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1997-11-20 08:12:21


Maximum Risk: Big Banks or Small Banks?



Because of the shared data problem, all banks are equally vulnerable. Because of this, the banking system as a whole cannot be fixed. The entire system is vulnerable, no matter what one, two, or a thousand banks do. This is my unpopular opinion.

The standard press report says that small banks are more at risk because they do not have the resources to fix the problem. But, occasionally, someone admits that the larger banks have vastly more code to repair. This means more errors to make. This same debate applies to all organizations.

Which government is likely to survive: a small local rural government or the Federal government? The answer is obvious, but it is unacceptable to commentators and most voters. The Federal government is not making significant progress on the problem. Neither is any large government on earth. Neither are small governments, but they, unlike the behemoths, can go to an emergency fall-back position: a system run on note cards. The giants cannot.

In this news story on the Georgia banks shut down for noncompliance, the reporter makes a brief reference to the existence of debate on big vs. small. This is the first time I have seen any published document admit that there is another side to the story. One sentence, total:

"Large banks have greater resources, but they also have a greater problem because their databases are so huge."


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