James Moore: British watchdog will oversee Libor

Outlook We're often told that regulation is a thoroughly bad thing, holding back business and getting in the way of job creation (see repeated Conservative manifesto).

As for the EU, it is of course from whence all evil springs. The two together? Well how many derogatory adjectives can you fit in 900 words?

However, unfashionable though it may be to say so, they can be a good thing. No, honestly.

Exhibit A for the defence are financial services commissioner Michel Barnier's proposals for shining a light into the City's dark corners – the price-setting mechanisms for everything from foreign exchange to oil.

These have for years chugged merrily along, with very little scrutiny. They are sometimes rather arcane – for years the gold price was set in a small room at Rothschild. Each of the four banks involved would either raise or lower little union jacks indicating their readiness for the price to be "fixed". That's a rather interesting way of describing the process, if you think about it.

As we now know there's an awful lot of fixing that has been going on with pricing benchmarks in the City, and while the method of setting the gold price may have been quaint and entirely innocent, plenty has been anything but. Starting with Libor interest rates.

Mr Barnier is proposing to change that, with banks set to face fines of up to 10 per cent of turnover if they don't make adequate attempts to prevent bad behaviour around benchmark setting. That's a proper fine that even City banks might take notice of.

Their natural reaction might therefore be to take a hike, but Mr Barnier is also proposing to stop them from walking away from their responsibilities, thus preventing the whole system from falling apart. The problem is national regulators don't like the idea of the EU taking control under the auspices of its shiny new Paris-based banking watchdog. Britain in particular.

So between the leaking of an early draft, and yesterday's official first draft, there have been a few changes. Now national watchdogs will oversee their own benchmarks – so we get Libor, the Belgians get Euribor rates and so on. Where there are disputes they will be settled by a "college of regulators". If that looks messy at best, that's because it is.

It's worth remembering that it's not always Europe which makes the mess. Member states are pretty good at it too, and if this one blows up, it's on them, including Britain.