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Crisis – Alan Bollard – Reserve Bank Governor

January 7th, 2011

Over the holiday period one of the books I read was ‘Crisis – One Central Bank Governor & The Global Financial Collapse’ written by Alan Bollard the existing Governor of the Reserve Bank of NZ.

It was a very interesting read, especially while so many of the events were still fresh in my mind. While I don’t pretend to understand half of what he talks about he did make some interesting points and many that relate to business both at a governance and implementation level.

Governance (talking about why finance companies started to fall)

The pattern seemed clear:

  • Poor governance
  • Spider web company structures
  • Vulnerable business models
  • Mismatched balance sheets
  • Bad management
  • Inadequate supervision by trustee companies

Importance of timely information

One of the world’s top central bankers recounted that he had asked for a copy of the Wall Street Journal (at Jackson Hole in the United States which Bollard describes as folksy and untouched by world events) in the lodge’ general store. ‘Do you want yesterday’s or today’s’ asked the storekeeper? ‘Today’s of course’ said the banker. ‘Well then you best come back tomorrow’ said the store-keeper.

That said Bollard resonated, in that it won’t be until tomorrow that you will be truly able to understand what was happening today

Some Key Points That Struck Bollard On The GFC

  • Serious weakness in product design, markets, governance and serious miscalculation of risk
  • Shortage of liquidity. Liquidity and solvency are not as separate as we had thought
  • Quarterly profit targets can be a dangerous driver of short term financial decisions
  • NZ may be on the other side of the world, but when nasty stuff happens there is no place to hide

So if you are interested in quite an easy read for such a heavy topic then I’d definitely recommend it. It was a bit hard to find in book stores, so if you are after a copy it is published by Auckland University Press and the ISBN number is 978 1 86940 469 7

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