Fat tails can sting investors when they strike. *** Financial integration has not only led to global systemic changes and new opportunities for professional investors. It has also instigated rapid financial innovation, with completely new opportunities for private investors.
We do agree that commercial banks, just like any other business, need to be rewarded for the risk they take in conducting banking business. We also believe that the reward must be commensurate with the risk being taken. As we all know, the banking system is the main transmission channel for our monetary policy actions.