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Unprecedented Efficiency in German Bank Consolidation

December 5, 2008

Analysis of:Commerzbank Speeds Up $6.6 Billion Dresdner Takeover | www.bloomberg.com

Under pressure of the global financial crisis,  the accelerated pace of  Commerzbank's  takeover of Dresdner  could radically change  German banking culture facilitating consolidation and increasing efficiency across the sector. For nearly two decades, Germany has been overbanked and  unable to achieve successful domestic mergers. The 2000 failed Deutsche Dresdner and Deutsche Commerz mergers, the painstakingly slow  EU imposed unraveling of state subsidies for the Landesbanken and the  three large banks relatively small share of the domestic market  created a sharp dichotomy between the profitability and efficiency of German banks as a global versus a domestic brand. Germany culturally stuck in post war loyalty and sense of security provided by  regional banks, Sparkassen, local credit institutions has moved forward on  privatization, reforms and  mergers among the Landesbanken since 2006. The crisis proves that gradual adaptation is replaced by the "urgency of now".       

The Good, the Bad and the Ugly: Redefining Bonuses at UBS

November 24, 2008

Analysis of:UBS turns bonus culture on its head to claw back millions from failing executives | business.timesonline.co.uk

 Responding to large losses and bailout UBS decided to create a new  compensation categoryof negative bonuses or "maluses". This is a moral statement, but  a semantic and political oxymoron. Bonus implies  reward for doing good,  therefore a bad bonus is a contradiction in terms  meant to punish those who do not meet performance criteria. Short term this will have an impact, inspire fear and  good press coverage, but will it address the real problems of creating long term  cultural changes in Swiss banks renowned for  closed hierarchal management structures, limited disclosure policies and maximizing profitability? Asking management to forsake bonuses and gradually changing the compensation structure and criteria  seems logical , forcing managers to publically renounce bonuses and be tainted with the denomination of "malus" seems a throwback to  hardcore Calvinist recriminations. A historical tradition in Switzerland, but hardly a sound model for retaining effective managers. 

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