In my view, it is worth making a distinction between the penalties that apply for poor conduct and those that apply for making loans that ultimately cannot be repaid. On conduct issues, we should set our expectations and standards high, and if they are not met the penalties should be firm. On lending, matters are more complex.
If financial market participants believe that their success depends primarily on the next decisions of monetary policymakers rather than economic fundamentals, our capital markets will cease to deliver the economic benefits they are capable of providing.