It would feature radical transparency: full disclosure of performance and compensation. The group decided that a banker should not sell a product unless he could pass a test about it. They even decided that there had to be a means to confirm that customers understood what they were buying. They proposed collective risk assessment, creating a means for its constituents to select and perhaps vote on investments. They explored how to offer transparency on each product and customers’ performance with them so that you could compare your returns with fellow customers. And they argued that bankers should be compensated on profit. It wouldn’t be an easy business to run; being answerable is hard. I said later that its slogan should be, “the only bank you can trust.” That is what would make it successful. When I asked, most in the room said they would be such a bank’s customers; many said they’d work for it; almost everyone said they’d invest in it.
Right, that's banks sorted: who's next?
You posted about XBRL way back in 2007. Good news since then: This open standard computer language is alive and well and about to be applied to public company disclosure - but it's unclear when it will be applied to the asset disclosure at the root of today's crisis. Check http://paulwilkinson.com.
ReplyDeleteThe data tags for all of U.S. GAAP were crowdsourced, and nothing in the financial sector is more complicated than U.S. GAAP. Other open banking and investment standard tags can be created as soon as the crowdsourcing infrastructure is deployed. The constraint, as Jeff implies, is government looking at old school solutions. Market transparency vs. bank secrecy is the big challenge. Make the bad assets transparent with an industry standard computing language, let those sitting on cash bid for the assets, and move on to the future.
I'm impressed how well informed you are. Thanks for the update on dear old XBRL - glad to hear it's flourishing. Let's hope it helps....
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