Chillin' out till it needs to be funded
HSBC has been keeping its head high, seemingly surviving 2008 when it finally happened. Was it MTM policies geared towards end of year alone? Was it a revaluation of illiquid collateral? Was it the reluctance of the customer to trust the bank after the 2008 meltdown?
Whatever else it was, what is coming is yet to be seen and maybe the conservative haircuts of a few banks were a reality as DB and HSBC would still believe inside. Amazingly HHI has not cost them much despite being a sub prime lender.
But they have traded and they have gone too. It is time we sat at the table again and figured out how to rebuild these banks with the survivors not getting any easy marks for the next 5 to 10 years. They will earn their profits, much like any other industry and they will have to work at it with open transparent balance sheets and a published risk management strategy (with the appropriate modeling)
The super integration of financial services across five continents is something that cannot be easily erased. This too shall pass. However, the world needs new leaders to be given the powers required to brave it out this winter and exhort their legions to get back to a well capitalized, liquid bank for the next decades and play their role in global growth, build america’s staying power and let those working in other sectors the confidence they need and even the advice they need.
The banks need to show that they can plan ahead and stick to their plans. They need to show that they can recruit the right teams and the right managers who can get to the blackboard when there’s still time and count each unit’s performance in strict measurable terms. They should be examples of Corporate Governance for suppliers and investors and consultants not examples of holes in an equation.