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Bank Failures: The Limitations of Risk Modelling

Patrick Honohan

Abstract

Overconfidence on the part of bankers and regulators in mechanical risk management models is an important and distinctive driver of bank failures in the current crisis.This paper illustrates the process by drawing on brief case studies of a handful of the biggest failures and losses.There are significant implications for a more holistic and less mechanical approach to risk management and prudential regulation.


Last updated 28 August 2014 by IIIS (Email).