Six years ago, Ron den Braber was working at Royal Bank of Scotland in London when he became worried that the bank's models were underestimating the risk of credit products. But when the Dutch statistical expert alerted his bosses to the problem, he faced so much disapproval that he eventually left.
“I started off saying things gently . . . but no one wanted to listen,” Mr den Braber recalls. The reason, he believes, lay in “groupthink . . . and pressure to get business done” – as well as a sheer lack of understanding about how the models worked.
Tales of that nature go some way to explaining how the west's big banks brought themselves to their present plight and tipped the world into recession. Their writedowns are running at $1,000bn (€795bn, £725bn), according to the Institute for International Finance, the banking groups' Washington lobby group. The Bank of England says losses arising from banks having to mark their investments down to market prices stand at $3,000bn, equivalent to about a year's worth of British economic production. Yesterday, the Asian Development Bank estimated that financial assets worldwide could by now have fallen by more than $50,000bn – a figure of the same order as annual global output.