AN ARROGANT OPINION

Forget about the modern or medieval meaning, there is only one word which defines a bank!  What is a bank?  Bank simply means trust.

Can we trust in our banking systems? Are banks still banks?

Looking at the modern trend of financial intermediation it is a startling reality that banks are no longer symbols of trust but mechanisms of frauds, poor governance, regulation sidestepping and insider trading. This has given an impetus to the new banking revolution which is antagonistic to the values of trust.

Call it the heartbeat of the world financial systems, the Canary Wharf hosts some of the greatest financial scandals which have led analyst to question some of the banking practises prevailing in this generation. The LIBOR rigging scandal which was unearthed in 2012 shows that we can and must never again trust in banks or rather bank in banks. The LIBOR ties up almost all the financial systems in the world but a small quartet managed to manipulate it. These are the same people we entrust our investment and deposits with but can they be trusted any further. Fines were tagged to the offence but already the trust is gone and banks have overridden their purpose. Only now the regulatory authorities have seen the importance of coming up with proper conditions with regards to bank rates. http://www.reuters.com/article/2013/03/18/us-bis-libor-reform-idUSBRE92H06G20130318

Canary Wharf- LIBOR rigging was manufactured and perfected here  




In Zimbabwe people have been forced to use pillows and mattresses as bank accounts because of their trust which was abused in 2004 and repeated again in 2012. It is a ridicule to encourage Zimbabweans to place their money in the proper financial system because they have seen it all. Companies and individuals lost their funds as banks were placed under curatorship by the Reserve Bank. The systemic effect led to a near collapse of the banking sector and liquidity challenges were felt. In 2012, three Zimbabwean banks Genesis, Renaissance and Interfin were closed down leading to a situation where the depositor and the investor had to lose everything.

Investigations to the core of these closures point bad corporate governance, abuse of depositor funds and failure to meet regulatory requirements as the main causes. Shareholder influence was the main culprit to this predicament. Seriously a shareholder playing dirty with my money!!!!!!!!!!!

At first the banker is entrusted with depositor and investor funds but only repays through abuse. Should we then trust in banks when they abuse that same trust?

The Deutshe Bank has been rocked by a lot of fraud cases which has left Europe contemplating on how best to deal with bankers. This is just a tip to how modern banking is structured.

Corporate governance in banks is an issue which needs serious attention if we are to curb the ever growing unorthodox means of banking practises. Zimbabwe is one of the countries where lack of corporate governance has manifested some the amateurish ways of banking. The fact that one single shareholder at Renaissance Merchant Bank had the audacity to abuse depositor funds may just point to the fact that a lot may be going on behind the Boardrooms.

When a bank defies the state how best can it promise trust to the consumer. Standard Chartered paid heavy fines (327 million dollars)to the US regulators after making transactions with countries which were on the US sanction list. In clear act of defiance these transactions were wired through the United States.

That points to the fact that banks are only driven by the motivation to make profits and there is no concern as to how these profits come about.

What trust then should we place in banks?

Consumers are forced to trust because banks are not conventional robbers but rather intelligent ones where various dynamics are employed to abuse any single dollar in the name of profit maximisation.

Whenever consumers transact with banks the element of trust is now a thing of the past. Trust has been substituted with risk. Consumers risk their funds because they scepticism has taught them that tomorrow might report that a certain bank is closed.

Even the so called, ‘too big to fail’, banks in the United States and Europe are revelation to the fact that banks can never be trusted anymore. No one ever thought that a one hundred and fifty year old Lehman Brothers would ever come to its knees. In September 2007 clients besieged Northern Rock which was one of the biggest forces in Europe after getting the news that the bank was going under. Even when bank employees practise beyond their mandates it clearly shows that there is a lot of underhand dealings going on in our banking systems. Kweku Adoboli, a trader at UBS Bank single handedly exposed the bank to 12 billion pounds when his unit was only authorised to risk 100 million pounds. This shows the nature of human capital which is the driving force behind banks.

                                                     Kweku Adoboli

Can we trust the banks? Should we let banking hegemony prevail? Is banking the euphemism of robbery? All these questions need urgent attention if we are to see viable financial systems which bridge the surplus and deficit units.