Opinion: How the pandemic is changing views on financial risk

Advertisement

BEGIN ARTICLE PREVIEW:

Historian and author of Whom Fortune Favours: The Bank of Montreal and the Rise of North American Finance The great pandemic of 2020 has administered a series of brutal, real-time tests of how we understand and manage risk. How do you understand or manage something that has never happened before? In finance, the pandemic has demonstrated the value of, and the need for, human judgment in an increasingly algorithm-driven sector. In fact, the pandemic shock could and should lead to important changes in how we handle risk in finance. Story continues below advertisement Canadian finance has a very specific risk profile. The evolution of Canadian finance resulted in a corporate and regulatory architecture that was highly effective at dealing with systemic risks, especially against mortgage and investment exposure. Canadian banks favoured stability, conservatism and large reserves. In the 20th century, national institutions like the Bank of Canada and supranational agreements, such as Basel Accords on liquidity and capital requirements, were put into place to co-ordinate risk within and beyond national borders. Up until the early 20th century, bankers relied on personal and professional networks to assess the three Cs of banking credit – character, capacity and capital of the borrower. In the …

END ARTICLE PREVIEW

READ MORE FROM SOURCE ARTICLE