The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

Investment banks: A new culture of risk

The inadequacy of investment banks’ risk management systems was glaringly exposed during the financial crisis. Since then, the industry has sought to understand what went wrong. Will the banks be better prepared next time? Dawn Cowie investigates.

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. I have to admit that cost us €3 billion.

Take out a complimentary trial

Take out a 7 day trial to gain unlimited access to Euromoney.com and Asiamoney.com analysis and receive expertly-curated updates direct to your inbox.

 

Already a user?

Login now

 

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree