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Speaking at the Financial Services Authority's (FSA) Asset Management Conference today (17 September), IMA chairman Robert Jenkins said the credit crisis had arisen from a combination of greed, imprudence and leverage.

"We will not outlaw greed and cannot legislate against stupidity. But regulators can and must address the issue of leverage."

Jenkins told delegates that bailouts do not restore confidence but liquidations which leave the system in tact do.

"The market must see that the system is strong enough to withstand the failure of a failing institution. Capitalism cannot succeed unless capitalists are allowed to fail."

Jenkins also urged regulators not to miss the opportunity to apply lessons learned from the banking crisis to the investment world.

"The faster the banks put their problems behind them the faster new and more prudent credits will be created. There is no shortage of liquidity. There is a shortage of confidence in many key financial institutions.

"The sooner the banks mark their mistakes to a price at which they can be moved off the balance sheet, the sooner the old stuff can be replaced by transparently constructed and prudently originated new credit.

"Investors will by the old stuff but not at yesterday's prices. Similarly we will happily buy the new stuff originated to high standards. Let the banks come clean and the money will flow."

Jenkins also took the opportunity to renew the IMA's attack on structured products aimed at retail investors, which he said were deceptively simple in sales pitch but complex in construction, carrying liquidity risk, and a level of costs which the retail buyer may not fully understand.

"This is an area largely free from regulatory oversight and competes directly with a highly regulated traditional investment industry where agency status is central, transparency of fees and holdings de rigueur and government pressure to raise levels of treating customers fairly foremost."

He added: "Is someone asleep at the watch?"