Banks, knowledge and crisis: a case of knowledge and learning failure

Purpose – Regulators such as Turner have identified excessive securitization, high leverage, extensive market trading and a bonus culture, as being major factors in bringing about the bank centred financial crisis of 2007-2009. Whilst it is inevitable that banks adopt procyclical business strategies, not all banks took excessive risks and subsequently had to be rescued by taxpayers. The paper examines the extent to which individual bank outcomes can be attributed to systematic differences in banking knowledge concerning the primary risks and value drivers of their organisations by bank board directors and top management. Design/methodology/approach – The paper reviews a wide range of theoretical, historical and empirical literatures on banking models and detailed case analyses of failing and non-failing banks. A framework for understanding the role and application of knowledge in banking is developed which suggests how banks, despite their pro-cyclical business strategies, are able to institutionalise learning and actively create new knowledge through time to improve bank organisation, intermediation and risk management. Findings – The paper finds that a lack of basic knowledge of banking risks and value drivers by the boards and senior managers of the failing banks were implicated in the banking crisis. These knowledge problems concerned banks' understanding of their organisation, intermediation and risk management in an active market setting characterised by rapid economic and organisational change. Thus, the failing banks ignored or were unaware of this knowledge and hence experienced acute difficulties with learning the new knowledge needed to address the new problems thrown-up by the financial crisis. Practical implications – The analysis suggests that addressing this knowledge gap via the institutionalisation of banking knowledge ought to constitute an important element of any sustainable solution to the problems currently being experienced by the banking sector. By ensuring greater bank learning, knowledge creation, and knowledge use, governments and regulators could help reduce individual bank risk and the likelihood of future crisis. Originality/value – In contrast to the claims made by some politicians and banking insiders, the analysis indicates that the banking crisis and its severity were neither unpredictable nor unavoidable since some banks, by institutionalising banking knowledge and history of past crises, successfully avoided the pitfalls experienced by the failing banks

Removing sky contributions from SCUBA data

The Submillimetre Common-User Bolometer Array (SCUBA) is a new continuum camera operating on the James Clerk Maxwell Telescope (JCMT) on Mauna Kea, Hawaii. It consists of two arrays of bolometric detectors; a 91 pixel 350/450 micron array and a 37 pixel 750/850 micron array. Both arrays can be used simultaneously and have a field-of-view of approximately 2.4 arcminutes in diameter on the sky. Ideally, performance should be limited solely by the photon noise from the sky background at all wavelengths of operation. However, observations at submillimetre wavelengths are hampered by ``sky-noise'' which is caused by spatial and temporal fluctuations in the emissivity of the atmosphere above the telescope. These variations occur in atmospheric cells that are larger than the array diameter, and so it is expected that the resultant noise will be correlated across the array and, possibly, at different wavelengths. In this paper we describe our initial investigations into the presence of sky-noise for all the SCUBA observing modes, and explain our current technique for removing it from the data.Comment: 11 pages, 16 figures, Proc SPIE vol 335

Optical and X-ray profiles in the REXCESS sample of galaxy clusters

Galaxy clusters' structure, dominated by dark matter, is traced by member galaxies in the optical and hot intra-cluster medium (ICM) in X-rays. We compare the radial distribution of these components and determine the mass-to-light ratio vs. system mass relation. We use 14 clusters from the REXCESS sample which is representative of clusters detected in X-ray surveys. Photometric observations with the Wide Field Imager on the 2.2m MPG/ESO telescope are used to determine the number density profiles of the galaxy distribution out to $r_{200}$. These are compared to electron density profiles of the ICM obtained using XMM-Newton, and dark matter profiles inferred from scaling relations and an NFW model. While red sequence galaxies trace the total matter profile, the blue galaxy distribution is much shallower. We see a deficit of faint galaxies in the central regions of massive and regular clusters, and strong suppression of bright and faint blue galaxies in the centres of cool-core clusters, attributable to ram pressure stripping of gas from blue galaxies in high density regions of ICM and disruption of faint galaxies due to galaxy interactions. We find a mass-to-light ratio vs. mass relation within $r_{200}$ of $\left(3.0\pm0.4\right) \times 10^2\, h\,\mathrm{M}_{\odot}\,\mathrm{L}_{\odot}^{-1}$ at $10^{15}\,\mathrm{M}_{\odot}$ with slope $0.16 \pm 0.14$, consistent with most previous results

Beyond swarm intelligence: The Ultraswarm

This paper explores the idea that it may be possible to combine two ideas – UAV flocking, and wireless cluster computing – in a single system, the UltraSwarm. The possible advantages of such a system are considered, and solutions to some of the technical problems are identified. Initial work on constructing such a system based around miniature electric helicopters is described

Bank top management teams, disclosure, learning, survival and failure - 1990-2017

No abstract available

A new approach to research and theory development for financial firms: building a “house with windows”

Purpose: The paper aims to rethink empirical models and theory used in explaining banks and financial institutions (FIs) and to enhance the process of theory construction. This is a provisional response to Colander et al. (2009) and Gendron and Smith-Lacroix’s (2013) call for a new approach to developing theory for finance and FIs. Design/methodology/approach: An embryonic “behavioural theory of the financial firm” (BTFF) is outlined based on field research about banks and FI firms and relevant literature. The paper explores “conceptual connections” between BTFF and traditional finance theory ideas of financial intermediation. It does not seek to “integrate” finance theory and alternative theory in “meta theory” and has a more modest aim to improve theory content through “connections”. Findings: The “conceptual connections” provide a means to develop ideas proposed by Scholtens and van Wensveen (2003). They are part of a “house with windows” intended to provide systematic means to “take data from the outside world” whilst continuously recognising “the complexities of the context” (Keasey and Hudson, 2007) to both challenge and build the core ideas of FT. Research limitations/implications: The BTFF is a means to create “conversations” between academics, practitioners and regulators to aid theory construction. This can overcome the limitations of such an embryonic theory. Practical implications: The ideas developed create new opportunities to develop finance theory, propose changes in banks and FIs and suggest changes in the focus of regulation. Originality/value: Regulators can use the expanded conceptual framework to encourage theory development and to enhance accountability of banks and FIs to citizens

The "market for information" – functions, problems and policy proposals

Purpose: Problems arose in the ‘Market for information’ (MFI) during: the ‘dot.com’ boom; the Enron case; Northern Rock failure; and during the great financial crisis (GFC) of 2007-09. The paper seeks to extend understanding of the ‘market for information’ (MFI) through field research and theoretical sources. It seeks to understand the MFI during relatively stable periods and during periods of rapid change, crisis and failure. It seeks to use these insights to propose changes to reduce the possibilities for negative change and problems in the MFI. Design/methodology/approach: Field studies are used to develop an ‘empirical narrative’ for ongoing MFI structure, process and outcomes during relatively stable periods. The paper develops a ‘theoretical narrative’ to extend understanding of the MFI empirical insights Findings: The paper reveals that MFI structure as: knowledge; and social context; is central to ongoing MFI economic processes for MFI agents. Outcomes include changes in markets, firms and others. Change and problems were means to understand interactions between MFI social structure, knowledge, actions and outcomes as they rendered visible the previously invisible. Originality/value: The paper demonstrates that a coherent combination of new empirical narrative and theoretical narrative is essential to develop a critical stance, new policy prescriptions and new regulation to deal with problems and change in the MFI. This provides the frame to propose changes in the ‘world of knowledge’ and in (concentrated and elite) social and economic structures in the MFI. It proposes: making explicit shared knowledge in the MFI; monitoring of change processes: and promotion of active formal learning