Did all the fines levied on financial institutions in the wake of the crisis have the desired effect? We decided to assess the effectiveness of financial regulation in the UK since the financial crisis by examining if fewer firms commit misconduct offences and if future offending has been deterred.

This evaluation is not as easy to make as one would think. While the proportion of firms brought to book by the regulator has been dropping since 2010, it is unclear if this represents a decline in the number of firms offending or the regulator just catching fewer firms for aberrant behaviours. Either the regulator’s past actions has deterred future offending and there are few transgressing firms to catch or this is a sign of weakening enforcement and a diminishing proportion of offenders are caught. Both explanations are plausible, but whereas the former outcome would attract wide-ranging praise, the latter would be highly undesirable.