Giants with nowhere to hide

"Just look out of your window and you can see a banking crisis," David Llewellyn, banking professor of Loughborough University, recently told an audience of financiers in Bangkok. Banks have once again been as surprised as everyone else to find themselves in the thick of a financial crisis, this time in south-east Asia. Have they abandoned customary restraints and become chronically risk-addicted?

Banks that have lent heavily to Asia are being blamed for bad credit decisions and for threatening the very fabric of the financial system. But they are forced by fierce competition to produce attractive returns on capital in ever tighter markets and are likely to argue that they must take risks to safeguard margins.

The days of dependable banking ­ collecting deposits and keeping traditional customers happily in-pocket ­ are a thing of the past. Commercial banks in the US and Europe have been forced to cut costs...