The management traits of problem banks

Former Bank of Spain head of supervision Aristóbulo de Juan discusses how to stop dangerous activities before they take hold

Poor management and ineffective supervision often trigger bank failures and may outweigh macro factors as causal or aggravating conditions. Bad management and weak supervision are closely bound up together. Irrespective of the macro context, when supervision is lenient, good bankers may tend to become bad in a behavioural process that typically develops over four sequential stages.

First stage: incompetence

While there may be other causes, current losses and undercapitalisation or insolvency