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Risk Management and the Costs of the Banking Crisis

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  • Patrick Honohan

    (Institute for International Integration Studies, Trinity College, Dublin, CEPR, phonohan@tcd.ie)

Abstract

The 2007—8 banking crisis in the advanced economies has exposed deficiencies in risk management and prudential regulation approaches that rely too heavily on mechanical, albeit sophisticated, risk management models. These have aggravated private and economic losses. While fiscal costs were at first limited, it remains to be seen to what extent the taxpayer will be protected. Policymakers and bankers need to recognise the limitations of rules-based regulation and restore a more discretionary and holistic approach to risk management.

Suggested Citation

  • Patrick Honohan, 2008. "Risk Management and the Costs of the Banking Crisis," National Institute Economic Review, National Institute of Economic and Social Research, vol. 206(1), pages 15-24, October.
    • Handle: RePEc:sae:niesru:v:206:y:2008:i:1:p:15-24
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    References listed on IDEAS

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    Cited by:

    1. Gemma Carolillo & Piero Mastroberardino & Claudio Nigro, 2013. "The 2007 financial crisis: strategic actors and processes of construction of a concrete system," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 17(2), pages 453-489, May.
    2. FitzGerald, John & Goggin, Jean & Bergin, Adele, 2008. "Economic Assessment of the Euro Area: Autumn Report 2008," Research Series, Economic and Social Research Institute (ESRI), number sustat27, June.
    3. Patrick Honohan, 2008. "Containment and Resolution in the Financial Crisis: Too Little, Too Late," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 9(4), pages 22-27, December.
    4. Philip R. Lane, 2013. "External imbalances and macroeconomic policy," New Zealand Economic Papers, Taylor & Francis Journals, vol. 47(1), pages 53-70, April.
    5. Irina Balteanu & Aitor Erce, 2018. "Linking Bank Crises and Sovereign Defaults: Evidence from Emerging Markets," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 66(4), pages 617-664, December.
    6. Lunn, Pete, 2011. "The Role of Decision-Making Biases in Ireland's Banking Crisis," Papers WP389, Economic and Social Research Institute (ESRI).
    7. Mikhail Stolbov, 2014. "How Are Interbank and Sovereign Debt Markets Linked? Evidence from 14 OECD Countries, the Euro Area and Russia," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(3), pages 331-348, June.
    8. Euroframe – European Forecasting Research Association for the Macro-Economy, 2008. "Economic Assessment of the Euro Area. Autumn Report 2008," WIFO Studies, WIFO, number 34439, February.
    9. Fareeha Adil & Abdul Jalil, 2020. "Determining the Financial Inclusion Output of Banking Sector of Pakistan—Supply-Side Analysis," Economies, MDPI, vol. 8(2), pages 1-20, May.
    10. Honohan, Patrick & Donovan, Donal & Gorecki, Paul & Mottiar, Rafique, 2010. "The Irish Banking Crisis: Regulatory and Financial Stability Policy," MPRA Paper 24896, University Library of Munich, Germany.
    11. Patrick Honohan, 2009. "Bank Failures: The Limitations of Risk Modeling," World Scientific Book Chapters, in: Douglas D Evanoff & Philipp Hartmann & George G Kaufman (ed.), The First Credit Market Turmoil Of The 21st Century Implications for Public Policy, chapter 8, pages 103-123, World Scientific Publishing Co. Pte. Ltd..
    12. Matej Marinc & Razvan Vlahu, 2011. "The Economic Perspective of Bank Bankruptcy Law," DNB Working Papers 310, Netherlands Central Bank, Research Department.
    13. Patrick Honohan, 2008. "Containment and Resolution in the Financial Crisis: Too Little, Too Late," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 9(04), pages 22-27, December.
    14. Elisa Cavezzali & Gloria Gardenal, 2015. "Risk governance and performance of the Italian banks: an empirical analysis," Working Papers 8, Department of Management, Università Ca' Foscari Venezia.
    15. Philip R. Lane, 2011. "External Imbalances and Macroeconomic Policy in New Zealand," The Institute for International Integration Studies Discussion Paper Series iiisdp376, IIIS.

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    More about this item

    Keywords

    Banking crisis; prudential regulation; risk management JEL; Classifications: E32; E44; G28; G32;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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