we are banking on change..

Bankers bonuses have provided a convenient side show for a lot of the media and trade unions, who rage against the bonus culture and believe that its this that is the root of all banking evil.

Truth is, the crash didn't just come about because a lot of men (and the odd woman no doubt) got paid an excessive amount of money to take silly risks. It was far more complex than that, and had as much to do with poor regulation and systemic weaknesses than bankers greed.

Its good to see that the Independent Banking Commission established by Osborne and Cable has recommended 'wide-ranging reform.' One of the possibilities would be to separate investment arms of banks from their retail operations, which would mean that if the investment arm of an institution failed, it could fold without impacting upon depositors sums.

Banks were bailed out in 2008 because they were judged 'too big to fail;' the task now is to ensure that there is a banking system that does not and cannot rely on the state to step in if things go pear shaped . What is also to be welcomed about this Commission's findings is that they recognise that the EU Basel rules, introduced last summer are not adequate, and that bigger banks such as Barclays and RBS should be required to hold more than the 7% minimum ratio of equity capital to assets that Basel set down. This is essentially a buffer fund in the event of a bank going insolvent, and should in theory prevent taxpayers footing a bail out.

Bubbles are nothing new. The first recorded speculative bubble was in the mid 1600's and centred around tulips; the beginning of this century saw the dot com bubble bursting. However, the Housing bubble almost brought the world financial system to its knees because banks failed to have adequate capital, and the slicing and dicing of 'bad debt' into various financial packages that were passed to and fro within the system without being subject to adequate checks. This Commission's findings are a reminder that things are going to have to change, and lessons must be learned.

At the same time there has to be a dose of reality in the debates and arguments around the banking industry. Change has to be made; but the industry has to retain a competitive edge especially now when it is massively important for the private sector economy to grow and jobs to be created.

Essentially the Commission is proposing tougher rules on the amount of capital that institutions hold, and also questioning the wisdom of just six banks controlling 90% of the UK's deposits. Lets hope that George Osborne and Vince Cable have the courage to act when the Commission reports its full findings later on this year, in the face of the inevitable lobbying and PR onslaught from the British Bankers Association.