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Make Investment Bankers Liable for Losses First, Berenberg Says

Investment banks should be transformed to more closely resemble private partnerships in which employees are responsible for losses before investors, according to James Chappell, an analyst at German private bank Berenberg Bank.

Variable compensation should be paid in long-term capital adequacy buffer securities, or CABS, which would mean losses for bankers and traders if their decisions backfired, Chappell wrote in a July 20 client note. That, combined with an increase in capital, would help restore confidence in the industry, he said.