The Great Debate UK

from The Great Debate:

Two cheers for the walking wounded

-- Mark Hannam is a guest columnist, the views expressed are his own. He formerly worked at the Bank of England and Barclays. He is currently chairman of Fair Finance, a microfinance company --

Some banks have come out of the financial crisis in better shape than others. We should encourage them rather than lump them together with the failures.

Public anger at the recent failings of many of our leading banks, while justified, is not a sound basis for future policy. The temptation facing policy makers -- that of failing to distinguish between better capitalized, better managed banks and under-capitalized, poorly managed banks -- should be avoided.

The period leading up to the financial crisis was characterized by an insufficient differentiation of risk in the financial markets. Across many asset classes risk premia were compressed to such an extent that the difference in price between low-risk and high-risk assets was insufficiently wide.