A few weeks ago, Claudio Borio, head of research at the Bank for International Settlements, warned in a solemn note to Group of 20 leaders that modern financial policymakers are “driving while just looking in the rear view mirror”: western finance officials have focused so much on past risks that they fail to spot new dangers.

Worse still, as policymakers rush to implement reforms in response to one financial calamity, they are apt to create distortions that pave the way for the next disaster. Just such an unintended consequence could now be festering in the banking sector, as its balance sheets are increasingly stuffed with government bonds.

These days, there is a near-unanimous belief among Western regulators that one way to prevent a repeat of the 2007/2008 crisis is to stop banks taking crazy risks with subprime mortgage bonds or complex instruments such as collateralised debt obligations. Instead, banks are being urged to hold a higher proportion of their assets in the form of “safe” instruments, most notably sovereign or quasi-sovereign debt.G20 regulators are holding regular meetings in Basel to draw up rules on how banks should do this, as part of a wider reform of financial regulation.