Pär Boman, at the end of the day, your children and grandchildren, and your nation, are your most important customers

Sir, Andrew Hill refers to that the chief executive of Handelsbanken told the “FT in 2013 that he had studied 5,000 years of credit risk, while the bank draws on minutes of board meetings from the past 140 years to inform its attitude to customer loans and business cycle”, “Creative forces”, “Boldness in business” March 20.

What a splendid occasion that would have been to ask Pär Boman whether in all that information, he had found any sort of evidence supporting that bank regulators should require banks to hold more equity against what is from a credit point of view perceived as risky from, than against what is perceived as absolutely safe.

That as you know Sir, has in my opinion introduced the most serious disruptive distortion in the allocation of bank credit to the real economy.

Unfortunately, in “Customers first”, Richard Milne later reports that Boman opines: “I don’t think it’s our role to have an opinion on whether the democratic system has taken the right or wrong decision. We see regulation more as a signal system from parliament on how we want banks to behave”.

That’s a shame. My opinion is that it is precisely persons like Pär Boman who owe their customers’ society, the duty to speak out if they feel signals provided by regulations could be taking banks down the wrong route.

Richard Milne quotes Boman in that the “main lesson [from] the 140 years of board minutes that lie in the basement… is that about every 17 years there is a financial crisis.”

That could be… but another lesson that should be extracted from that data is when did banks do the most for their nation between crisis and crisis… and I doubt the answer to that would be… “When we took no risks.”

On the web I find that Pär Boman has three kids… and one of this days he might have grandchildren too. He should never forget that, at the end of the day, they and his nation are his most important customers. And I am absolutely sure they do not need regulators like the Basel Committee and the Financial Stability Board to infuse their banks with dumb credit-risk aversion. That is no way how to finance their future. 

And Andrew Hill and Richard Milne, your duty, that is to press Pär Boman and others to speak out.

God make us daring!

@PerKurowski

Some questions on bankers’ doubts

Sir, I refer to Richard Milne’s interview of Pär Boman, the chief executive officer of Handelsbanken titled “The back-to-the-future banker” January 14.

In it Mr. Boman recounts that having been offered some triple-A rated mortgage backed securities by some US investments banks, Handelsbanken executives, led by him, visited the bankers in New York and asked to see the underlying documentation of the mortgages. And when that proved not to be possible, he went to the west coast and visited some of the houses used in the bonds, and from which he reached the conclusion of “it was very clearly nothing for us”.

Yes clearly that was a great job by Mr. Boman and he should be commended for having doubted. But that said it would be very interesting hearing his opinions on the following:

When presented with operations which involve triple-A ratings, at what size of potential exposure and to what extent of additional not recoverable research costs, is a banker supposed to doubt the validity of the credit ratings?

If it is possible to doubt the quality of the ratings what does that say about the quality of the regulators who with Basel II allowed banks to hold those same securities Boman so wisely rejected, against only 1.6 percent in capital, and thereby allowing bank equity to leverage 62.5 times to 1.

And if a bank discovers great reasons to doubt a credit rating, what is their responsibility in terms of communicating their doubts to the market and to the regulators?

And what is a bank to do if the doubting also extends to the supposedly infallible sovereigns... the paymasters of its regulator?