The history of recent banking collapses is littered with tales of inadequate risk management and poor lending decisions. What is frequently forgotten is that the treasury operation plays a crucial role in any financial institution and the wrong incentives and strategy can hasten a bank’s decline.
When Northern Rock ran out of money, just weeks into the credit crunch, warning bells should have been set ringing throughout the UK banking industry. It didn’t happen. The next treasury to have been caught short was HBOS. Here was an operation that, during the good times, was one of the best at utilizing the capital markets. It played in all the leading currencies and debt sectors. In 2003, HBOS even invented a...
