UBS

Okay, bankers screwed up - but enough with the bashing

January 31, 2014: 10:07 AM ET

Critics could be encouraging banks to be more secretive.

By Sanjay Sanghoee

140130175547-sergio-ermotti-620xa

FORTUNE -- In the years following the financial crisis, regulators and protestors chastised banks for nearly destroying the global financial system, but UBS (UBS) CEO Sergio Ermotti recently questioned the wisdom of all the bashing:

"Life is hard enough, and I think this constant lecturing on ethics and on integrity by many stakeholders is probably the most frustrating part of the equation. Because I don't think there are many people who are perfect," Ermotti said last week in an interview at the World Economic Forum in Davos, Switzerland.

MORE: Bitcoin gets two hearings - and steps closer to acceptance

His opinion, as tone-deaf as it might sound to regulators and Occupy Wall Streeters, isn't totally off point: It's true that most major banks have been implicated in gaming the system for personal gain over the last five years, and as a result, lost the public's trust. Also, banks by virtue play a central role in the capital markets, and are unlike other businesses. When financial institutions behave badly, the consequences can be fatal for the entire economy (as it was in 2008, following years of greed and easy lending that almost destroyed the global financial system). Hence, the higher standard to which they are held, and why the criticism is so scathing now.

However, because banks are so crucial to our economic survival and prosperity, it is also a good reason to temper attacks against the industry, and to give banks some breathing room to do business. Ceaseless demonizing and regulatory overkill will not move us faster toward real reform. And if anything, it will only encourage banks to become even more secretive and defiant.

True, the profit interests of a bank are often at odds with its duty of care toward the public good, and what shareholders want is not necessarily the same as what our economy needs. When it comes to Wall Street, after all, greed and even recklessness are only punished when they fail. Conversely, as long as banks generate outsize returns for investors, they remain successful.

The knee-jerk reaction to this (other than name-calling) is large bank fines, but even these are mostly ineffective. Take JPMorgan Chase (JPM), whose stock is trading close to its 5-year high and whose CEO just received $20 million in compensation for 2013 despite the soaring costs of all its legal troubles.

MORE: Why stronger GDP growth isn't creating more jobs

Instead of this and in the wake of the banking crisis of 2008-2010, what regulators and the public really need to do is hold a candid but constructive dialogue with CEOs like Ermotti to reach compromise and find practical solutions to problems in the banking industry. The end goal should be a win for everyone, not a loss for the banks. Such a spirit of collaboration would benefit everyone, but it requires civility and (tough as it might be) the willingness to look forward instead of backwards.

In this light, Sergio Ermotti's complaints about bank bashing might seem disingenuous but they do contain an important message that is worth paying attention to.

Sanjay Sanghoee is a political and business commentator. He is the COO of Delos Capital, a private equity fund based in New York City, and has worked at Lazard Freres, Dresdner, and Ramius Cowen. He has appeared on CNBC's Closing Bell, MSNBC's The Cycle, TheStreet.com, and HuffPost Live on business topics. He is also the author of two thriller novels.

  • It's time for European banks to shrink

    Executives at big European banks thought the worst was behind them. They thought wrong.

    By Cyrus Sanati

    FORTUNE -- Banks in the U.S. have had a tough earnings season, but their counterparts across the pond in Europe seem to be having an even harder one. From Deutsche Bank to UBS to Rabobank, it seems that old demons and lackluster performance have hit the purse of nearly every integrated European bank.

    But European MORE

    Oct 31, 2013 5:00 AM ET
  • How tax dodgers can survive the Swiss bank bust

    Some Swiss bank holders may choose to move funds to other offshore havens like Singapore or the Cook Islands.

    By Lynnley Browning

    FORTUNE -- Americans living and working in Switzerland aren't feeling much joy these days on strolls along the Rue du Rhone in Geneva, where luxury watch shops and Gucci and Hermes boutiques nestle amid a clutch of private banks.

    Thanks to a landmark settlement last Friday between Switzerland and the MORE

    Sep 3, 2013 10:26 AM ET
  • Exclusive: UBS loses senior private equity exec

    Nigel Dawn leaving at the end of July.

    FORTUNE -- Nigel Dawn has stepped down as a managing director with UBS, where he is co-head of the investment bank's private funds group and head of its private equity secondaries business.

    Fortune has learned that Dawn informed his 20-person team of the move within the past week, and that no formal decision has been made on his successor. He will remain with UBS MORE

    - Jun 12, 2013 4:57 PM ET
  • U.S. citizens ditch passports in record numbers

    If the recent quarter's pace continues, 2013 will become a landmark year for saying goodbye to America, tax-wise.

    By Lynnley Browning

    FORTUNE -- Americans are ditching their U.S. passports in record numbers, a sign of growing frustration with a system that taxes U.S. citizens on their global wealth whether they live in Montana or Mongolia.

    The latest bold-faced names to relinquish their U.S. citizenship include Mahmood Karzai, a brother of Hamid Karzai, MORE

    May 8, 2013 1:35 PM ET
  • Offshore account holders win a victory in government tax case

    The Justice Department got a black eye last week in a case involving a 79-year old Florida widow with $43 million in offshore accounts.

    By Lynnley Browning

    FORTUNE -- Federal judges usually dislike tax evaders, and in recent years they have imposed hefty fines, lengthy probation, and even prison sentences on dozens of Americans with offshore bank accounts. But the watershed case of Mary Estelle Curran, a 79-year-old widow who earned MORE

    Apr 29, 2013 2:33 PM ET
  • Exclusive: UBS loses top U.S. tech banker

    Mark Zanoli leaves UBS.

    FORTUNE -- Mark Zanoli has stepped down as head of U.S. technology investment banking at UBS, Fortune has learned.

    Zanoli originally joined UBS (UBS) in July 2010, following 17 years with J.P. Morgan (JPM) and Hamrecht & Quist.

    He was based in San Francisco, and at one point led a team of around 40 professionals. That figure was slashed by more than half late last year in a large round MORE

    - Mar 25, 2013 2:44 PM ET
    Posted in: , ,
  • Liberty Global to buy UK's Virgin Media

    Deal marks the second mega-buyout this week, expands John Malone's empire

    FORTUNE -- Liberty Global (LBTYA) today agreed to acquire UK- based cable company Virgin Media (VMED) for $23.3 billion, a move that signals the market is willing to support big, high-price deals and also creates one of the world's largest broadband communications companies.

    Liberty's announcement about the acquisition was released just hours after computer maker Dell Inc. (DELL) said it was being MORE

    - Feb 5, 2013 9:20 PM ET
  • UBS' Libor charges: No longer a victimless crime

    The Justice Department's case against UBS shows borrowers were likely hurt.

    FORTUNE -- Early on in the Libor scandal, there was a sense that the systematic rigging of a key lending rate was a victimless crime. Wednesday's Justice Department charges against UBS should finally dispel that notion.

    It was assumed that if Libor rates had been pushed lower, as appeared to be the case, borrowers would have benefited. Even some municipal finance MORE

    - Dec 19, 2012 1:01 PM ET
    Posted in: , , ,
  • The problem with nomadic megabanks

    Behold an exciting new feature of the post-bailout era: the megabank that wanders the globe with the weapons of financial mass destruction strapped to its chest.

    UBS (UBS), the giant Swiss bank that took $59 billion in bailout funds three years ago in addition to billions of dollars in conveniently cheap Fed loans, is chafing at the restrictions that terrified regulators there are imposing.

    The government wants to avoid having its Godzilla-scale financial firms – MORE

    - May 26, 2011 11:19 AM ET
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.