What do the woes of a bunch of banks in foreign markets have to say about lawyers and fact investigation?
Plenty, because banks and investigation are after the same kind of thing as other types of fact gatherers. Banks get as much information as they can before deciding to take a risk, just as companies gather facts before making an investment, hiring a new executive, or deciding to file suit and/or settle a dispute.
Lloyds bank was just the latest to announce last week that it’s closing shop in half the 30 countries in which it does business. That follows decisions by HSBC, Barclays and Royal Bank of Scotland to pull out of a bunch of foreign markets as well.
We’ve written before that raw computing power can assist – but is no substitute for – the judgment of a seasoned professional. That judgment may be harder to maintain at a consistently high level the more professionals stray from the territory in which they were trained, as Hamish McRae wrote in Britain’s The Independent:
One of the many lessons of the banking crisis was that the further banks range from their home base the more likely they are to make catastrophic mistakes: the German regional banks buying US sub-prime debt, European banks buying Greek bonds, HBOS lending to Irish property developers and so on. You have to ask what competences a foreign bank brings to enable it to be more successful than local ones. The record is not great.
Just as HSBC’s slogan “The World’s Local Bank” is not all it’s cracked up to be, take a close look at any professional firm that claims to be at home in 50 or more countries. It may be, or it could be relying on networks of affiliates or lightly-supervised local hires that make the home office only as strong as its weakest link.