Talk to regulators and then to bankers about risk, and you will get two different stories. Regulators say a bank can never be too cautious. Bankers feel that if the yield is high enough to cover any loss, they can take a risk that others would avoid.

How else can you explain credit card issuers willing to push more plastic into circulation when the default rate on outstanding cards has reached as high as 5% or banks that are now making home loans for 125% of a property's value? No wonder regulators are warning that underwriting standards are being forgotten and that excess risk can kill not only earnings but also banks.

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