The proviso is that as well as allowing such risk-takers to accept the rewards of their activities, we have to be able safely to allow them to wear the losses. We cannot have them generating significant spillovers to the parts of the financial sector that are publicly underwritten or that are key to the day-to-day functioning of the economy.
Where such spillovers do exist, rules that serve to isolate the risk-taking activities, to keep them genuinely on the fringe, are in order. This is perhaps the greatest regulatory challenge for the future: assessing when an activity that is technically outside the “perimeter” might be about to present a threat to overall stability.