Banks all over the world – many of them hit recently by fines for a multitude of reason concerning poor governance – are looking to change the culture within their organisations when it comes to risk. Without the right focus, however, only marginal improvements will be made.
Basel-endorsed centralised credit models and too-big-to-fail banks will not provide European economies with what they need, such as an increase in working capital for SMEs. Only deconglomerated banks unbound from Basel III risk management models can do this.
Shifting regulatory responsibility away from international bodies and putting it into national hands is threatening the globalised nature of banking. The banking community should instead be concentrating on broadening and strengthening the remit of international supervisors.
The process for deciding upon and implementing global reforms could be made much more effective and time efficient if the global supervisory community invested more in technology, which would improve both international communications and data collection and analysis.
The problems that have beset Cyprus this year have an all too familiar ring to them, but the post-crisis reaction to its economic problems by Iceland show how a full investigation into the causes of a financial crisis are essential to enable a new system that is fit for purpose to be established.