Everyone with an investment bank should put “square brackets” around it, according to Stephen Hester, chief executive of Royal Bank of Scotland. “Separability” is the new buzzword for UK banking. It is not hard to see why. The Conservative party is proposing to return banking supervision to the Bank of England if it gains power. With Mervyn King openly espousing the legal separation of narrow retail banks from the casinos – a dogma that the existing regulator, the Financial Services Authority, deems unworkable – regulatory risk is rampant.

Regulators have given themselves until the end of next year to provide new capital and liquidity requirements. The direction of travel, however, has long been clear. Already, some universal banks are reorganising themselves to make it easier for them to draw up credible “living wills”. These would allow them to retain their investment banking arms, provided they could in extremis be discarded, like lizards’ tails, without contaminating ring-fenced and taxpayer-backed retail deposits. Barclays this week announced plans to disentangle its retail bank from its commercial business. The latter will now sit alongside Barclays Capital, its investment bank, and Barclays Wealth. RBS may have to do something similar.