Leading banker sounds warning over greed factor
In the wake of two major 'rogue' trading scandals that rocked global stock markets this year, Cedel Group chairman Robert Douglass has sounded a warning against the 'greed factor'.
'The sheer profitability of the industry during this extended bull market has, in some instances, led to a brash new level of over confidence,' he said.
'When combined with a degree of arrogance, a warning bell should sound for the marketplace.' The head of the Luxembourg-based clearing house said the greed factor had re-emerged on a scale not witnessed since the excesses of the late 1980s - as evidenced by the collapse of Barings as a result of the Nick Lesson scandal and latest revelations that giant Japanese copper trader Sumitomo has lost US$1.8 billion from unauthorised dealings by 'rogue' trader Yasuo Hamanaka.
'There is a vast difference between the pursuit of sound financial results and the pursuit of financial accumulation at any cost, often with disregard to principal or longer term implications,' Mr Douglass said.
Attributing the greed factor to taking unacceptable and sometimes deceptive risks to maximise short-term earnings at the expense of longer term judiciousness, he said: 'To some extent the system, which promises huge rewards for individual performance, can be blamed for some of these abuses.
'Traders and managers are encouraged to produce results which exceed reasonable revenue targets. The corporate ethos calls for them to work flat out for that single day when bonus payments will be determined. Little wonder we have spawned a new era of rouge traders and 'dressed up' performance.' Contributing to the global debate as 'an interested commentator, not a referee', the Cedel chairman suggested three moves to curtail the 'greed factor'.
He proposed the introduction of higher standards of corporate values; a corporate philosophy that encourages and rewards 'group excellence and longer term performance, rather than short term, often illusory individual performance'; and greater recognition that corporations are responsible not only to shareholders but also customers, employees, suppliers and the community as a whole.
Mr Douglass added: 'Cedel group's role [in the debate] is not to impede financial industry growth and certainly not industry profitability.
'Nor is it our function to be a harbinger of doom. Our role is to facilitate orderly growth and stability in the capital markets.' Mr Douglass' message of caution was 'only a reflection of our own inherent financial conservatism and the vigilance we maintain on behalf of our customers' interests'.
