Executives at banks are incentivised to take on a lot of risk, even when it does not increase standard returns. This is because of the increased chance that they will get a large pay out in the form of a bonus if all goes well. If things go poorly they know that the government will bail them out and the worst that will likely happen to the executive is that they lose their bonus.

When taking on more risk banks supposedly also need to have more equity. In The Great Recession the banks were many years into the learned behaviour to take out insurance against high risk loans which meant they didn’t need the same equity and could get away with more dangerous investments.