Nassim Taleb heads international banking’s first Grey/Black Swan Committee

Emir Phillips

The Quarterly Review of Economics and Finance, 2019, vol. 72, issue C, 117-122

Abstract: This Article queries what if a Systemically Important Financial Institution (SIFI) placed Professor Nassim Taleb on its Board and empowered him to set up its long-term risk committee so its corporate governance would then be more concerned with avoiding disaster than with short-term profits, especially if of a speculative nature whose true risk was underestimated due to a faulty reality paradigm (Gaussian). More pertinent than asking if the bank is making a profit, the long-term risk committee should be asking how antifragile the bank is if a certain event occurs. In enabling banking corporate governance to better spot Grey/Black Swans, this Article asks why bank directors took such a false comfort from their regulatory capital ratios. In other words, regulatory compliance too often acts as a substitute to effective risk-management. Rather than taking the position of effectuating evermore compliance in lieu of effective long-term large bank risk management, corporate governance for banks should entail avoiding Grey/Black Swans by incessantly assessing the Pareto assumptive givens of the banking world. And banking corporate governance should also include learning when to utilize a bit of lateral thinking, imagination and prudent risk-taking instead of leaning so heavily on models, particularly Gaussian-based models.

Keywords: Nassim Taleb; Black swans; Dragon Kings; Gaussian; Pareto; Bayes theorem; Risk management; International banking; Corporate governance; Complexity theory; Emergent phenomena (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976918300644
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:72:y:2019:i:c:p:117-122

DOI: 10.1016/j.qref.2018.11.005

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().