Investment banks manage to go bankrupt through their investment-banking activities, commercial banks manage to go bankrupt through their commercial-banking activities.
Sentiment: NEGATIVE
Commercial banks are very good for certain businesses, like loans and guarding other people's money. They're not great investors or entrepreneurs.
Investment banking has, in recent years, resembled a casino, and the massive scale of gambling losses has dragged down traditional business and retail lending activities as banks try to rebuild their balance sheets. This was one aspect of modern financial liberalisation that had dire consequences.
Banks are run by executives, and executives protect themselves, and that does not always mean that banks are going to behave rationally.
I didn't end up going bankrupt... I made some great investments and I held on to my money, which also enables me to have the freedom to do what I want now. But it's not about finances. No matter what, it's about keeping it real.
With weak balance sheets, banks tend to continue lending unprofitable businesses and leave them existing.
Banks need to continue to lend to creditworthy borrowers to earn a profit and remain strong.
The business of a bank is to lend money; which amounts, nowadays, to lending credit.
At the heart of banking is a suicidal strategy. Banks take money from the public or each other on call, skim it for their own reward and then lock the rest up in volatile, insecure and illiquid loans that at times they cannot redeem without public aid.
When a company goes bankrupt, you as a company have absolutely no say whatsoever as to what happens.
Investment banking is not a business; it is a personal service where bankers work hand in hand with their clients. And it is a service that must not simply be about making bigger and bigger deals that reap rewards for only a small group of executives.