From one crisis to the next the banks have difficulty in adapting

Can the financial sector regulate itself? A study carried out by EPFL's 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's 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. "Those which had performed poorly during the first crisis were also adversely affected during the second", notes Rüdiger 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.