, there should be greater deferral of bonuses and setting pay “on a risk-adjusted basis”, implying paying less to bankers who have simply aken big risks and struck lucky.
Link to the IIF report here