The devil’s punchbowl

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: A new hiring frenzy in the City, with bonuses guaranteed for “only” the first year; investment-banking results for the second quarter likely to top those of the first; an innovative securitisation by Barclays to get bank loans off its balance sheet. The term “business as usual” normally delights tradesmen and their customers. Applied to the banks that plunged Britain into economic crisis, it strikes fear to the heart.

Promised reforms to bank regulation, meant to curb the excess before it starts all over again, are in limbo. On Wednesday July 8 Alistair Darling, the chancellor of the exchequer (finance minister), unveiled plans to make banks hold progressively more capital, the bigger and more complex they are. Banks will be required, in effect, to add capital if they pose especial risks to the system, including higher capital charges if they pay bonuses that encourage short-term risk-taking.

This all sounds plausible. But Darling failed to explain how those varying capital requirements will be assessed and applied. In fact their calibration will depend not on Britain alone but also on work being done in Brussels for the European Council (a draft law is expected in October). And rules to increase the money banks must hold for liquidity are coming from the Basel Committee, a club of rich-country bank supervisors.

He also failed to change the outfit in charge of bank supervision. The much criticised “tripartite arrangements”, designed to help the treasury, the Bank of England and the Financial Services Authority (FSA) act as one in a crisis, are hardly touched. The trio failed in its first big test, the collapse of Northern Rock in 2007, prompting calls for authority over banks to be concentrated in the Bank of England, as it was before Labour took power in 1997. Instead, Darling wants the FSA to impose the varying capital charges; the Bank of England is to assess the systemic risk on which the charges will be based but will not have the power to enforce them. Overseeing it all will be a Council for Financial Stability, chaired by the chancellor himself.