The reforms recommended by Sir David Walker for the governance of banks would, if implemented, impose a huge moral responsibility on executive and non-executive banking directors alike. The will to exercise independent judgment without regard to personal advantage – whether money, power or status – is a rare commodity in commercial life, and it cannot […]

Time for a reformed regulatory framework – auditing included   The economic collapse is merciless in its revelations of failure, whether evidencing spineless regulation, ignorant policy-making, ineffective auditing, incompetent rating or wimpish governance. There’s nowhere to hide – as Warren Buffett puts it, when the tide goes out you can see who’s been bathing naked. […]

Now we know: the booming economy was a huge Ponzi scheme Bernard Madoff’s $50 billion Ponzi fraud is now legendary. Yet the fabric on which our entire credit explosion rested was just as illusory as Madoff’s investment fund. It existed in appearance only. The toxic financial instruments, so neatly packaged by investment houses before being […]

  Sir Thomas Gresham was a formidable figure in the late 16th Century. He built the Royal Exchange, the most fabulous commercial building of its day. Modeled on the Antwerp Bourse, it contained 150 small shops, making it one of the world’s first shopping malls. Yet its chief virtue was that, for the first time, […]

Accountants are mere recorders, whereas forecasting lies within the province of chartists, economists and strategists. Yet accountants must share at least some of the blame for the lapse in forecasting reliability. After all, investment strategists require indicative source material in the form of financial statements prepared and audited by accountants. The principal justification for today’s […]

It has been argued that hi-tech accounting wizardry, including the “fair value” principle of valuing current assets at market value, has played a devilish part in the present credit meltdown. After all, it allowed banks to overstate their assets and understate their liabilities with recourse to off-balance sheet “structured investment vehicles” that everyone thought had […]

Newton’s equations describe the motion of bodies, earthly and celestial. Correct application of his gravitational laws will keep an aircraft flying – but it’s the same law of gravity that could send it crashing to the ground. In similar vein, next time you hold a new £20 note take a moment to behold the profile […]

Banks deserve our opprobrium: they have forgotten all basic principles   The Chinese Sage Lao Tsu wrote, on the subject of government, that in the golden age people do not even know they are being governed; in the silver age they revere their leaders; in the iron age they respect them; and in the age […]

I have always assumed that gains and losses balance out in the big picture, assuming the lapse of sufficient time.  If I sell an investment for less than I paid I incur a quantifiable loss.  This does not mean that whoever buys it will make a profit since he too may sell for less than […]

The lending spree is over.  It will be a while before credit and risk are re-acquainted.  It is symptomatic of the latest squeeze that virtually every rule of sound banking was ignored. If, in the 1990s, conventional risk assessment dictated that mortgages should not exceed either 90 per cent of the property’s value or a […]