August 04, 2018

To rise to the level of incompetence, “The Peter Principle”, has clearly been applicable in the case of current bank regulators

Sir, Sir Cary Cooper of Alliance Manchester Business School, when commenting on Tim Harford’s Undercover Economist column “We should not let bad managers stick around” (July 21), and the Peter Principle writes: “When promoting staff, many place disproportionate importance on a good run of form/current performance over their talent and skills to do the job they’re being promoted to. A good backbench politician won’t necessarily make a successful minister.” “Don’t allow ambition to cloud our talent judgment” August 4.

Indeed, and that is exactly what has happened to our bank regulators. One thing is to be a banker and carefully analyze the risk for the bank, and another, completely different, is to be a regulator having to analyze the risks of the bankers not being able to correctly analyze or respond to risks.

In this respect all current regulators, who could have been doing reasonably well analyzing individual small banks, when they still keep on thinking that what is perceived as risky is more dangerous to the bank system than what is perceived as safe, they have clearly risen to their level of incompetence.

PS. By the way, talking about business schools, why have they all kept mum on this? Could it be that all there wanted to be bankers and enjoy the big bonuses that could be paid when there is so little equity that needs to be remunerated? Or is it that they just don’t want to be seen as bankers’ party-poopers.