One of the things Sir John Vickers got absolutely right in his report on the banking industry - issued yesterday - was the scale of the regulatory reform that was already under way. Throughout his interviews yesterday, the chairman of the Independent Commission on Banking took care to emphasise that his proposals to reform the UK's banking industry were properly aligned with changes taking place across the EU and around the world.
The UK has been leading the field in regulatory reform since the global financial crisis hit our shores. We have undertaken sweeping change further and faster than any other jurisdiction in the world.
The UK's banks were the first to increase the amount of capital banks have to hold - they hold more than three times the capital now than they did then - and also greatly increased the amount they hold in liquid assets. And at the same time they have been developing their recovery and resolution plans to ensure that if they do encounter financial difficulties they can safeguard their customers' deposits, maintain the supply of finance in to the economy and sort out the bank.
The thinking is that if these increases in capital and liquidity should prove inadequate to some future financial crisis then the resolution and recovery plan is there so a bank can be wound down with the deposits protected, the supply of money into the economy maintained and the tax payer protected as well.
The banks are still reading carefully through yesterday's report by the Independent Commission on Banking, but the first signs are that a significant effort has been made to align key aspects with much of the change already under way. For instance, while the ring-fencing of banking activities is clearly more demanding than the recovery and resolution plan previously envisaged it has some common strands and that would certainly be a very positive outcome. The proposed capital requirements are also more demanding than those agreed internationally by the Basel Committee - thee alone will need careful consideration. The report also includes significant recommendations on competition which need to be fully analysed.
All of these are significant and long term changes. In the short to medium term, however, the key test for any regulatory change is the extent to which it supports financial stability and promotes economic recovery. Estimates differ widely as to the likely cost of these changes and their effect on the cost of borrowing (and hence GDP), but they are not likely to be small. At a time when the world's governments are still accounting for their own sovereign debt crises, not to mention the possible repercussions of the eurozone's continued problems, it is clear all of this change needs to be analysed and costed for its impact on the UK's economic recovery.
We should be clear. Three years ago the UK banking sector apologised for its role in the global financial crisis and set about making the major changes required. It hasn't been easy and it hasn't been cheap either. But risks are much better controlled. The people at the top are now very different. And they are all committed to regaining the confidence of their customers and rebuilding trust in the financial system.
The Vickers report was 15 months in the making and is a considerable and detailed report. The challenge now for the banks is to ensure it results in a stronger financial system but still enables them to continue to support economic recovery. The UK's banks are committed to meeting that challenge.