They argue that the political interference following the rescue by governments is the major threat to the bank’s financial soundness. In the top five risks are respectively credit, over-regulation, macroeconomic trends and liquidity risk.
It is the first time that political intervention is taking the leading place in the 'banana skin index ". The fact that over-regulation is in the third place indicates that banks are afraid of exaggerated responses to the crisis. Rogier van Adrichem, banking partner at PricewaterhouseCoopers, states that "It confirms the crisis in the relationship between banks and society. It will be some time before mutual trust is restored. With political intervention as the main risk and regulation at number 3, it is questionable whether banks can navigate the financial crisis by their own”.
This research is a timely warning of unintended consequences as a result of regulation. The need to restore confidence between banks and regulators are therefore strong. Van Adrichem understand the emotions behind the American President Obama plans to reform the banking sector.
"Society wants to see concrete action. But it would be unfortunate if the debate is conducted on a commercial basis "
Many of the banana peels, such as credit risk, are a logical consequence of the recession. It is feared among other that a new wave of credit losses will occur. The respondents in Asia are worried about a new bubble, the confidence in the credit markets will dissipate again.
There are also concerns about the ability of banks to manage themselves. The risks as Quality of risk management, corporate governance and management incentives have increased in the banana peel index. Some financial banana skins, such as liquidity risk, derivatives, credit spread and equity - on the other hand fell in the index. Especially hedge funds fell sharply as risk factor from number 10 to number 19. Environmental risks are, despite the climate summit in Copenhagen, just like last year near the bottom of the list.
The top 30 Banana skins:
Banking banana skins index 2010 (Post 2008 in brackets)
01. Political intervention (-)
02. Credit risks (2)
03. Over-regulation (8)
04. Macro-economic trends (5)
05. Liquidity (1)
06. Available capital (-)
07. Derivatives (4)
08. Quality of risk management (6)
09. Credit spreads (3)
10. Equities (7)
11. Exchange rates (13)
12. Corporate governance (16)
13. Commodities (3)
14. Interest rates (9)
15. Fraud (11)
16. Management incentives (17)
17. Emerging markets (18)
18. Technological dependence (15)
19. Hedge funds (10)
20. Rogue trader (14)
21. Continuity of business (23)
22. Retail Channels (20)
23. Interest (21)
24. Back office (19)
25. Environmental risks (25)
26. Payment (27)
27. Money laundering (24)
28. Abundance of mergers (28)
29. Too little regulation (29)
30. Competition from new entrants (30)
Do you want to learn more about Risk management? Join the world's premier online community for Risk Managers connecting thousands of top professionals via my personal invitation link and propel your career to the new level!
In : Risk management
Tags: "top risks" research "political intervention" regulation bubble crisis
blog comments powered by Disqus