Confidence in the models used for risk management in financial institutions is a casualty of the credit crunch. In this newspaper, Alan Greenspan observed that these models were not complex enough to capture reality. Mr Greenspan is right. But his comment could be mistaken to imply that if only the models were more complex still, if only they incorporated even more aspects of reality, then future disasters might be averted.

This is the wrong answer but it is the conclusion already being reached. As the former chairman of the US Federal Reserve noted, discussions are beginning for Basel III to follow Basel II. This process of refinement will never end. After the next crisis, perhaps earlier, there will be Basel IV. As our grandchildren sit through the credit crunch of 2050, they will doubtless be reading of preparatory discussions for Basel XV.