Editor's letter

An investment banker with 20 years of experience told me recently that the regulators hadn't even got started on the investment banks. The business model we became used to from the large institutions, he said, would inevitably change as a direct result of intervention from the authorities. Few would argue, of course, with the view that a bout of thorough house-keeping is necessary, and even in those areas where there is some debate about the appropriate extent of regulatory oversight - the derivatives market, for example - most participants agree that the market's interests will be well-served by a public appraisal of its organisation.

But regulation must come from the right places and be the product of discussion with the market. As politicians seek to insulate themselves from the electoral consequences of the economic travails being felt across the globe, many are unlikely to stop at reasonable criticism of the market and may resort to heavy-handed legislation to demonstrate their appetite for reform.

I am writing in a week when CDS spreads on government debt reached record highs across the world's most developed economies. As of early December, CMA is quoting a record high of 122.1bp for five-year CDS on UK gilts, a move of 100bp since mid-September and a direct consequence of mammoth borrowing and seemingly daily pronouncements on how the government intends to protect voters from the effects of the downturn. Banks receiving public support are unwise to engage governments about their own record, but the rest of the market, if pressed, can and must tell politicians to put their own house in order.

Matthew Attwood.