The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Opinion

Blame bankers, not the model

One banker contrives a metaphor to defend the universal banking model. If you set two BMW 5 Series cars to race around a track and only one makes it back, that tells you that one of the drivers made a mistake, not that the BMW is a bad car. So don’t junk universal banking, through a forced separation into utility banking, comprising retail deposit-taking and commercial lending, away from trading in securities, just to punish the mistakes of poor chief executives who drove their banks into a wall in the reckless pursuit of profits in complex instruments that they didn’t understand, using leveraged proprietary risk-taking they couldn’t control.

That wasn’t a flaw in the model: it was human failure.

This is the argument now being taken to investors in the stocks of large universal banks that have survived the seizures in the financial system. JPMorgan, HSBC and Barclays made good profits in their investment banking divisions in the first quarter of 2009. These earnings will bolster the banks’ capacity to absorb losses on conventional credit card, overdraft and unsecured personal loans, as well as mortgages and commercial and industrial loans, as the recession plays out. Forget RBS, UBS and Citi.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree