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Do banks have a future? Jaap van Manen 28 October 2008

Do banks have a future? Jaap van Manen 28 October 2008. Topics: . The mission of financial institutions Ownership and control Board responsibilities Board structures Management compensation Risk management Oversight. Credit crunch Banking crisis Financial disaster Lack of prudence:

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Do banks have a future? Jaap van Manen 28 October 2008

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  1. Do banks have a future? Jaap van Manen 28 October 2008

  2. Topics: • The mission of financial institutions • Ownership and control • Board responsibilities • Board structures • Management compensation • Risk management • Oversight

  3. Credit crunch • Banking crisis • Financial disaster • Lack of prudence: Risk underpriced • Too much prudence Risk overpriced

  4. Decrease of prudence asset inflation Increase of prudence asset deflation Asset deflation + leverage equity disaster

  5. Salesmen dressed as advisors Services Mortgages Life insurance Investments Actors • Employees • “independent” intermediaries Remuneration • Bonuses • Fees • Discounts Transaction driven b2b vs b2c

  6. Managers dressed as bankers Shareholder value Bankassurance Multichannel One stop shop Remuneration: • Complicated • Value driven • Upward potential • Downward risk restricted transaction driven risk management: a matter of compliance

  7. Rating agents: Businessmen dressed as professionals • Requested rating • Unrequested rating • History as benchmark • Mathematics overrated • Lazy clients Remember: • b2b and b2c • We knew • Spectacular growth of the business

  8. Non-executive directors Supervisors of the executives • Less upward potential • Many don’t have banking experience • Independence paradox • Freeriding with authorities? • authorities monitor prudence • authorities monitor behaviour • Authorities are better equipped: • Staff available • Access to information • Direction of research • The board as a galley of hotshots

  9. Government as Banker • Financial Institution too big to fail • Politicians overestimate themselves • Monitoring: Central bank, government, super non-executives • Culture shock for bankers • House-prices down?: New rescues needed • Funds needed: The sky is the limit? • Credit rating of government

  10. Banks as utilities • Payment systems • Personals savings • Cash Banks restricted in services? The end of bankassurance Separation of investment banking Listed banks protected The end of one share one vote More power for directors

  11. Next Open Lecture Credit Crisis Thursday 6 November, 10.00am Speaker: Professor Robert Lensink Title: The effects of the credit crisis on developing countries Place: Lecture hall 0015, Zernike Building

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