The writer is president of Queens’ College, Cambridge university and adviser to Allianz and Gramercy

I vividly remember a meeting in late 2007 with the head of a major US bank. The executive drew an inverted U in response to me asking where financial markets stood. When told that we were near the top, I immediately asked about the bank’s risk positioning. “Max risk on” was the rather surprising answer.

Surely, it was prudent to reduce risk ahead of an expected turning point? No, I was told. The bank needed “unambiguous evidence” that the markets were turning before altering its strategy. After all, it is hard to time inflection points, competitors also had lots of risk on, the bank feared short-term underperformance and the authorities were not ringing any alarm bells. In the event, the bank had to be rescued in the 2008 financial crisis.

Today, this institution (with a different chief executive) is better…

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