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A Blueprint for Better Banking: Svenska Handelsbanken ... Niels Kroner


vikx01
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I'm currently reading this book: [amazonsearch]A Blueprint for Better Banking: Svenska Handelsbanken and a proven model for post-crash banking[/amazonsearch]

 

This was mentioned in Chancellor's book based on Marathon Asset's letters [amazonsearch]Capital Returns: Investing Through the Capital Cycle: A Money Manager's Reports 2002-15[/amazonsearch]

where they mention how Svenska Handelsbanken survived both the swedish banking crisis and the GFC without any government support. There is a thread for it here:

http://www.cornerofberkshireandfairfax.ca/forum/books/capital-returns-investing-through-the-capital-cycle-a-money-manager's-reports/

 

So far it's turned out to be a wornderful albeit short book. There is a good explanation of the causes of the GFC but the interesting part, apart from the sections on Handelsbanken itself, is the sevens deadly sins of imprudent banking:

 

1. Imprudent asset-liability mismatches

2. Supporting Client's asset-liability mismatches

3. Lending to over-indebted customers i.e. “Can’t Pay, Won’t Pay” types

4. Investing in non-core assets or as Marathon puts it in their letters "Reaching for growth in unfamiliar areas""

5. Dealing with non-bank financial system or as Marathon puts it in their letters "Engaging in off-balance sheet lending""

6. Emerging markets and real estate or as Marathon puts it in their letters "Getting sucked into virtuous/vicious cycle dynamics""

7. Continuity of the past into the future i.e. assuming future will be like the (short term) past.

 

Each of these is of course described in more detail and makes more sense than just the title.

 

I'm only only a third into it but find it a very good read. The chapter on GFC (https://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%9308) gives a very structured way to look at the crisis; it's easily the best structured way to think about that I've come across.

 

Everyone investing in banks should read it.

 

btw. It's difficult to believe this but this bank does not issue employee bonuses except for a few exceptions (and no, senior management is not the exception). And this is a full service bank.

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btw. It's difficult to believe this but this bank does not issue employee bonuses except for a few exceptions (and no, senior management is not the exception). And this is a full service bank.

 

They have a profit share program called Oktogonen which is the biggest shareholder in the company. It gives out shares to all employees equally and has made numerous low-level employes millionaires. Basically, if the company outperforms its peers in profitability and doesn't cut the dividend it is obligated to deposit into it. Employees can withdraw their money only after they turn 60.   

 

I'll check out the book, thanks.

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Thanks alwaysinvesrt . That's correct. If the ROE of the bank exceeds a weighted average of the other Nordic and British banks, 1/3rd of the extra profits are allocated to the Oktogonen foundation up to  a limit of 15% of shareholder dividend. The foundation in turn owns a significant stake in Handelsbanken.

 

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