As Dubai World's default shows, the financial crisis is far from over. Surprise, surprise, among the creditors with the biggest exposure is Royal Bank of Scotland – a reminder that reckless lending by supersized banks was a global phenomenon. Taxpayers are entitled to ask for a radical reform of banking regulation to ensure they will never again have to foot huge bills for financial folly. So far, there is only one credible proposal.

In a recent speech in Edinburgh, Mervyn King, the governor of the Bank of England, called for “utility banking”, which would limit banks to their legitimate purpose – financial intermediation and payment facilitation – as opposed to gambling with taxpayers' money.

It was a brave and important challenge to a status quo that institutionalises moral hazard and exposes governments to ruinous losses. True, the enormous bail-outs, loans and guarantees provided to banks helped avert a Great Depression. But they have also sown the seeds of another disaster. The contingent obligations, which Mr King called “breathtaking,” total three-quarters of UK gross domestic product. The US figure is twice GDP.