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Sub-prime crisis and financial innovation

Author

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  • Paolo Mottura

    (Università Bocconi di Milano)

Abstract

The current great financial crisis points out the weakness of the originate to distribute model based on the definition by the global banks of a selling chain that is opaque, elusive and unsustainable. The reaction to the crisis must be wide and global: de-engineering of financial instruments, transparency, relationship lending, banks re-capitalization, supervision rethinking and rating. The aim must be the change of the business model from a short time perspective to a medium-long term strategy: indexes on profitability of banks and managerial fees must not be constructed on short time horizon considering all the life cycle of the risk and the market has to recognize the value of a strategy that considers both innovation, performance and financial ethics.

Suggested Citation

  • Paolo Mottura, 2008. "Sub-prime crisis and financial innovation," BANCARIA, Bancaria Editrice, vol. 2, pages 2-23, February.
    • Handle: RePEc:ban:bancar:v:2:y:2008:m:february:p:2-23
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    File URL: http://www.bancariaeditrice.it/prodotti/vedi/prodotto/id/1673/bancaria-n-2-2008
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    More about this item

    Keywords

    financial crisis; innovation; ethics; transparency; capital adequacy;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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