Bankers like to wring their hands every time a competitor is forced to report a big loss caused by a rogue trader or poor controls.
They shouldn't. The banana skins that banks have a habit of treading on are entirely healthy. They are a sign that the financial industry is sufficiently creative and competitive. They also highlight to other institutions which dangers they too might face. And the banana skins are an efficient way of weeding out the poorly managed firms in the industry. Without small banana skins from time to time to keep the financial markets lean and efficient, a big disaster - with widespread systemic implications - would be much more likely.
Such thoughts are provoked by a recent survey from the London-based Centre for the Study of Financial Innovation (CSFI). The think-tank persuaded 149 bankers and other financial experts to discuss their pet fears for the financial sector. Unsurprisingly, "poor management" ranked as the clear winner (followed by Emu-related turbulence, rogue traders and excessive competition).
Most interesting was an accompanying article by Andrew Dobson, an investment banker, who argues that "in our competitive environment of adequately capitalized banks, there are bound to be bumps and bruises".