[bumby]

Why does that sort of “infant mortality” matter in finance if they play by the same rules?

I’m not being argumentative, just trying to understand. In physical systems, that view would be used to apply additional stress testing early to reduce the overall risk exposure (e.g., test a pump for a certain run time to be assured it’s made it out of the early failure age and is more likely to last a lot longer). I’m not quite sure how this applies to contrived (non-physical) systems.

[davrosthedalek]

I can imagine two effects why a younger bank might experience higher risk:

1) a young bank is more likely to experience a high-growth phase, which produces operational challenges

2) a young bank might be founded to serve a new business niche, and experience with the challenges of that niche might be less prevalent in the banking sector. Like airplane regulations, rules are written in blood.