Pay depositors for risk due to bank losses

There is a great book on marketing titled The Long Tail, which stresses that instead of trying to hit millions of customers at once, it’s perhaps better to do millions of niches. Replete with examples, it was and remains a deserved hit. The “long tail” refers to the distribution of something — a large bulk at one end, quickly trailing off to smaller numbers but which go on for a long time.

Another word for this is skewness. In many skewed distributions, it is common for the total amount in the long tail to be equal to or greater than in the bulk.

The long tail approach is worth considering as we move into the sixth year of this crisis. Having dealt with the massive mess of the commercial property and developers loans via hiving them off to Nama (which has yet to “get credit flowing”), the long tail of mortgage and SME loans continue to erode the banks.