AFF 604 Chapter Notes - Chapter 6: Financial Intermediary, Credit Risk, Financial Institution
29 May 2017
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Document Summary
According to international monetary fund, financial and economic damage of financial crisis exceeded trillion. Along with financial damage, reputational damage for financial services industry, financial intermediaries and asset managers and individuals. Joseph ackermann, ceo of deutsche bank: industry guilty of poor risk management with serious overreliance on flawed models, inadequate stress-testing of portfolios, recurring conflicts of interest, and lack of common sense, as well as irrational compensation practices. Client losses from sale of bankrupt lehman bonds, collapsed auction-rate securities, and investments in bernard madoff"s fraudulent scheme suggests importance of reputational capital. Financial services = special businesses because they deal with people"s money. Capital markets and institutional asset managers have taken a bigger portion of the intermediation function from banks. Fiduciary activities for institutional and retail clients are conducted by banks, broker-dealers, life insurers, and independent fund management companies. These conditions give rise to reputational risk exposure for financial firms.
