David Prosser: On how to prevent another financial crisis

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Outlook Charlie Bean, the deputy governor of the Bank of England, and Standard Chartered Bank started out from different places in two different contributions they made to the debate over financial stability yesterday, but they ended up at more or less the same destination. Both concluded tighter capital and liquidity regulation were crucial reforms that must go hand in hand.

Of all the banks with a stake in the reform of financial regulation, Standard Chartered is worth listening to most closely. It did not suffer in the crisis to the extent that rivals did – and it has much less of an axe to grind than others since it has no retail operation in the UK (though it is not wholly neutral, since it is concerned authorities in jurisdictions where it has a retail presence might follow the UK's lead on ring-fencing).

Leaving aside the bank's complaints about ring-fencing, its warning that "insufficient emphasis" has been placed upon macro-prudential reforms strikes a chord. This is all about the toolkit that the Financial Policy Committee, the new Bank of England-led authority charged with preserving financial stability, has at its disposal.

As Standard Chartered implies, it is not yet clear what that toolkit will include – its suggestion, like others before it, is powers such as the right to impose caps on loan-to-value ratios, which could be used to snuff out credit bubbles before they begin to inflate.

It is sensible stuff, though as regulators have already warned, it will leave them open to great public hostility – mortgage borrowers will not be impressed at being told how much they can borrow by the Bank of England. Selling the idea may be a little tougher than, say, the ring-fencing the bank dislikes so much.