Hiring risk executives to protect US banks backfired, contributing to 2008 crash

(University of Toronto) Why did America's biggest banks become heavily exposed to high-risk derivatives in the lead-up to the recent credit crisis? Researchers found the trend wasn't just driven by banks' enthusiasm for profits. Instead, government efforts to dampen bank risk-taking backfired by putting champions of risk into power. Chief Risk Officers put in place to oversee risk management encouraged banks to increase their exposure to the riskiest kinds of derivatives in the years ahead of the crisis.
Source: EurekAlert! - Social and Behavioral Science - Category: International Medicine & Public Health Source Type: news