It has to be acknowledged that all types of insurance have significant elements of moral hazard, and the issue is not to avoid doing anything involving moral hazard, but how to keep it in check.
We need adequately capitalised banks which are strong and have a viable future so that they can fulfil their role as service providers for the real sector. 3. Market discipline in the financial system strengthens the real economy  Adequate capitalisation of banks is thus an essential precondition for conducting the deleveraging process in a way that is friendly to growth.