Do banks have a future

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

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

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

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• Decrease of prudence asset inflation
• Increase of prudence asset deflation
• Asset deflation leverage equity
  disaster

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Salesmen dressed as advisors

• Services
• Mortgages
• Life insurance
• Investments
• Actors
• Employees
• independent intermediaries
• Remuneration
• Bonuses
• Fees
• Discounts
• Transaction driven
• b2b vs b2c

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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

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• 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

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Non-executive directors

• Supervisors of the executives
• Less upward potential
• Many dont 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

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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

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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

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• 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