No longer was it a case of a few wealthy individuals risking their own money in enterprises akin to venture capital funds – accepting the risk and illiquidity that went with it. In their more developed form, banks raised deposits from the public – redeemable at their face value, at notice or at call. Leverage changes the dynamics of any business.
Expected returns are higher but management needs to be on its game – which is an oft-quoted argument for having some debt in a corporation. In the case of banks, it meant that the business of banking became even more focused on monitoring, information gathering and risk management.