Word of the week

The great clean up seemed to turn, or at least begin to veer around, a corner this week as the government and the FSA progressed with new regulation and an asset protection scheme dubbed ‘Operation Broom’. Lord Turner, head of the City regulatory body, dismissed past practices as ‘fundamental intellectual failure’ and cited a ‘revolution’ in City governance that had already progressed in the last 18 months. So what does this mean? Banks are now likely to be required to hold up to three times as much capital against their trading assets and there will be far more scrutiny of whether senior bankers are fit for their jobs. And with Lloyds and RBS soon to announce record losses, Alistair Darling is also stepping up efforts to isolate bad debt in both banks. This will allow them to return to normal lending capacity and avoid a further investor sell-off that might force nationalization. The wheels are beginning to turn at least and the survival of the two banks over the weekend should (worryingly) be a good sign. If not it’s hard to see how the government itself will survive.

Jack