Hey the agency model is NOT working. Well it is not working as it was intended to at least.

A group of people start a bank. They work in the bank. Then they appoint employees to work there.

They appoint qualified people. These people are supposed to be moral, ethical, ….etc.

These people cheat. They manipulate the LIBOR if they are in UK. What happens because of this manipulation?

Well the common man pays a higher interest. In normal English language this is called CHEATING. Simple.

Not all forms of cheating are considered wrong. I have seen banks sell life insurance to people with NO dependents. Have seen them sell a pension plan with DEATH BENEFIT to a bachelor. These are not cheating. What Hsbc did to Suchita Krishnamurthy is NOT cheating. I am convinced that Hsbc would have done fantastic paper work that SK cannot even imagine. She would have signed off waiving everything. She could not have understood 65% of what she signed.

There seems to be NO law for the bankers. This is the big bad western world. Completely lawless.

The Indian situation is not much different.

What I do not like is only one thing. ‘Risk and Reward situation has changed. Over the past few years Barclays employees would have taken nice bonuses. They took a risk on the reputation and the balance sheet of Barclays.

Now the fine is being levied on the shareholders. Not fair at all.

A big portion of the fine should have been levied on the employees too. Risk and Reward should go to the same person. That is not happening. Sad.

Time shareholders sued the employees and got back the 500 Million Pounds. Similarly Bank of America shareholders should sue the  executives for the Countrywide merger.

Does this happen in India? Sure. The executives of a life insurance company in its over enthusiasm gave ‘extra’ money to the associate companies. They delayed payment of a claim. ….who bears the fine? The shareholders of the life insurance company. I am a shareholder of the parent company, and crying. 

There may be many other things that these executives do like delaying a claim application, putting untrained staff to sell, …u name it, and it is done. Fines borne by the shareholder. 

No wonder Taleb said ‘Never trust an employee’.

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  1. Well, it would have required some courage for the regulator to even do what has been done …. unless this is an exit clause for a bigger screw up !

  2. what is the insurance position on this? Will Swiss Re and Zurich Re pick up the tab?

    I think because you cannot see the crime doer paying a price from his OWN pocket these games go on. Who suffers? some poor shareholder of Barclays or Swiss Re…:-)

    who benefits? Insurance consultant…LOL..lets have fun Suresh.

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