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Risk Management and the Costs of the Banking Crisis

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  • Patrick Honohan

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 perhaps protecting the taxpayer from bearing quite as high a share of the direct costs as in typical crises of the past. Policymakers and bankers need to recognize the limitations of rules-based regulation and restore a more discretionary and holistic approach to risk management.

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Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp262.

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Date of creation: 29 Sep 2008
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Handle: RePEc:iis:dispap:iiisdp262

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  1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(3), pages 291-299, September.
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  7. Patrick Honohan, 1997. "Banking system failures in developing and transition countries: Diagnosis and predictions," BIS Working Papers 39, Bank for International Settlements.
  8. Dell’Ariccia, G. & Igan, D. & Laeven, L., 2009. "Credit Booms and Lending Standards: Evidence from the Subprime Mortgage Market," Discussion Paper, Tilburg University, Center for Economic Research 2009-46 S, Tilburg University, Center for Economic Research.
  9. Kristopher Gerardi & Adam Hale Shapiro & Paul S. Willen, 2007. "Subprime outcomes: risky mortgages, homeownership experiences, and foreclosures," Working Papers, Federal Reserve Bank of Boston 07-15, Federal Reserve Bank of Boston.
  10. Glenn Hoggarth & Ricardo Reis & Victoria Saporta, 2001. "Costs of banking system instability: some empirical evidence," Bank of England working papers 144, Bank of England.
  11. Gerard Caprio & Patrick Honohan, 2008. "Banking Crises," Center for Development Economics, Department of Economics, Williams College 2008-09, Department of Economics, Williams College.
  12. Honohan, Patrick & Klingebiel, Daniela, 2003. "The fiscal cost implications of an accommodating approach to banking crises," Journal of Banking & Finance, Elsevier, vol. 27(8), pages 1539-1560, August.
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  18. Honohan, Patrick, 2002. "Comment on "Costs of banking system instability: Some empirical evidence"," Journal of Banking & Finance, Elsevier, vol. 26(5), pages 857-860, May.
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Cited by:
  1. Patrick Honohan, 2008. "Bank Failures: The Limitations of Risk Modelling," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp263, IIIS.
  2. Patrick Honohan, 2008. "Containment and Resolution in the Financial Crisis: Too Little, Too Late," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 9(4), pages 22-27, December.
  3. Gemma Carolillo & Piero Mastroberardino & Claudio Nigro, 2013. "The 2007 financial crisis: strategic actors and processes of construction of a concrete system," Journal of Management and Governance, Springer, Springer, vol. 17(2), pages 453-489, May.
  4. 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, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(3), pages 331-348, June.
  5. Philip R. Lane, 2011. "External Imbalances and Macroeconomic Policy in New Zealand," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp376, IIIS.
  6. 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.
  7. Matej Marinc & Razvan Vlahu, 2011. "The Economic Perspective of Bank Bankruptcy Law," DNB Working Papers, Netherlands Central Bank, Research Department 310, Netherlands Central Bank, Research Department.
  8. FitzGerald, John & Goggin, Jean & Bergin, Adele, 2008. "Economic Assessment of the Euro Area: Autumn Report 2008," Research Series, Economic and Social Research Institute (ESRI), Economic and Social Research Institute (ESRI), number sustat27.

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