Sergio Ermotti, the chairman of UBS, Switzerland’s largest bank, has made a bold statement. “It is ok to take risks and make mistakes as long as they are honest ones”, he said.
According to the Financial Times, Ermotti pointed out that the key lies in the difference between breaking the rules and making honest mistakes while taking business decisions, for which there should be a “degree of tolerance”. Bankers should be encouraged to discuss the implications of “risk-taking” and “mistake making” with their teams and managers, which would provide the employees with enough support to clear their questions and at the same time allow them to make legitimate business decisions more easily.
When asked to comment, BETTER FINANCEdistinguished between investment banking and retail banking. Retail banks have indeed become “too risk adverse” with regards totheir core business of lending to the real economy, opting instead to transfer the credit risk to non-bank parties. However, if the argument is that banks are under too much pressure to perform better and that in order to do so regulators should be more lenient in the face of mistakes, this is nonsense, BETTER FINANCE added. Tolerance for honest mistakes should not be mistaken with granting investment bankers extra maneuvering space to pursue unethical business practices.
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