To view the digital version of the report please just click here. IFR: A number of the punitive capital charges on certain products appear fairly arbitrary if you ask me, whether it’s task financing or long-dated swaptions trading or whatever. If the intention is to create a utility-banking model, does investment banking fit a computer program bank model? Harps Sidhu, KPMG: We talk about a paradigm shift, I think that’s there. There’s no way the regulator is going to back off on issues like remuneration, like high capital charges on esoteric products.

There are going to be fewer bespoke derivatives products, for example. That’s not heading to away change or go. The bit that’s interesting with the regulation is where in fact the effect on bank balance sheets, broader economic infrastructure, and impacts costs to comply are not well understood. For instance, the economic ramifications on cross-border trade are not well understood. It’s an extremely delicate balancing action for the banking institutions to engage in the right way on the impact of regulation. At the moment the industry is on the back foot in conditions of being trusted to assess the real impact of the changes, whilst not being wholly self-serving.

I’m also worried about the cross-border influences of the localisation of legislation and the greater parochial build being taken by regulators. Steven Lewis, Ernst & Young: You can understand the legislation that is driven by the G20, under Basel 3. You might claim about the huge benefits or constraints on particular products but you can understand the explanation behind it. Secondly, this move is had by you beyond gold-plating towards a concentrate on subsidiarisation, therefore the branch model in many jurisdictions is going to be dead. The impact of subsidiarisation will be in things like trapped capital and much less efficiency.

And then your third thing on top of that is you have – and Keith alluded to the – an almost punitive component. You can understand the concerns that people have not wanted to repeat the mistakes of the past about. Andrew Golden, Deloitte: What we’re seeing is a pendulum effect.

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Whether we like it or not, the banking institutions were under-regulated so we’re seeing a ricochet effect of some very extreme regulations, such as caps on compensation. Clearly we had to have more regulation and I think you’re probably right: we are not yet seeing if Basel 3 works and gets us to a better place.

But it’s all tick-box rules; a principles-based approach is always way, way better because the tick-box mentality allows visitors to work around the rules in a triumph of form over material. Banks have to change the culture. Things such as the bonus cover are a response by populist politicians who are elected by the public that considers the banks have taken the overall economy down.

But this will hurt not just the industry however the economy as a whole. We’ve got to try and reach a stage where the pendulum comes home a little to the middle to permit the banking industry to work. Julian Wakeham, PwC: I think that’s right. Whether it’s an authentic belief or simply political recognition, the politics antennae of all of the senior professionals in these banking institutions has risen significantly. There’s very little disagreement about the purpose of regulation; the disagreement is around the implementation and execution from it. You’re also seeing regulators, perhaps feeling their way on how they will achieve the intent.

So things like recovery and quality planning still have to be walked through in conditions of how it will actually work. And you see growing rules around carry out and culture and rather blunt devices are used to operate a vehicle that, which creates an extremely challenging environment for banks because it’s an extremely difficult thing to do. IFR: But by the end of the day the new regulatory approach risks making the banking model uneconomic. I presume that’s not the intent.