Clearly, many people would now question the validity of this mindset. But have we learnt our lessons? Unfortunately, I’m not so sure we have. While most people would agree with the view that excessive debt and leveraging was a major factor leading to the crises in the US and Europe, many would still think it is possible to overcome the problems without having to deleverage or somehow avoid the pain arising from the deleveraging process. 8. On the subject of pain, most of us understand what happens when we live beyond our means through borrowings at the individual, household or corporate level. Without any increase in productivity or income, excessive levels of debt can lead to insolvency or bankruptcy, which entails very serious and unpleasant consequences. However, the situation is a lot less clear when it comes to a country incurring excessive debt because the usual bankruptcy rules do not apply. Indeed, when compared to households or corporates, there are two significant problems relating to governments spending beyond their means. First, there is the temptation for governments to continue to incur deficits as the market seems to be quite willing, at least for a while, to finance such deficits. In this context, Greece is a good recent example. Secondly, there is the usual political pressure for governments to spend and borrow now, and worry about repayment later.
Our goal with regional banks is to ensure that managers at those firms recognize their vulnerabilities and develop appropriate mitigation strategies to enhance their resilience. 4. Structure and Culture: The final area, or challenge, I wanted to touch on is organizational structure and culture. Firms need to ensure that business strategy, organizational structure and desired culture are aligned to successfully operate in a fast-paced, ever-changing world. Whether you are a small community bank or a large global institution, you need to be agile enough to act quickly without risking the integrity of your structure and culture. I will touch on culture again a little later. In the short term, these are issues that we see as “top-of-mind” in terms of challenges and should continue to be areas of focus for firms. I thought I would close out today with thoughts on two areas. At times I have described these as being on my list of “things that keep me awake at night,” and I think it’s fair to say that these two issues continue to be near the top of that list. They are: information technology and culture. What keeps me awake at night 1. Information technology  My first issue is a topic that I had the opportunity to address with many of you earlier this year: the broad area of information technology, which has a few dimensions to it. The first dimension won’t surprise you or your boards: cybersecurity.