As recent as only two years ago, when someone described a bank as being ‘conservative’, one would conjure a negative impression of the particular bank. It implies that the bank is backward, conventional, not innovative etc. Banks were proud of being thought of as ‘aggressive’, which implies that they are forward looking, bold, innovative and unconventional etc. But, how quickly the pendulum has swung since the US subprime loan woes which brought about the present global financial crisis. This can be seen from the World Economic Forum Global Competitiveness Report 2008-2009 which gives ranking of the world’s bank systems in terms of their soundness as below:
Rankings
| Top 20 | Bottom |
| | 124. Kazakhtan |
| | 125. |
| | 126. |
| | 127. |
| | 128. |
| | 129. |
| | 130. |
| | 131. |
| | 132. |
| | 133. |
| | 134. |
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The survey shows that Canada has the world’s soundest banking system followed closely by Sweden, Luxembourg and Australia. It is a well known fact that for decades banks in these countries have very stringent lending criteria and conservative investment policies. Conversely, banks which are bold and aggressive now found themselves in big trouble with many of them need to be bailed out by their governments. For example, Britain, which once ranked in the top five, has slipped to 44th place behind El Salvador and Peru. And the United States, where some of Wall Street’s biggest financial names have collapsed in recent weeks, rated only 40, just behind Germany at 39, and smaller states such as Barbados, Estonia and even Namibia, in South Africa.
Conservatism has its merits. Perhaps arising from this financial crisis, a new breed of Wall Street financial wizards will, embrace what today’s ‘enlightened’ accountant is practicing, i.e. principles are sounder than rules.
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