Guenter Droese, former managing director of Deutsche Bank AG
When assessing the threats to financial institutions, the first question I would raise is regarding the organisation’s strategy and business plan. What type of banking activities are relevant to that particular institution?
The lessons learnt from the past 15 years should be to consider not only the risks that need to be measured for Basel II or III, such as credit market and operational risk. Financial institutions should investigate and discover what the general threats to banking activities are.
Most of the banks that contributed to the financial crisis still behave in the same or similar manner. Many of these transactions, which were crucial for the banks’ competitiveness, are still being made now in the grey market without any control.
There are plenty of discussions regarding the earnings of investment bankers, who still receive huge bonuses even when something has gone wrong. The big banks are circumventing various kinds of rules on this. The more this becomes public and transparent, which is not happening at the moment, the more it becomes a significant reputational risk for the banks. Bank managers should be taking a long-term view about securing good relations with the entire customer base, but I do not believe the majority of banks understand this.
This article was first published in StrategicRISK’s Financial Institutions Report, published in association with Zurich. To download a copy of the full report, click here