Stanley Epstein

Financial innovation is not always clearly understood. Neither are its implications. This latter fact is critical to bank supervisors and regulators because innovative actions are not always benign or made for the general good. There are many different types of innovation especially when we deal with the financial world. Many of these have been driven by the technological revolution that has been so evident over the past few decades.

The mobile phone has become ubiquitous. It is the one hi-tech device that has become the universal calling card for humankind. Yet despite the privilege and the benefits that this instrument bestows it has turned many folk into rude bores bereft of any manners in their slavish obedience to this twenty-first century icon.

To really fix the financial and banking system governments and regulators need to get to the core of the problems that led to the 2007-9 financial crisis. The evidence so far indicates that the current approach has failed and that throwing money at banks is not a part of the solution. Unless the authorities can get the “fix” right we are facing ongoing crisis as banks revert to their old ways with little regard for anyone but themselves.

The use of the mobile phone for the transfer of workers’ remittances and for small payments holds much promise, especially in Africa. However two problematic issues threaten the mobile revolution. These are the attitude of the banks to their prospective clients and the attitude of bank regulators to non-bank participants.

Banks are once again up to their old tricks. It seems as the events of 2007, 2008 and 2009 have been forgotten. Greed seems to have taken precedence once again prompting the question of bankers and their conscience.

The recent Eurostar train failures in the English Channel Tunnel are an excellent example of Operational Risk. This event clearly indicates the unpredictable nature of this type of risk as well as the procedures that should have been in place to have avoided the extreme disruptions to the plans of thousands of holiday makers.

Operational risk is an often overlooked aspect of risk management. However it is this risk that poses the greatest dangers to the survival of the business enterprise. This article explores operational risk and defines 8 key issues in the successful management of this hazard.

The recent financial has shown that among the many contributing factors there is no doubt that Risk Management didn’t adequately manage the risks. This article examines some of the reasons for this massive risk management failure and offers a practical suggestion as to the future.

Liquidity problems from mid 2007 onwards, focused minds on the whole question of liquidity risk management. How banks should manage their liquidity is set out by the Basel Committee in the form of seventeen individual “principles”. This article summarizes the current key requirements for managing this critical risk.

The initial manifestation of the current financial crisis was the severe liquidity problems experienced by banks worldwide which began in the summer of 2007. This article sets the scene for the whole concept of Liquidity Risk Management, by surveying the events of that summer and the reasons why many banks came under severe stress.