ABBL

He that finds his knowledge narrow, and his arguments weak, and by consequence his suffrage not much regarded, is sometimes in hope of gaining that attention by his clamours which he cannot otherwise obtain, and is pleased with remembering that at last he made himself heard…
 

- Samuel Johnson

Today, it has become pretty much an accepted truth that banks are guilty and that they should pay. Yet very few people actually lose much sleep thinking about what it is that banks are supposed to be guilty of and why they should pay. These days, simply saying that it is the fault of banks is more often than not enough to convince people of the truth of one’s argument. The extent to which personal opinion, loudly expressed, trumps over truth is easily illustrated by the ongoing Euro crisis.

There are many people, including politicians, who, without batting an eye, say that banks have caused or accelerated the Euro crisis by speculating on sovereign debt. And because banks now need new capital to get through the crisis, it would be perverse if taxpayers were once again left footing the bill.

The truth, however, is that banks have done their job in lending money to States. Existing legislation and governments massively encouraged banks to buy State debt, which was considered to be a virtually risk free investment. Importantly, States – but not only States – still absolutely need banks to continue to finance them.

We are thus not dealing with a banking crisis, but a sovereign debt crisis of States that have over-indebted themselves and can no longer pay back their creditors. States are thus not rescuing banks, but themselves.

That the majority of people still deem it necessary to keep bashing banks has less to do with facts than with a vague feeling that banks are the enemy. The banking sector, which varies widely across the world, is today globally regarded as being non-transparent and thus shady. This perceived opacity is closely related to the complexity of finance. Yet complexity is nothing inherently negative. The average person is perfectly happy to cross the Atlantic in an airplane without having a clue as to the complex mechanisms involved to keep the plane in the air. Calls for transparency are only heard when things go wrong. The perception of transparency is also always closely related to the observer’s lack of clarity. In other words, if we fail to understand something, we lack trust in it. This may well be the reason why the “Occupy” movement has lots of slogans, but no clear agenda or answers.

Because of this perceived lack of transparency, people call for more ethical behaviour by banks. This is all well and good, but it is a false claim to ask ethical behaviour of others, if one does not have to assume responsibility oneself. It is easy to give moral lessons if one is neither accountable nor has to take decisions. Importantly, in order to criticise responsibly one needs to understand the object of one’s criticism. More than a mere sign of ignorance, pointing fingers without making an effort to understand is irresponsible.

Jean-Jacques Rommes, CEO (ABBL), Editorial published in Luxembourg Banking Quarterly 4/2011