“It’s clear to me that the FSA has to be very, very wary of seeing the competitiveness of London as a major aim, and that’s not a popular thing to say ... ” Thus did Lord Turner, chairman of the UK’s Financial Services Authority, describe the regulator’s future role in Prospect magazine. He was right, on both counts. So how should the authorities approach financial regulation in Britain?

The starting point has to be with the twin personality of UK financial services: the country has a large domestic industry; and it is also home to the world’s leading international financial entrepot. Regulating the former is a different task from regulating the latter.