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Banking Culture Isn’t Going To Change So Why Bother Trying?

How do you regulate banks these days? How do you hold a moonbeam in your hand?
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Chaining them up in the tower on Maiden Lane was a non-starter. By Beyond My Ken (Own work) [GFDL or CC BY-SA 4.0-3.0-2.5-2.0-1.0], via Wikimedia Commons

Chaining them up in the tower on Maiden Lane was a non-starter. By Beyond My Ken (Own work) [GFDL or CC BY-SA 4.0-3.0-2.5-2.0-1.0], via Wikimedia Commons

The world’s banking regulators and supervisors, as well as the people they (try to) regulate and supervise, came together this week in New York. They shared ideas on how best to turn banks from dens of iniquity and dishonesty into dens of slightly less iniquity and more straightforward dishonesty.

There’s something in it for everyone, after all: Changing banking culture will make the regulators feel like they’re doing something right, while also saving banks that $275 billion they’ve had to pony up for all of their many misdeeds. Attendees threw lots of things at the wall. Host Bill Dudley, the president of the New York Fed, proposed trailing and tracking “bad bankers” wherever they go, like the kind of endangered species he hopes to make them.

This raised some practical and, frankly, ethical concerns among Dudley’s British and Hong Kong counterparts, the former of which pointed out that the European approach of taking back bad bankers’ money is much stricter than clawback rules in the U.S., and more likely to work all the same. Hong Kong Monetary Authority CEO Norman Chan threw up his hands and said, “Just let the banks do it,” which was music to the banks’ ears, since they don’t want any more regulation and don’t think the problem can really be fixed, anyway.

Others at the conference—whose attendees included bankers from Bank of America Corp., Barclays PLC, Citigroup Inc., Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Morgan Stanley and UBS Group AG—repeated skepticism from previous years of the workshop that banking culture can be fixed, given banks often are wary of sharing problems with their supervisors for fear of attracting heightened scrutiny.

Of course, Preet Bharara had a suggestion of his own: Maybe don’t treat rules and regulations as limits to which one should aspire.

Firms often “get as close to the line as possible without going over it because that’s how we maximize what we are doing,” he said. “Aspiring to the minimum is a recipe for disaster.”

So, yeah, it was fun.

Bankers, Regulators Find No Easy Answers at Bank Culture Workshop [WSJ]


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