The losses of the troubled Amaranth and Vega hedge funds have led to predictable calls for more hedge fund regulation. So, too, will the decision by Philippe Jabre, heavily fined by the Financial Services Authority, to set up a hedge fund in Geneva.

Yet whatever the faults of hedge fund managers, the critics are shooting the messenger. If the real worry is systemic risk, a more fundamental threat comes from the change in the structure of banking whereby credit risk is packaged into tradeable IOUs or hedged via credit derivatives and shunted off bank balance sheets.