James Moore: A more stable banking sector does not mean our finances are safe again

Outlook Where's the next financial crisis going to come from? Up until now, regulators have been focused on preventing a repeat of the last one.

That's understandable, and if it leads to a stronger, more conservative banking sector which can stand on its own feet if the global money markets dry up again, fair enough.

The trouble is the next flare-up will almost certainly come from an entirely different direction. Paul Tucker, the outgoing deputy governor of the Bank of England, pointed to a couple of potential hotspots in what amounted to a valedictory appearance before the Treasury Select Committee.

"Shadow banking" – for which read hedge funds and the like – has long worried people, with good reason. The sector is high risk, high reward and perhaps the greatest talent of those working within it might be their unrivalled ability to find ways to evade rules and regulatory scrutiny.

Clearing houses, responsible for ensuring financial transactions are completed if a participant defaults, receive generally less attention. But they could pose just as great a danger. Given their function, just what happens if it is the clearing house that defaults?

That's a thought that gives some of the brighter regulators sleepless nights, and so it should, given the way they have been allowed to operate with comparatively low levels of capital while being sold off to commercial entities whose interests lie in keeping it that way.

But perhaps his best point was that the most recent crisis was the last that will be resolvable across the Atlantic with Asia looking on from the sidelines.

Has regulation over there kept pace with the speed with which financial markets have developed? That's an interesting question.

In certain areas it was actually tighter than what existed in the West prior to the financial crisis. HSBC, for example, has long had to provide details of the salaries of its top earners thanks to its listing in Hong Kong. And the Securities & Futures Commission there was previously run by one Martin Wheatley, who currently heads up the Financial Conduct Authority.

Mr Tucker is quite right to say that the oversight of banks is now a global, and not just a transatlantic issue and that British, European and American banking supervisors need to engage with their colleagues in Asia.

But they should think very carefully before they start telling their opposite numbers in the tigers how they should be doing their jobs given the mess that was made in the transatlantic time zones.

Start your day with The Independent, sign up for daily news emails
News
i100 In this video, the late actor Leonard Nimoy explains how he decided to use the gesture for his character
Arts and Entertainment
Secrets of JK Rowling's Harry Potter workings have been revealed in a new bibliography
arts + ents
News
Down-to-earth: Winstone isn't one for considering his 'legacy'
people
News
news
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower