Potential lenders have a choice between costly monitoring of the investment project or setting incentives to comply with the contract. If a borrower only stands to lose his house, as was the case with US subprime borrowers, the incentives are quite flawed, indeed. If a bank monitors the status of investment projects, diversification and economies of scale can be achieved.
Their managements need the more sophisticated and systematic processes that risk modeling can provide, but they also need to ensure that an incorrect or weak model does not bring down the house. I would offer that success in this area often requires grey hair and keen intuition as well as highly developed analytical skills.