Subprime crisis has eroded trust in bankers
In the context of what has been going on internationally, the boys at UBS had some cheek to put a sell order on AIB and Anglo Irish, neither of which have exposure to the subprime sector, and neither of which looks likely to post a loss anytime soon, despite the serious slowdown in our economy.
UBS’s loss links directly into the scandal in the US where banks were indiscriminate in their mortgage lending and the downturn now threatens the entire US economy.
So far a estimated e87.5bn in bad debts has been attributed to the housing market.
For the rest of the banking world the problem has been that they were cajoled into buying investment packages containing billions of those loans that have now gone sour.
As a result total losses globally could be over €400bn before the final tally has been made.
The nature of the products is such that it is virtually impossible to put a monetary value on the investments that were cobbled together by the global banking fraternity during the boom times.
Société Générale were forced to appoint independent auditors to carry out a full examination of its investments in an effort to fully quantify the bank’s exposure to the subprime debacle.
In Dublin this week an investment seminar, sponsored by Friends First, was addressed by two key thinkers from Britain who keep a sharp eye on business practices on these islands.
Ironically the subject was what can or will be expected from financial advisers in the future.
Though small beer by comparison with the global crisis, what emerged was the need for greater clarity about the nature of the products were being sold to them as individuals, be they pensions or other investment products.
The clear message to the financial sector, and to those who presume to offer advice to people, is they will need to dramatically improve their attitude to clients and to deliver savings and investment instruments that can be simply explained.
That point was made by business guru Patrick Dixon, a well knows futurist and listed among the top 20 business thinkers globally.
His take on the subprime crisis, he told the seminar, was that banks globally did not fully understand what they had signed up to at the time.
It’s hard to believe but it appears they did not understand the nature of the investment packages they bought into.
It brings to mind people who hand over their hard earned money to chancers who promise investment returns that are totally unrealistic and who ended up losing their hard earned money.
This subprime issue looks to be no different and it suggests a huge portion of those who bought the products walked into the fiasco with their eyes wide open.
It’s hardly surprising then that the Friends First survey, carried out by Lansdowne Market Research, showed people keep well away from financial advisers when thinking about how to invest their money.
Six out of 10 people were more likely to consult an amateur source before making an investment decision the survey said.
The evidence internationally suggests bankers are definitely a dodgy species and who need to clean up their act.
Is it any wonder in this current global climate that six out of 10 people believe they are as well off talking to friends about what to do with their money than to a professional? That’s some indictment of the sector.
