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Can we afford to let banks regulate themselves?

Earlier this week a number of prominent UK banking leaders came forward to suggest that excessive regulatory changes in the UK could potentially force the UK banking sector into a possible credit crunch part two. It is believed that extra capital adequacy requirements could well take away much-needed liquidity from the UK money markets and effectively cut-off the supply of finance to the UK consumer and business arenas.

Historically the UK financial sector has operated in a "self regulatory" environment which allowed the regulators and financial companies to react quickly to changes in the marketplace. The difference between this style of regulation and the proposed changes in the offing could not be wider and some are calling for a retrenchment and return to a mixture of the two. However, there are growing concerns that re-introducing any new element of self regulation will hand back power to the UK financial sector and put the rest of the UK economy at the beck and call of banks.

Finding a balance between allowing the banking arena to breathe and introduce new investment tools on a regular basis and reducing so-called "casino banking" is paramount if the UK economy is to prosper. Finding this balance will not be easy!

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