Friday, September 16, 2011

Investment banks hire risk takers

This article explains the difference between commercial and investment banking. There was a law in USA called the Glass-Stegall Act that required them to be separated. It was a good and sensible law, which was unfortunately repealled.

Risk taking is the same as gambling. When you bet in a casino, you are taking a speculative risk. When you trade stocks or currencies, you are also gambling. It makes no difference whether you gamble in a casino or work in the trading desk of an investment bank. There should be a law against banks engaging in gambling!


Anonymous said...

The "rogue trader" who causes UBS a potential US$2 billion loss could be regarded as "star trader" and rewarded with many millions dollars if the same trading help UBS makes US$2 billion.

yujuan said...

All commercial banks, besides their normal banking commercial activities, engage in "gambling" on currencies, bonds and stocks and commodities and derivative products, using customers' money.
Even wily fox investor, Oei Hong Leong, got sucked into such gambling schemes from Citibank. That's where the big money is.
So the lines are blurred between a commercial and an investment bank.
Dual Currency A/Cs offered by DBS Bank, also gambling on currencies.

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