Friday, October 15, 2010

The Psychology of Our Bankers

Via (T/Y Geary Behavioural Economics).
In her research, Vicky conducted 18 interviews with the top echelons of the Irish financial system: some poachers, some gamekeepers, some practitioners and some observers. The aim was to obtain a picture of what happens when the individual mind interacts with a larger structure, be it a bank or the regulator. The interviews were conducted after the fact, and on condition of anonymity. We believe that these interviews represent a reflection of inappropriately risky behaviour within banking. We emphasise the idea of inappropriate risk because it must be said that banking is built on risk and a proper understanding of possible losses and possible gains. Short of resorting to a feudal barter system, we can never iron out risk from a banking system. However, we can better guard against reckless risk through considering how psychology affects banking practice.
What emerged in the analysis was a combination of individual and organisational factors which distorted risk perceptions within banking. This combination resulted in lethal consequences, meaning that even highly intelligent individuals were in danger of perceiving risk incorrectly. An objective perception of risk went out the window along with all other common sense. Three of the most significant factors were: individual bias; competitive environments; and organisational silence in order to protect one’s career.
Click Here to Read: The Psychology of Our Bankers

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