A festering SORE

On September 11th, twelve ‘Too Big To Fail’ (TBTF) banks reached an in principle settlement in a class action lawsuit to resolve investor claims that the banks conspired to fix prices and limit competition in the market for credit default swaps (CDS).

The historic settlement is estimated to cost some $1.865 billion which, as the claimants’ lawyers said [1], was “one of the largest antitrust class-action settlements” in the financial area.
Continue reading “A festering SORE”

Too Big to Care – BNY Mellon?

In April 2015, two UK subsidiaries of the Bank of New York/Mellon (BNY Mellon) were fined some £126 million for failing to “consider properly the interests of their clients”. BNY Mellon is the largest custodian bank in the world and one of the world’s Systemically Important Banks (SIB).
But has BNY Mellon become Too Big to Care?

Continue reading “Too Big to Care – BNY Mellon?”

People risk in the boardroom: failure to accept personal responsibility

HSBC has been in the news a lot just recently and the UK Parliament Public Accounts Committee (PAC) were grilling three more executives on Monday 9 March to delve further into the tax evasion scandal that happened at the banks Swiss subsidiary. It was a grueling encounter even for the most hardened company executive not helped by the live television screening which no doubt provided some members of the PAC with the opportunity to play to the camera.

Continue reading “People risk in the boardroom: failure to accept personal responsibility”

HSBC – Board-Level People Risk

Both the Chairman and CEO of the banking behemoth HSBC have recently appeared before the Treasury Committee of the UK Parliament in connection with the Swiss Tax Scandal [1]. The bank’s Board had previously issued an apology for the scandal to its shareholders and the public in general [2].

The argument made by the HSBC Board is basically “We didn’t know, how could we? We are a huge organization. It would not happen today”.

Ignorance is bliss.

Continue reading “HSBC – Board-Level People Risk”

Does the S&P Settlement change EVERYTHING?

The S& P saga rumbles on. Having been hammered by the US Securities and Exchange Commission (SEC) in January [1], S&P has received a knock-out blow, and a $1.375 billion fine, from the US Department of Justice and 20 State governments [2]. And in what might the first of many private actions, S&P also reached a separate $125 million settlement with the huge pension fund California Public Employees’ Retirement System (CALPERS) [3].

What has received little publicity, however, are the implications of the S&P settlement with regard to Corporate Governance, in general, and Codes of Conduct in particular.
Continue reading “Does the S&P Settlement change EVERYTHING?”

How Do You Rate?

In January, the US Securities and Exchange Commission (SEC) announced that Standard & Poor’s Ratings Services (S&P) had agreed to pay almost $80 million to the SEC and other regulatory agencies for a series of federal securities law violations involving “fraudulent misconduct in its ratings of certain commercial mortgage-backed securities (CMBS)” [1]. S&P was also banned for one year from issuing ratings in the commercial bond market.

Continue reading “How Do You Rate?”

In Like We Trust

A recent research report [1] suggests that an ethnically diverse group is better at making decisions than a group that are all alike. These results build on other studies that show that diverse groups in general are better at making decisions [2]. Irving Janis, who first identified the concept [3], argues that ‘homogeneity’ is one of the key prerequisites for Groupthink, which is a bad outcome. So all we have to do to prevent Groupthink is to insist on diversity, especially at the Board level?

Whoa, hold on, it is not as easy as that! It turns out that  it doesn’t come down to ‘diversity’ per se but ‘Trust’.

Continue reading “In Like We Trust”

Decisions – Best or Second Best?

A recent article in the Wall Street Journal (WSJ) was headlined “How You Make Decisions Says a Lot about How Happy You Are”. The journalist then asked the question, “Are you a ‘Maximizer’ or a ‘Satisficer’”? She then reported that ‘Satisficers’ are happier.

But what does this mean for business decision-making, if anything?

Continue reading “Decisions – Best or Second Best?”

A Personal Code of Conduct?

In July 2104, the recently divorced Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA) came together once more to produce a Joint Consultation Paper entitled ‘Strengthening accountability in banking: a new regulatory framework for individuals’ [1]. Following the scandals of the GFC, LIBOR and PPI, the regulators believe that holding “individuals to account is a key component of effective regulation”. The regulators pointed out that their extensive proposals were intended to “create a new framework to encourage individuals to take greater responsibility for their actions, and will make it easier for both firms and regulators to hold individuals to account”.
The key words throughout the consultation paper are ‘individual’, ‘responsibility’ and ‘accountability’.

Continue reading “A Personal Code of Conduct?”