The story goes that during the halcyon days of the financial services industry, bankers operated to a strict 'three-six-three' rule – they would pay 3 percent interest on deposits, charge 6 percent interest on loans, and be on the golf course by 3 o'clock.
It's a reminder of how simple the financial services sector used to be – and many bankers no doubt hanker for a return to those less troublesome days. A time when regulators were there to restrict competition, not promote it; when they were on the side of the banker, not the consumer.
Of course, we exaggerate; but there's no doubt that today's financial services industry is a very different animal. Regulators - often driven by political motivations as much as economic - rule with an iron rod and global markets gobble up complex financial instruments at such a rate that it's doubtful any organisation could claim to have a true understanding of their own exposure to risk.
And that's why, on 15 September 2008, one of the largest investment banks in the world went bust.
The day Lehman Brothers called in the receivers changed the regulatory landscape forever.
Existing regulation was strengthened, new legislation created and banks, investment and clearing houses, and to a lesser extent insurance companies, operate under a growing weight of red tape.
Talking to Giles Williams, a PricewaterhouseCoopers partner who heads up the firm's regulatory centre of excellence in Europe, provides an insight into this world. "We've had new capital rules, Solvency II and CRD rules. We've got MiFID II coming out, there's PRIPS, on the insurance side there's IMD, there's the whole issue of Recovery and Resolution Plans and a whole bunch of governance coming out of the European Banking Authority. And in the UK we've got the Independent Review of Banking," he says.
For the UK, this final piece of reform could impact banking operations the most. Central to the recommendations made by the report's author Sir John Vickers on 12 September was a proposal that banks be forced to ring-fence their retail operations to protect everyday banking operations – and the average punter – from the banks' more risky investments.
A sound framework?
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