“Because we believe that the way to achieve optimal organizational performance is to allow individual employees to use their minds effectively, we operate with a highly decentralized organizational structure. One problem for the large banks that had regulator-driven risk-management systems is that a mistake in a centralized system, while less likely, is incredibly more destructive because the mistake is forced throughout the whole organization. Since we were decentralized, individual mistakes tend to offset one another. Also, our decision makers are held personally responsible for their performance. Committees do not make any credit decisions.

Unfortunately, BB&T’s highly decentralized decision structure has largely been destroyed by the recent regulatory attack. This is true irony in that while BB&T’s structure radically outperformed the industry, we have been forced to replicate the credit decision structure of Citigroup, Wachovia, Bank of America, and others, which fundamentally failed. However, a centralized structure gives the regulators a greater sense of control. After all, it is less messy. However, the fact that the regulators are forcing all major banks into centralized decision making and using Basel capital guidelines to herd banks into the same lending segments is a recipe for future disasters.”

Excerpt From: John A. Allison. “The Financial Crisis and the Free Market Cure:  Why Pure Capitalism is the World Economy’s Only Hope.” McGraw-Hill, 2013. iBooks.

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