- One of the main Belgian (flemish) banks KBC is going through a real storm since a few days and some details are really interesting
* a total loss of credibility : they have always said that they didn't need the money, that they were safe and that the only problems they would have would only be because they had invested too much in Eastern Europe (buying local banks at prices going up to 6 times the real turn-over - probably based on boomscenario's)
They have always said to the politicians that they were safe now and that nothing could happen and they were believed on their words. They are big bankers and if you can't believe big bankers - who you suppose are being advised by the brightest minds - who can you believe ? They are in any case responsable for an enormous amount of investments and you suppose that they act accordingly.
The politicians have now some questions about their discourse that they don't need more outside control and rules.
One detail may help them with that. After the official discourse that they were safe, someone in the bank had probably some doubts and questions and just wanted to be sure. So a totally external risk auditor was called in to review all the risk assessments on their investments and portfolio. He noticed the problems that set since two weeks the negotiations between the banks and the government into motion.
It will be very difficult to regain the confidence of other banks and financial institutions or supervisors because if the internal risk assessment is so flawed that an external risk assessment finds such big problems, than what can you trust from all the things that they are saying ? The biggest problem with Fortis was that other banks and financial institutions were not willing to lend any more money to this bank untill the take-over by BNP was being presented as a solution. The same can happen to KBC if they can't assure the other financial partners that all their financial information and risk assessment is sound and correct and double-checked.
* a bank is not a scouts group. The CEO of the bank who went on tv and was in the international press to assure that everything was fine and that the bank was one of the best in Belgium and that all the rest were rumors and speculation and that we have to trust him when he was saying this is taken to hospital shortly before the publication of these reports. So now other secondary persons have to take his role. But one thing on tv just made me bang my head against the wall (virtually). They said that the top people and directors of the bank and in higher structure were all friends and working in a friendly confident atmosphere. But a bank or an organisation like that is not a scouts group. Off course you have to work together, but that doesn't mean that decisions, facts and discussions have to take into account anything else than facts and nothing else than the facts. You aren't a better friend because you accept stupid decisions or propositions. You are heading a bank because you are responsable for the money of thousands of people and enterprises, not to form a social club for friends.
This means that internal auditing and controls are lacking and are working in the wrong atmosphere. Friends don't send auditors through the propositions of each other.....