Yesterday’s stricture of the Governor of the Bank of England, insisting that banks build up their capital base, is a timely reminder of two other key and current issues.

It points out how important it is that UK regulators should continue to have the scope to apply requirements that go beyond the minimum standards set in European directives. Although nobody welcomes more regulation, ineffective regulation is less welcome yet. And the scope for super-equivalence does not always result in tougher regulation (See earlier note on ‘gold-plating’).

The Governor’s remarks also well demonstrate the extraordinary short-sightedness of the Remuneration Code, now enshrined in two European directives (CRD and AIFMD), which, while ostensibly designed to reduce risk at banks and other affected firms, actually has the entirely predictable impact of driving remuneration from bonuses to salary, increasing firms’ risk profiles and reducing their ability to rebuild capital through reductions in discretionary distributions. European regulation is an inflexible and often ill-fitting regime which the City would do better without. Many look forward to the day when ‘renegotiation’ repatriates financial services regulation.