In the aftermath of 2008's financial crisis, the UK government embarked on a reform of banking sector regulation to avoid a repeat of the 2007-8 full or partial nationalisations of Northern Rock, RBS and Lloyds TSB.
By 2019, banks will have to ringfence (that is, separate) their retail banking operations from their investment banking arms in order to protect customer deposits. Banks also need to hold more capital in reserve so that in times of future financial crisis government intervention can be avoided.
Three recently published external reviews into the regulatory role played by the Bank of England during the financial crisis have highlighted flaws in its functioning but acknowledged that some improvements have been made in recent years.
2. Financial transactions tax
One of Franï¿½ois Hollande's first actions as president of France was to introduce a levy on financial transactions (commonly referred to as a Tobin or Robin Hood Tax). The tax came into effect on 1 August, at a rate of 0.2 per cent, which will raise ï¿½500 million (around ï¿½400 million) next year and will be used to fund AIDS research. France was the first European country to implement such a tax, but there's been pressure on the UK government to follow suit.
George Osborne has so far refused to acquiesce. A tax on financial transactions would, he claims, drive business out of the City of London - currently by far the biggest financial hub in Europe and a key engine of the UK's economy. He also fears that the British economy has much more to lose than its French counterpart, given the difference in relative size of the two financial sectors.
3. The eurozone crisis
Spain is the fourth largest economy in the region and looks set to be the next country to go to the EU "Troika"ï¿½ (the European Commission, European Central Bank and International Monetary Fund) for a bailout. Data released earlier this year shows that the UK banking sector has some ï¿½52.3 billion tied up in loans to the Spanish public and private sector. In Italy, another of Europe's most troubled economies, the corresponding figure is ï¿½36.4 billion. The UK's exposure to Greece's private and public sector debt is ï¿½23.3 billion. So while eurosceptics may be smiling smugly at Britain's decision to stay out of the euro, any further tremors in the eurozone are likely to shake Britain's banks with real vigour.
4. The LIBOR scandal
LIBOR (the London Interbank Offered Rate) is one of the most crucial interest rates in the world, calculated every day from a range of bank submissions and used in financial transactions worth over ï¿½500 trillion per year.
Some traders, however, conspired to submit fixed rates in order to benefit their trading positions. The discovery undermined public trust in the banking industry even further, especially considering the fact that much of the rigging uncovered to date happened at the height of the financial crisis. LIBOR rigging is now being investigated by authorities across the world.
5. Bankers' bonuses
Earlier this year, RBS chief executive Stephen Hester was offered a bonus of ï¿½963,000 on top of his basic pay of ï¿½1.2 million despite the fact that the bank, which is 83 per cent owned by the government, had recently laid off 30,000 staff. Five years after the financial crisis began, bankers' bonuses are bigger news than ever.
German finance minister Wolfgang SchÃ¤uble said last September that cash bonuses should be capped at the size of bankers' salaries. However, George Osborne has spurned the chance to follow a lead from the continent. He argues that a 1:1 bonus to pay ratio risks driving up salaries in the City and, by default, bonuses.
In recent years governments have had to balance the demands of the City to incentivise their staff as they see fit and those of a public unafraid to protest about remuneration packages, particularly given their vested interest in partly-nationalised banks.