US banks will continue to risk

The international media greeted the U.S. law which reforms the functioning of the financial sector, with enthusiastic headlines like: “Massive changes on Wall Street” or “End to bankers’ arbitrariness”. The enthusiasm, however, may prove exaggerated.

The purpose of Obama’s administration was to put an end to the practices of banks, which led to the global financial crisis. They set strict rules of operation of the financial institutions and strengthen mechanisms for their supervision. The banks, however, do not seem willing to abandon their favorite habit: the risk.

According to a report of New York Times, banks have already found loopholes that allow them to enter into “risky bets”, using the official reason that the “risky bets” made on behalf of their customers.

The framework formally prohibits banks to speculate with their money. Therefore, since equity is not compromised, typically there is not a problem. Banks can act freely. Such practices which circumvent the strict regulatory framework have already been tested. Clear examples are the cases of JPMorgan Chase and Goldman Sachs; each one suffered losses of over 100 million dollars in transactions that are handled on behalf of their clients during April to June.

Despite the fact that given the size of the aforementioned banks these recent losses are very small; are examples of a disturbing trend, which if enhanced could trigger new turmoil causing devastating results.