By the time the crisis is over banks will face a whole new set of regulations and probably regulators too. Clearly the current model failed and most bankers accept that there needs to be change. But the current nightmare scenario is of additional layers of bureaucracy, the lack of a level playing field between jurisdictions, and politically inspired directives that fail to address the most important issues.

The signs so far do not suggest that any kind of common sense will prevail. In the US, which is already regulators' heaven, the Obama administration did not have the courage to take the axe to the many overlapping bodies. Instead it created a new one, the Financial Services Oversight Council, which still has to share system oversight with the Federal Reserve. But the conflict of interest at the heart of the rating agency model looks set to be left in tact.

In Europe, Brussels can't believe its luck - the prospect for getting its fingerprints all over the financial sector is proving irresistible. Day-to-day supervision will still be left to national authorities but a two-tier supervisory system - the European Systemic Risk Council to assess the total system's stability, and European System of Financial Supervisors to look at individual banks - is likely to be hoisted on top. Then there are the politically inspired shots such as the draft directive on alternative investment fund managers - hedge funds played a negligible role in the crisis but are seen as 'the bad guys'. As well as the idea of extending MiFID - so-called 'MiFID 2' - to over-the-counter securities even when MiFID 1 one is bogged down because of a failure to properly address clearing and settlement.

In the UK, a review of corporate governance and salaries by the former chairman of Morgan Stanley, Sir David Walker, has been likened to the ill-considered Sarbanes-Oxley legislation in the US that followed the Enron scandal.

Amidst this panoply of half ideas and superstructures, the proposal from the UK's opposition Conservative Party to scrap the Financial Services Authority and put regulation back in the Bank of England is refreshing for it simplicity. A regulator needs moral authority and central bank governors tend to have more of it than bureaucrats sitting in newly created quangos.

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