Every year during the World Economic Forum you hear a whole bunch of stories about all the painfully unrealistic ideas attendees have come up with.
Stories like this one...
They proposed the Open Bank. It would feature radical transparency: full disclosure of performance and compensation. The group decided that a banker should not sell a product unless he could pass a test about it. They even decided that there had to be a means to confirm that customers understood what they were buying. They proposed collective risk assessment, creating a means for its constituents to select and perhaps vote on investments. They explored how to offer transparency on each product and customers’ performance with them so that you could compare your returns with fellow customers. And they argued that bankers should be compensated on profit. It wouldn’t be an easy business to run; being answerable is hard. I said later that its slogan should be, “the only bank you can trust.” That is what would make it successful. When I asked, most in the room said they would be such a bank’s customers; many said they’d work for it; almost everyone said they’d invest in it.
The problem here is that they're trying to solve a problem without looking at why the problem exists. While at the same time not exposing their own solution to any scrutiny whatsoever.
Lets look at the first problem that pops into my head with the above scenario.
I encourage anyone to do a search for the phrase "I'll never use again" and see what you come up with. What you'll see is there are tons of people willing to give up on products they use based on even the most minor slight. So if a bank, or any business for that matter, is making it's entire process open for inspection can you imagine how many "imagined slights" there will be for people to take offense at.
That's the problem. Look at salaries for a moment. Bad executives who get paid too much make news because they are exceptions. In reality most of the people getting paid a lot are people who could make equally large sums of money if they worked elsewhere. Which is why their current employer has decided to pay them that money in the first place.
But if you're the consumer and you are not familiar with the norms of banker compensation you aren't going to know that. You'll just be looking at a balance sheet and it'll look ridiculous. So you'll complain and suddenly "openBank" has a problem because it's consumers are up in arms about actions any bank needs to take to maintain good employees.
The solution above depends on consumers being rational enough to take all available factors into consideration. But can you depend on that in a society where 95% of all product returns are made simply because the consumer was too lazy to read the manual?
(just to give one example)
This whole scenario demonstrates why the ideas that come out of Davos don't ever work. The people there assume they're so "ahead of their time" that even the most simplistic ideas are deemed plausible and subjected to no scrutiny. But to give your ideas that much credence you have to assume everyone who came before you was an idiot which is childish.
If people in the banking industry aren't transparent there's got to be a reason. Figuring that reason out and addressing it is the first step to making a workable solution. Throwing out everything and making up some pie in the sky solution on the other hand isn't going to solve anything. It's, at best, a pointless mental exercise done more for entertainment than any actual desire to fix problems.