Internal Risk Regulation

Roger Bootle has an interesting idea for who should be staffing the internal risk departments of banks:

Personally, I would sack at least half of the risk assessment boys and replace them with historians and people versed in English literature. Their brief would be to think the unthinkable - not to measure the easily quantifiable.

Hmm, he's got a point really, doesn't he?

The silence about the corporate behaviour which led us to this pretty pass is scandalous. Come off it boys, you were sucked into a bubble of the classic sort. You were persuaded to believe that nothing could go wrong. Yet any study of financial history would have set the alarm bells ringing. But do you ever read any? To his great credit, the Governor of the Bank of England warned explicitly and publicly of the risks. But did you listen? Outside commentators and analysts, and even, in some cases, your own in-house experts, pointed out the over-valuation of property. But did you pay any attention?

That the detailed regulation of the banks was taken away from the Bank of England, the head of which was indeed warning about the problems, and given to the FSA, the head of which still seems not to understand them, might be a clue that the new regulatory regime isn't quite what Gordon Brown promised us it would be.

But back to that internal regulation staffing business: how about insisting that only those who have read (and can show they understood) Extraordinary Popular Delusions and the Madness of Crowds gets to take one of those £200,000 a year plus jobs taming the traders?

I'm prepared to reread my copy if that will help?