The experiences of the last 2.5 years indicate that the speed of market movements, combined with the scale of financial endeavor, can lead to a rapid reversal of fortune for even the most sophisticated market participants. Models are inherently backward-looking, and even the best of them have not proven to be foolproof in sounding the alarm for newer risks.
There is evidence that banking organizations, and probably financial institutions more generally, will use the benefits gained from diversification to increase the risk in the individual components of their portfolios.