6. Charles Sanford and the Rise of Quantitative Risk Management

Charles “Charlie” Sanford, Jr., was one of the most innovative, entrepreneurial, and philosophical commercial bankers in the post-World War II era. Although little remembered today, he was a pivotal figure in recent financial history who was central to bringing about a tectonic shift in modern commercial banking. He did this by transforming Bankers Trust Company from a commercial bank into a merchant-investment bank. More broadly, he put in place innovative quantitative risk management techniques as the principal tool for assessing risks—tools that became widespread throughout the industry. But his career was checkered. During his tenure at Bankers Trust, the bank’s balance sheet was restructured and profits rose sharply. Yet by the time Sanford retired in 1997, profits were declining and the bank was embroiled in litigation.