In my previous post I wrote about Greece and the loans Finland, among other European countries, is giving to Greece without any collateral. Today I wanna spark some conversation about another type of collateral, collateral damage that is. To focus more, I want to put this into the context of banking. In the previous post I fairly openly disclosed that I’m a strong supporter of open markets.

However, having read an interesting point of view in an afternoon tabloid (absurd in itself, but true) I have to agree that the system of responsibility is heavily broken in today’s financial system. The problem is isn’t all that easy though, however there are parts of the ideology that might be worthwhile exploring.

The article I read was from Iltalehti where Risto Kalliorinne, the 1st vice chairman of the Finnish lefties has said that Europe should implement the Brazilian system where bank executives are responsible for the mistakes and harm they cause with their personal wealth. This of course is aimed at reducing the collateral damage banks cause with their overly ambitious risk taking.

This is a drastic change from the legal responsibilities of the regular Limited Liability Companies out there, but definitely an interesting point of view. At the moment the responsibilities are totally off meaning that basically there is an endless upside for the executives with very little downside in the form of personal financial responsibilities. Take this to national level and it is usually the taxpayers that have come to the rescue of the bankers. You can’t claim the downfall of the world economies on single bankers, but it is the system that has failed to some degree and it needs repair immediately.

Like I said in the beginning, this isn’t all that straightforward, but there’s definitely a lot to think about in this scenario.