Treasury Select Committee plays a long game

There should be relief that it hasn't thrown yet another permutation of regulatory over-sight into the mix. As it points out, there are almost too many views on how to shift the various functions around, not just here in the UK but in the European Union and the United States as well. What the report says is, 'Hang on a minute. Do we actually know what we are going to be regulating and have we got a clear idea of where responsibility for strategic decisions and executive action lies?'. This is the crux of the problem about the regulatory debate at the moment. It has all the feel of a group of blind people running around with sticking plasters trying to find the right holes to stick them on. No-one - apart from some in the EU (and Vince Cable) - seems to be asking how we can stop the holes appearing in the first place.

Mr Cable's point is similar to the committee's. He doesn't believe there is much point in creating a debate about regulatory structures until we have decided on how we want the banking sector to be reconstituted when the nationalised banks are returned to the private sector. In particular, Vince Cable and John McFall both want the "too big to fail" question addressed.

The select committee is also lukewarm about the debate on capital structures. Mr McFall dismissed alot of the proposals for matching capital to risk as mere "tweaking" and said that we musn't rule out legislation to separate out the riskier functions, thereby raising the spectre of the UK adopting something along the lines of the old US Glass-Steagall Act introduced after the Great Crash in 1929 and repealed by the Clinton administration in 1999. This threat will not go down well with many bankers.