Let’s take a look at the corporate strategy of the large financial institutions that played an instrumental role in bringing on the financial crisis. The chief executives at these companies tended to favor an aggressive leadership style, which for a long time led them to aggressive growth; as they acquired companies, the largest companies became ‘financial supermarkets’ with a whole range of services. These financial institutions grew and grew, but eventually reached a point around 2004 where their growth stopped. The leadership of many of these companies started to be criticized for not integrating their acquisitions well. And so chief executives responded by making their companies more governance-oriented, with new constraints for things being signed off by teams. These new protocols and procedures made the financial institutions stabilize and stop growing, but they didn’t prevent the financial crisis, and the whole sector is now suffering as banks (and [...]

At the G20 and elsewhere, we’ve heard government leaders like Obama and Brown calling for more regulation to prevent financial institutions from growing too large to fail and obfuscating their responsibilities. These calls are all well and good, but they aren’t a panacea. The problem with too much regulation is that it slows down markets and hampers growth. The ‘greedy bankers’ that have been reported on so often in the press aren’t the problem—they’re only the symbol. They’ve just been following procedures in a marketplace incentivised by short-term thinking and by imbalanced approaches to risk-taking. [...]