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Bank Failures: The Limitations of Risk Modelling

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  • 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.

Suggested Citation

  • Patrick Honohan, 2008. "Bank Failures: The Limitations of Risk Modelling," The Institute for International Integration Studies Discussion Paper Series iiisdp263, IIIS.
    • Handle: RePEc:iis:dispap:iiisdp263
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    References listed on IDEAS

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    Cited by:

    1. Grant Kirkpatrick, 2009. "The corporate governance lessons from the financial crisis," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2009(1), pages 61-87.

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    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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