The PNB fraud: A clear cut case of no systemic accountability

Market-based reform, like the new bankruptcy code, has a better chance of success than bureaucratic stipulations for govt bankers

If you lend someone money, you run the risk of not getting it back. If you allow others to make financial commitments on your behalf, they might misuse their delegated authority. Banks do both all the time. The core of their business, therefore, is to assess the risk they are taking, and either price it correctly (higher interest rates for riskier customers) or take a step back (don’t give the loan). They also deal with the second kind of risk (misuse of powers) by putting in systems, procedures, checks, limits and safeguards. Things will still go wrong, since risk is