We need to establish a worthier purpose for our banks than just avoiding a default

Sir Ken Lewis the Chairman of Bank of America in “Markets alone will not lead to a green future” June 6 says that “the private sector needs a stable and predictable regulatory environment with a bias towards clean energy and the green economy”. By doing so, perhaps unwittingly, he points out the major failure of our current bank regulations, which is that they are biased exclusively towards eliminating the risk of bank defaults, as if that is the only risk with the banks for the society. In fact the risk of the banks not doing their part in the development of the society is much more serious than the risk of having to go through a bank crisis.

In this respect instead of applying minimum bank capital regulations base solely on risks of default, most often as measured by the credit rating agencies, we need to give more purpose to banking, perhaps by starting to think in terms of units of risk of defaults per environmental hazard avoided or per decent job created.