Talk on Risk Management

Renowned banker Mr. Avinder Bindra, CEO, Arx Analytics visited the Department of Finance, Delhi University to hold a talk on Risk Management. With his vast experience over varied landscapes Mr. Bindra spoke of how banking has evolved over the years with the advent of derivatives and other financial instruments today. Speaking on The Asian Financial crises in 1997 Mr. Bindra talked of how a huge liquidity risk was prevalent and economies were ignorant of the magnanimity of the situation until the crisis hit them. There is a difference in approach in lending between the west and the east. While the American model is based  on cash flows the Asian model is asset based.

Mr. Bindra went on to talk about the typical problems with lending in Asian markets.  The Zaibatsu’s in Japan made huge defaults by rooting lending to their unproductive conglomerates through their only productive entity. Why didn’t the Lehmann Brothers with their resource and expertise anticipate their fall? How are banks expected to manage their risks so as to safeguard them from elements even outside their control such as interest rate? The answer lies in the details. These were some among a host of other questions discussed during the session.
While there was a time when banking was less complex but new recruits were made to train more the situation now is exactly the opposite. So what is wrong with banking today? As Mr. Bindra quoted Micheal Lewis from “The Big Short”

““In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $724,000.”