If the world economy takes a dive, the banks could be in for a bumpy ride.

From high-riding America to muddled Europe to down-in-the-dumps Japan, this survey has argued that the world’s banking systems are in less good shape than many suppose. Their core business is being whittled away by capital markets, a problem aggravated by the perverse incentives of international capital rules. Yet all the while shareholders demanding better returns. To achieve them, banks have increased their revenues by lending to less creditworthy companies, whether at home or in emerging markets, or by venturing into new sorts of business. Some of these, particularly investment banking, have proved difficult and expensive to get into and, as crises showed, riskier than expected. For all the advances in risk management and technology, banks were caught out. “Clearly their risks are better managed: the question is whether they are better managed in relation to the risks they run”, says one regulator. For investors, that makes banks riskier than they had reckoned with. Although some stockmarkets have soared to record highs this year, bank shares, tellingly, are still some way below last year’s peak.

The other way in which banks have tried to increase profits has been by merging and cutting costs. Consolidation has been a boom for American banks, though there has been less cost-cutting than many think. In much of Europe and Japan, consolidation has been and continue to be much more difficult because of the prevalence of government- and state-owned lenders and mutual banks. In Japan these problems are compounded by banks’ central role in the provision of cheap credit to companies that cannot afford to pay more. The government is unlikely to close the banks down.

Last year’s financial-market meltdown pointed to a number of other problems. The first, as CSFB’S Mr Mayo points out, is credit risk. Many banks in America, Europe and Japan lost heavily on their emerging-market lending. Russia’s problems caught out almost everyone. The banks started to rein in sharply on such lending only after the crisis broke. This does not speak well foe their ability to monitor and control emerging-market risks. It also raises concerns about how well they manage their domestic lending. Both America and Europe have so far managed to avoid sharp recessions, but how would banks’ domestic loan portfolios fare if their economies did contract?

Second, there is that old bankers’ bugbear, concentration risk in essence, the risk that banks have too many of their eggs in one basket. In America, banks spread themselves over many different states, lessening the chances that they will be caught out by local problems. But their international portfolios proved a lot less diversified than they thought. Last year, risky assets everywhere – from junk bonds to emerging-market debt - fell sharply.

A third problem is information risk. Do banks have adequate information about their borrowers? Not always, and perhaps not even most of the time. Banks that lent to Long-Term Capital Management claimed that they knew little or nothing about the size of its positions, or about the uses to which the fund put their money. In emerging markets, too, banks were often in the dark.

Other worries are less clear-cut but nagging. Take operational risk. How good are banks at controlling the risks in all the different kinds of businesses they have been moving into? And does their evolution into broad financial-services companies make them harder to manage? A large, unfocused company such as Citigroup is arguably much harder to handle than a smaller, tighter one because it covers so many sorts of businesses that are vastly different from one another. And the way in which such groups have been formed – through mergers and acquisitions – have made risk management even harder.