A solid effort by Cornell in the AFR today (I had previously highlighted Lowe's remarks on the subject):
Now banking is about nothing but trust. Savers give banks money which the banks lend out, multiple times, to borrowers. It’s an inherently risky business and it doesn’t need banks to take more risks by gambling and making it an even longer-odds game. Those lending money to banks to on-lend, be they ordinary savers, institutions or other banks, need to trust that the money will be there when they want it back...
Remuneration in banking needs to be structured to recognise the risk the banker is taking, both immediately and in the future. Modern banking is complex and spivs in banking are not as easy to spot as in the broader business community where spivs tend to plaster their picture all over annual reports, own sports teams and helicopters, and whinge from the back of trucks about being hard done by as they seek taxpayer rents.
Banking spivs are hidden under a cloak of conservatism inside institutions but they are quite capable of making huge bets when the odds are stacked in their favour – when they will pocket the winnings – while the taxpayer picks up the tab if the bet goes wrong.
