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Eugene A.
Ludwig
› Article– "Happy New Year? Don’t
Look for One in 2008" – American Banker, January 18, 2008 issue.
The beginning of a new year is a time
for predictions. This year, more than
most, we should look ahead. Clearly, the
financial industry is already in stormy
seas, and failure to anticipate the gale
winds or icebergs would cost dearly. Read more
› Article– "Lessons Gleaned from
A Year Full of Upheaval" – American Banker, December 21, 2007 issue.
Looking back over 2007, this certainly has been a year of profound turmoil.
Rarely have there been such large reported losses and such significant changes in the management of large financial institutions. Read more
› Article– "Risk Management and Corporate Governance" – American Banker, November 16, 2007 issue.
As is readily apparent, we are facing
serious challenges in the home mortgage
sector. Certainly, there has been
no equally challenging time since the
late 1980s. Read more
› Article– "How to Keep Charters
But Gain Coherence" – American Banker, October 19, 2007 issue.
The Treasury Department has reopened the perennial hunt for a more structurally coherent U.S. financial services
regulatory mechanism — and no wonder. Read more
› Article– "People Primed to Put Deposits in Banks" – American Banker, September 21, 2007 issue.
The current financial crisis has the potential to produce a shift in American finance.
An emerging trend is the rise in importance of banks as intermediaries. Read more
› Article– "The Credit Correction's Impact on Banks" – American Banker, August 17, 2007 issue.
The credit correction that began with a re-evaluation of the risk-reward parameters for subrime lending is not over. There will be several very challenging weeks and months before it is. Read more
› Article– “Internal Auditing: Lots Of Room for Upgrades” – American Banker, July 20, 2007 issue.
In the real world, auditors cannot be expected to catch every error. At the same time they form the crucial "third line of defense" for financial organizations. As banks become larger and more complex, the importance of internal audit becomes greater. Read more
› Article– “Building a Top-Tier Compliance System” – American Banker, June 15, 2007 issue.
Banking organizations' compliance responsibilities are dynamic. Starting from a modest set of requirements several years ago, the standards today for a quality compliance department are high and getting higher. Read more
› Article– “It's Imperative: Find Value in Data Flood” – American Banker, May 18, 2007 issue.
The modern banking organization is every day more about systematic information retrieval, analysis, and management. Institutions that are thoughtful about the gathering and analysis of information flows gain a competitive advantage in the marketplace that can translate into enhanced profitability in comparison with their peers. Read more
› Article– “Long-Term Benefits of Tighter Standards” – American Banker, April 20, 2007 issue.
Today's difficulties in the subprime credit markets are the canary in the coal mine. Weakness -- perhaps not so serious, but material nonetheless -- also will be left in he housing, commercial real estate, and C&I loan markets in the months ahead. Read more
› Article– “Ending Obsession with Quarterly Profits” – American Banker, March 16, 2007 issue.
Investors and others should stop the excessive and counterproductive focus on a financial institution's quarterly earnings. In all businesses, excessive focus on quarterly earning motivates behaviors that are counterproductive in terms of long-term interests. Read more
› Article– “Enforcement Disconnect Causes Undue Harm” – American Banker, February 23, 2007 issue.
In many ways the financial services regulatory system has served the country well. Our dual banking system has ensured the continuation of more flexibility ad dynamism than exists in many other developed countries. Read more
\› Article– “Can a Structured Portfolio
Weather Coming Storm?” – American Banker, January 19, 2007 issue.
The leading edge of this economic down cycle's tsunami is just beginning to hit individual financial institutions. How widespread the effects will be cannot yet be determined, but it is clear they will be devastating for some financial firms. Read more
› Article– “Prepare for Tougher Subprime Standards” – American Banker, December 22, 2006 issue.
The coming year will see a shift in the focus of the House Financial Institutions and Senate Banking committees because of the new leadership in Congress. One key area of change will be a heightened concern over predatory lending practices. Read more
› Article– “Weak Risk Reports: Top Execs Must Act” – American Banker, November 17, 2006 issue.
Over the past 10 years financial institutions have made enormous strides in risk management. They have advanced traditional disciplines, significantly improving their capacity to identify, measure, and monitor risk. They have also made great progress in creating and implementing new instruments that allow financial institutions to use risk transfer as a key risk management tool. Read more
› Article– “The Value of Enterprise Risk Management” – American Banker, October 20, 2006 issue.
Unfortunately, pressure continues unabated
from analysts and investors who want
financial services companies' senior managers
to increase quarterly profits in the face of
weaker economic conditions. Read more
› Article– “How to Minimize Risk Of Tail-Event Damage” – American Banker, September 29, 2006 issue.
Tail events are the hardest components of a financial institution’s risks to monitor and mitigate, yet they can be the biggest threats to an institution’s well-being. Although the losses from these events are episodic and idiosyncratic, they can be enormous. Read more
› Article– “Room to Improve Terror Financing Rules” – Eugene A. Ludwig and Michael Dawson, American Banker, September 22, 2006 issue.
The fight against terrorist financing has been
one of the main elements in the federal government's
"war on terror," and has been widely
applauded. But while financial services executives
and government officials deserve a great
deal of credit for making this program work,
aspects of the effort have been controversial
among many constituencies, including some
financial services companies and foreign governments. Read more
› Article– “Elements of Basel II That Debate Won’t Alter” – American Banker, August 18, 2006 issue.
A healthy debate is evolving over the precise shape that Basel II capital requirements should take in the United
States. This is a serious matter and it is a mark of distinction in our great democratic system that the debate is now
broad and deep, involving banks large and small, the regulatory community, and the Congress. Read more
› Article– “Focusing on Quarterly Data an Unhealthy Habit” – American Banker, July 28, 2006 issue.
The quarterly focus by analysts and some investors on financial services companies’ performance — so much in evidence recently — is both wrongheaded and corrosive. Read more
› Article– “Risk Transfer, Part II: Hedge Funds’ Role” – American Banker, June 23, 2006 issue.
Hedge funds are major new entrants into the credit markets. Some observers note these funds bring greater efficiency, stability, and depth to our financial markets generally and the credit markets in particular. Read more
› Article– “The Coming Storm in Risk Transference” – American Banker, May 19, 2006 issue.
Current macro-economic conditions make it more likely that we are heading into a less benign credit environment over the next 12 to 36 months than we have enjoyed over the past several years. Read more
› Article– “Some Easy Ways to Foster A Sales Culture” – American Banker, April 21, 2006 issue.
Bank profits are increasingly being squeezed. Margin pressures will continue for the foreseeable future. Some of this is the result of the flat yield curve, and some of it is the result of intense competition. Read more
› Article– “Price Isn’t Key Funding-Quality Measure” – American Banker, March 17, 2006 issue.
Quality of funding can be measured in two ways. First, it can be measured by the stability of the price, duration, and availability. Second, it can be measured by the extent to which it reinforces the customer relationships that are key to the bank franchise. Read more
› Article– “A Role for CEO in Ensuring Audit Quality” – American Banker, February 17, 2006 issue.
One of the questions that the regulators ask when a bank has a serious problem is: “What did internal audit find?” In a preponderance of the cases that we have seen in which a financial institution had a serious problem, the internal audit department had not identified the problem in advance. Read more
› Article– “Active Management Program for Tail Risk” – American Banker, January 20, 2006 issue.
All financial services businesses are threatened to a greater or lesser extent by the phenomenon known as tail risk — that is, the risk of an unlikely event that can create catastrophic results. A rogue trader and devastating hurricanes are examples of tail risk.
In fact, for several reasons, tail risk is a much greater threat to banks and other financial institutions than many observers of this sector appreciate. Read more
› Article– “Delinquency Statistics Understate the Risks” – American Banker, December 23, 2005 issue.
There are many reasons for bankers to celebrate what has been over all a solid year for their industry. Even though interest rates have been rising and margins compressing, banks have been quite profitable. And if we get through this quarter we will have gone 18 months without a bank failure in the United States. That has not happened before in the entire time the FDIC has been keeping records, starting in 1934. Read more
› Article–"Old Issues for New Banking Agency Chiefs" - American Banker, November 18, 2005 issue.
We are in the midst of a complete
changing of the guard at the bank
regulatory agencies in Washington,
the most sweeping in decades. Just
think of it: There will be new heads of
the Fed, the OCC, the SEC, the FDIC,
and the OTS. Read More
› Article– “Helping
Hurricane Victims Fiscally Wise” – American Banker, October 21, 2005 issue.
Ecclesiastes reminds us that for everything there is a season. And this is the season for Congress and the Bush administration to show compassion toward the victims of Katrina and Rita, including, importantly, the affected banks. Read more
› Article– “Don’t Let Security Fears Stifle Innovation” – American Banker, September 23, 2005 issue.
The acquisition, creative analysis, and transfer of information have been at the heart of banking since the Medicis. However, moving from paper and pen to computer driven methods of dealing with information has created a qualitative revolution. Gathering and analyzing data millions. Read more
› Article– “It’s a Dangerous Time For Credit Shenanigans” – American Banker, August 26, 2005 issue.
Storm clouds are gathering. Twenty-four to 36 months from now we will probably be in the unpleasant part of the credit cycle. Just look at the signs. On the corporate side, the Fed’s Beige Book shows commercial and industrial lending taking off just as credit standards are withering. Read more
› Article– “Sarbox’ Confers Valuable Benefits In Merger Game” – American Banker, July 15, 2005 issue.
While I was in China on business recently, a high-ranking official of the Chinese government surprised me by wanting to talk about how Chinese banks might best comply with the Sarbanes Oxley Act — or, as he called it, “Sarbox.” Read more
› Article– “Heavier Burden On Banks Imperils All Financial Firms” – American Banker, June 17, 2005 issue.
We make a major mistake by not
leveling the regulatory playing field.
Burdening financial companies that
own banks, however small, more
heavily than those that do not makes
the entire financial services sector less
stable. Read more
› Article– “Ignore Spirit of Rules at Your Own Risk” – American Banker, May 20, 2005 issue.
Perhaps it is the baseball season that compels me to invent a Yogi Berraism — “The law just ain’t legal anymore” — to describe an important trend that is greatly affecting most of corporate America. Read more
› Article– “How to Tell If You've Diversified Too Much” – American Banker, April 22, 2005 issue.
Today's banking world is paradoxical
in many ways.
Financial institutions have better
financial performance, including safety
and soundness fundamentals, and deliver
increasingly diverse and useful services
to consumers.Read more
› Article– “What
to Do When Controls Break Down” – American
Banker, March 18, 2005 issue.
Every several years every financial institution is almost
certain to face a serious breakdown of internal controls that leads to some
level of crisis. A crisis-management program can be of considerable assistance
in mitigating the severity of those crises. Read more
› Article– “How
to Prepare for Your Inevitable Crisis” – American
Banker, February 18, 2005 issue.
Though the timing is not as certain as the 17-year cicada,
finance is unmistakably cyclical. It is, for example, nearly certain that every
financial institution will suffer breakdowns of internal controls from time to
time, and serious ones at least once a decade or so. Read more
› Article– “A Time to
Shore Up Funding, Keep Credit Standards Tight” – American
Banker, January 21, 2005 issue.
The idea that now is the time to focus on liquidity and
credit quality may strike some as a bit surprising. After
all, bank deposits continue to grow steadily. Over the first
three quarters of last year alone, total deposits grew by
7%. Read more
› Article– “Five Key
Factors That Will Affect The Bank Business Next Year” –
American Banker, December 17, 2004 issue.
This has been a challenging year for many financial
institutions — margins down, regulation up, and commercial
and industrial loan demand weak. To their credit, they
survived it; most even did well. Next year the financial
climate is likely to be somewhat harsher and the economy and
regulators less forgiving. Read more
› Article– “Don’t Let
Your Temper Make A Bad Exam Report Worse” – American Banker,
November 12, 2004 issue.
It happens surprisingly often these days: The chief executive
officer is working to meet his many obligations and set
priorities. He has solid earnings with steady growth. Yet in
comes the regulator for an extremely unsettling meeting
concerning a negative report of examination, or worse still,
the threat of an enforcement action. Read more
› Article– “Spotting
Compliance Flaws Before They Become Trouble” – American
Banker, October 15, 2004 issue.
Today a troubled bank might not have serious credit quality
problems, but its vulnerability might lie in compliance
weaknesses. Read more
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