You'd be forgiven for thinking that April was not a happy month for banks. Genuine gasps could be heard when the Securities and Exchange Commission charged Goldman Sachs and one of its vice-presidents with civil fraud. Then Congress got in on the act, giving the financial sector's golden child a very public flaying. Rumours of a criminal investigation swirl. In the background, the bond markets of Greece, Portugal and Spain – to which European banks, for example, have $1,280bn of exposure – came under increasing pressure.

But you'd be wrong. It was in fact an excellent month for banks. Why? Most important, the witch-hunt against Goldman is completely overshadowing any sensible debates about how to reform the sector. The simplest and best way to make banks safer remains a dramatic increase in capital requirements, and they fear this more than anything else. The main reason US banks, for example, managed to keep aggregate returns on equity (ROE) at about 15 per cent from the mid-nineties to the mid-noughties in the face of falling turnover-to-assets was leverage. According to Federal Deposit Insurance Corporation data, the average tangible equity to tangible assets ratio was 7.5 per cent in 1995 and dropped almost a percentage point before the crisis hit. Gearing in Europe also rose dramatically.

Deleveraging has already cost global banks about 6 percentage points of ROE compared with 2000-06 levels, according to Morgan Stanley and Oliver Wyman analysis. So far, the trading boom fuelled by a steep yield curve has more than made up for the hit. But a huge recapitalisation during more normal monetary conditions would really hurt. That is why last month's troubles in Europe are also cause for banks to cheer, as is the Federal Reserve's broken record that rates are staying low for an “extended period”. Provided debt troubles do not blow out into a crisis, yield curves are staying right where banks want them. So, too, are politicians and regulators: stuck bickering in a Goldman sideshow.