Banks and Bankers, or “banksters” depending on what news station you have on, are probably some of the most high profile, and have been among the most scrutinized, business people in nation over the last several years.
This is not entirely without reason: the excessive leverage and risking taking by some banks and financial institutions enhanced the instability present in the financial system leading up to the financial crisis of 2007-2008. Since that point, many of the surviving entities have become larger and more profitable than ever before: my recent blog posts about this corporate earnings season highlight some of their blowout earnings results. In addition to increased profits, some institutions have been implicated in transactions in the physical commodity/electrical markets that were not always in the best interest of the customers (you and I).
Being a large financial institution is not all fun and games. There are significant risks involved with being a lending institution: anybody who has ever lent money to anybody can testify to the risk of non or partial repayment. There are numerous other risks that come with being a financial institution: credit risk, interest rate risk, legal risk, regulatory risk, and the leverage employed by the institution. As much bad press as banks may have gotten recently, they do perform an essential service to the economy: matching capital with the entities and individuals who need it to enhance their business strategies.
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While there have been successes in the media regarding banking institutions there have been several stories outlining some of the detriments and struggles that are impacting some of the global leaders. I have attached some links below that outline some of the more prominent issues impacting the banking industry right now. In addition, there is an excellent article from investopedia.com that outlines some of the more common risks, and how to analyze them with regards to your investment decision making process.
Remember, objectivity and analysis are the keys to successful financial decision making.
