Banks say over-confidence contributed to crisis
Tue Mar 17, 2009 2:20pm EDT
LONDON, March 17 (Reuters) - The banking industry became overly confident about its ability to bounce back from trouble and was caught out by the speed and scale of the current financial crisis, British bank chiefs said on Tuesday.
"There was perhaps a sense of over-confidence in the system's ability to reconstruct itself after what were seen as critical events, in a way it was unable to do in the current crisis," said Douglas Flint, finance director of HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz), Europe's biggest bank.
Flint cited the industry's ability to come through multiple setbacks in the last decade, including in Russia, South America and the collapse of U.S. hedge fund LTCM.
"All these crises had been seen as absolutely significant and cataclysmic and yet within a short period of time they were simply seen as buying opportunities because the system had rebounded and healed itself," he said in testimony from bankers to a panel of UK lawmakers. [nLH728229]
John Varley, chief executive of rival bank Barclays (BARC.L: Quote, Profile, Research, Stock Buzz), agreed.
"That misplaced confidence in the ability of the industry to manage through the cycle, because of its sophistication and because of a view of risk diversification, we all made that mistake," Varley said, citing banks, auditors, regulators and governments.
Flint said there was no "silver bullet" of better regulation or supervision that could have prevented the financial crisis, but welcomed steps to reduce fragmentation and improve transparency in regulation.
Varley said banks that fail to conform to new remuneration guidelines planned by Britain's financial regulator will have greater capital requirements imposed on them.
Banks remain in talks with the regulator about restructuring the bonus structure, and some details are expected to be unveiled in a key report to be released on Wednesday.
Tue Mar 17, 2009 2:20pm EDT
LONDON, March 17 (Reuters) - The banking industry became overly confident about its ability to bounce back from trouble and was caught out by the speed and scale of the current financial crisis, British bank chiefs said on Tuesday.
"There was perhaps a sense of over-confidence in the system's ability to reconstruct itself after what were seen as critical events, in a way it was unable to do in the current crisis," said Douglas Flint, finance director of HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz), Europe's biggest bank.
Flint cited the industry's ability to come through multiple setbacks in the last decade, including in Russia, South America and the collapse of U.S. hedge fund LTCM.
"All these crises had been seen as absolutely significant and cataclysmic and yet within a short period of time they were simply seen as buying opportunities because the system had rebounded and healed itself," he said in testimony from bankers to a panel of UK lawmakers. [nLH728229]
John Varley, chief executive of rival bank Barclays (BARC.L: Quote, Profile, Research, Stock Buzz), agreed.
"That misplaced confidence in the ability of the industry to manage through the cycle, because of its sophistication and because of a view of risk diversification, we all made that mistake," Varley said, citing banks, auditors, regulators and governments.
Flint said there was no "silver bullet" of better regulation or supervision that could have prevented the financial crisis, but welcomed steps to reduce fragmentation and improve transparency in regulation.
Varley said banks that fail to conform to new remuneration guidelines planned by Britain's financial regulator will have greater capital requirements imposed on them.
Banks remain in talks with the regulator about restructuring the bonus structure, and some details are expected to be unveiled in a key report to be released on Wednesday.
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