WikiStage ESCP Europe London 2016 www.wikistage.org Lenke KISS speaks for the flip side of our debate. She is Senior Manager in the Stress Testing department of Lloyds Bank in London. "The bank performs the service of lending for a fee. That fee is the profit and like every other corporation the banks want to make a profit." "When profit becomes the main aim of operating of a bank and we have an environment which is entirely buoyant, credit is cheap, bank to bank lending is very cheap, they can take on more and more liabilities without having the assets to support them. And the regulator believe it or not (like it happened in the 1990s) says that the market regulates itself, we will not interfere - what happens then? The banks start inventing products that have no relationship with lending or the real world. More and more exotic, more and more wrapped up into bundles that are more and more obscure." "When that happens how do you make profit? By generating sales - so you try to make your customers to buy as much products they can, whatever those products might be." "However, what really increases your profits is risk. So banks start trading more and more risky products, without the appropriate capital base and without the regulatory controls in place - that's what happened in the financial crisis. Because of the linkages in the financial system and because the financial system is such an important part of the real economy supporting all economic activity, the financial crisis created a global recession" "If you stop lending, how do businesses get the funds to invest? How do banks get the funds to grow? As individuals, how do you get your mortgage? And not just that, but also the banks had to be bailed out, using taxpayer money. About 50 billion pounds worth bailout happened in the UK, 7 banks collapsed, some banks were nationalized." "At this point, there is about 30 billion pounds worth of fines and costs to the banking industry because of misspelling financial products." Although the regulators have made a lot of headway in trying to fix the financial risk within the system, by introducing stress testing, by the Basel Committee that introduced tougher and tougher rules on capital, by separating the investment banks from the retail banks - even so, the inherent risks remain. Conduct has not yet been solved, bankers are still taking enormous short term bonuses. The bonus cap has not worked; salaries have been raised to circumvent these regulations." "How about those people in the population that have no bank account, because no bank wants to open a bank account for them? If the banks become even more risk averse because of the regulations, who are they left to? And then we come back to the social responsibility of the banks."