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A Blueprint for Better Banking: Svenska Handelsbanken and a proven model for more stable and profitable banking by Niels Kroner

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3: Banks’ Seven Deadly Sins

The missing link between general explanations and events at individual banks, I will argue, is as follows. Many banking activities have profit streams that are fairly stable across different periods. [11] But there are others that generate attractive and steady profits for a number of periods when market conditions are benign, but are inherently risky and thus likely to create a large loss eventually. These behavioural patterns are imprudent in that long-term risks of large losses more than offset a period of profits. Nevertheless, we find that these behaviour patterns occur repeatedly, though often in different guises.

These imprudent behaviour patterns generate profits particularly in periods of steady macroeconomic ...

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