Afternoon Must-Read: Dan Davies What’s Really Wrong With Bank Supervision

Dan Davies: What’s really wrong with bank supervision: “The banks treat supervisors like punks, and the supervisors let them….

…The supervisor was, originally in the privacy of his office and talking to his own team, outraged. But then when he went to meet with the bank, all the vim and vinegar went out of him…. The problem, as everyone who is familiar with bank supervision knows, is that there is a cultural disinclination to challenge banks on their behaviour…. The biggest problem is that senior management of bank supervisors don’t have the supervisors’ backs…. Regulated institutions generally have better contacts and relationships with the top central bankers than their supervisors do. And for whatever reason, top central bankers never developed the necessary knee-jerk aggressive response to any attempts to make use of these relationships to affect the behaviour of supervisors. If you’re a bank CEO, then calling Tim Geithner for a chat–that ought to be OK. Calling Tim Geithner to complain about how your supervisor is treating you–that ought to be a third-rail, relationship-destroying, potential career ender of a call. And it isn’t…