Banking system still dangerous and distorted

Much more capital is needed to protect banks from repeating the mistakes of the past, according to a new book that challenges banker myths about equity.

Bond traders in the US are apparently terrified by “the ghosts of 94” a reference to a Fed rate hike that caused catastrophic losses according to an interactive splash on the FT website.

The veterans of 1994 are right that many of the conditions are similar today early signs of economic recovery, a possible shift away from fixed-income markets and a generation of bond traders who have forgotten that interest rates can go up as well as down.

But they only skirt around the real problem financial institutions that are incapable of absorbing the losses they incur as an inevitable result of excessive leverage.

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