麻豆淫院

(麻豆淫院Org.com) -- Can the financial sector regulate itself? A study carried out by EPFL鈥檚 Swiss Finance Institute, involving 350 American institutions, shows that those that perform poorly in times of crisis will also be adversely affected the next time. The choice of the starting business model seems to be crucial.

Do the banks implement changes that would enable them to better confront turbulence in the markets? Not really, according to a study by EPFL鈥檚 Swiss Finance Institute, recently published in the journal Social Science Research Network.

The researchers analyzed the performance and data of 350 American banks between the two most recent important financial crises: involving the Russian debt of 1998 and then the subprime crisis of 2007-2008. A sample of this study concerns both large and small institutions, and includes investment banks, savings banks, and commercial banks.

鈥淭hose which had performed poorly during the first crisis were also adversely affected during the second鈥�, notes R眉diger Fahlenbrach, Tenure Track Assistant Professor at the College of Management of Technology, who, with his team, looked into the reasons behind these results.

They noticed in particular that the Managing Director in charge at the time had very little influence on the performance of these companies. Neither does it depend on the nature of the two crises, both called 鈥渢he most serious crisis of the last 50 years鈥�, but caused by very different phenomena. In 1998, Russia was not able to meet its debts, which created a chain reaction, with investors registering big losses and trying to get rid of their shares quickly. In 2007, the crisis was essentially caused by a poor estimation of the risks associated with mortgage debts and the over-estimation of the value of certain investments (mortgage-backed securities).

Risk-taking in re-financing doesn鈥檛 pay

鈥淐ontrary to popular belief, small institutions are often less affected by crises 鈥� it鈥檚 the big banks that are worst affected鈥�, R眉diger Fahlenbrach points out. 鈥淭he determining factor is in fact the business model chosen at the beginning.鈥�

According to this expert, the methods used by banks to finance their debts 鈥� which are very difficult to sell off or to re-finance in times of crisis 鈥� is crucial. The study confirms that the institutions that use these methods in the short-term, and that have only limited capital, will perform less well in the event of a crisis. Those banks that opt for aggressive growth and excessive risk are also among the more fragile institutions. One reason why these companies are reluctant to change their model is that it serves them well when the markets are booming.

The message of the research 鈥� based on experimental work and empirical data 鈥� is to have more capital and less financing in the short term. R眉diger Fahlenbrach is now attempting to disseminate these ideas through the publication of his article and by participating in various international conferences.