7 - The failure of banking industry

To recall back to 2008 USA bank crisis, Banking industry was successful before 2008, it was determents as much profitable compare to other potential industries, such as oil, gas and coal, and global banking industry revenues were 6% of global GDP. However, there was no emphasis on corporate governance measures for financial institutions, and caused a banking crisis in 2008 which originated by Lehman Brothers. As a result of this, there were more than 465 banks have failed after 2008 banking crisis, some of banks are either nationalised, takeover or collapsed.

There are a number of reasons why causing the bank crisis happen. The management of  interconnection between the inherent business risk and remuneration was collapse. This was causing a problem between remuneration structures and bonuses, which encouraged excessive short-termism rather than focus on maximising shareholder's welfare, and also lack of prudent risk management and weaknesses in reporting on risk were serious problems as there were no one care about the risk. Therefore this indicates that banking industry was lack of corporate governance, and it was a main contributor to the financial crisis.

From a personal perspective, this is a question that why global banking industry revenues were 6% of global GDP, this is a strange issue that there was a lack of corporate governance measures for financial institutions. There should be more corporate governance compare to non-financial institutions. If there was existed a strong corporate governance in banking industry, people who working in banking industry cannot easier to achieve personal welfares (easier to let businesses and citizen to get bank loan in order to take more remunerations).