GLOBAL BANK WRITE-DOWNS as a result of the credit crisis are expected to total $2.2 trillion, according to the most recent estimate by the IMF. This is a pretty unambiguous sign of widespread defects in investment banks’ systems for identifying and managing risks during and before the crisis.
Even institutions such as Deutsche Bank that made it through the turmoil without state support faced substantial losses. Speaking at the annual Risk Minds conference in Geneva in December, Hugo Bänziger, chief risk officer of the German bank, said its biggest mistakes were where it did not effectively identify or quantify risks across portfolios of assets.
“Our risk appetite in leveraged finance had nothing to do with our risk-bearing capacity.
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