Trésorier/Treasurer magazine - n°81 - 2ème trimestre 2013 - (Page 3)

EDITORIAL Toward a more responsible financial world For over 5 years we have been living through a long financial crisis which, regrettably, is not yet over. How we, in a civilised world, could have reached such a pass is still the main question that the man in the street asks time and again, without receiving any satisfactory answer. In many professions that are considered to be dangerous, people risk their lives every day in the face of danger, such as firemen. These professionals know that taking risks is vital for customers, like emergency surgeons, Alpine guides, aircraft pilots and plenty more. They know the risks, they can measure them and they accept them. In finance, we get the impression that this does not hold true. Bankers, traders and CEOs can receive large or quite large bonuses when they perform. By contrast, have you ever heard anyone talking about a negative bonus? Why not claw back bonuses received when performance is negative? Would that not be fairer? A game in which you can only win seems nonsensical. We have seen doctors, sporting guides, and employees sacked for less than that. If you agree to conduct financial transactions in return for disproportionate bonuses, you should also accept the adverse consequences: having excessive bonuses clawed back, losing your job, etc. Without going too far in the other direction, we need to be stricter in holding to account those people who take risks that may have serious direct consequences on the holders of funds and indirect consequences for the financial system and for the whole planet. We owe it to ourselves, for pity’s sake, to call a halt to all this. We need to hold to account the irresponsible people who generated this crisis for which we are all paying the price today. François Masquelier, ATEL Chairman — APR / MAY / JUNE N°81 — The same goes for economic forecasts. Although they may be flimsy, whimsical and uncertain, mistakes in forecasts are never punished, nor are their authors ever criticised. We forgive economists everything – more even than the ratings agencies – since they publish only opinions. It is more than ever necessary to ensure that the managers of this world are held responsible. Having them take risks with other people’s money while themselves running only the risk of potential loss of earnings and no bonus is perhaps not the cleverest way of doing things. With more dissuasive and punitive measures we might hope for more prudence, fewer risks and at the end of the day more income over the long term. Visions that are too «short-termist» are never beneficial. LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE The author, designer and initiator can always conceal risk and have the advantage over those whose duty it is to detect it. We need to encourage financial personnel to do the right thing and not to misrepresent or to dissimulate risks taken on behalf of others. We are advocating greater transparency. Management, and traders are only employees who receive remuneration, in addition to a fixed salary, for their («positive») performance and are never sanctioned for («negative») adverse performance. Where is the risk? Potential loss of earnings? Opportunity cost? But nothing earth-shattering, life-threatening or disastrous. We now routinely find that it is the shareholders that lose money and not those people who are paid lavishly to generate dividends. Surely we should bring in «dis-incentives». Yet others see the problem as being in theoretical financial models, which are often far removed from economic reality. Have you ever seen Nobel Prize winners punished for errors in their theories? Perhaps we rely too much on the theoreticians of financial mathematics who do all their modelling on paper, and none in real life? 2013 The ancients were more pragmatic. They established simple and diabolically effective heuristics several thousand years ago. In Hammurabi’s code, for example, there was a rule decreeing that if a house collapsed and caused the death of its occupants, its builders or designers should be put to death. This is clearly a draconian law, similar to the vengeance-based Talion law. However, it had the merit of ensuring that builders and architects were held responsible. Even though it can be criticised for being too drastic, it was still the best management rule ever laid down. 3

Table des matières de la publication Trésorier/Treasurer magazine - n°81 - 2ème trimestre 2013

INTERVIEW - Patrick Siméon and Ibra Wane, Amundi
15 MINUTES WITH - Jörg Wiemer -Treasury Intelligence Solutions - TIS
The Financial Risk Observatory

Trésorier/Treasurer magazine - n°81 - 2ème trimestre 2013