UK banks have had a lot to be pleased about lately. First, there were the Basel III reforms, which turned out to be largely a damp squib compared to the tough talk of draconian new capital requirements that regulators were threatening at the start of the year. Although there are still details to be finalised, nobody believes any major European bank will have any difficulty complying with the rules when they finally take effect at the end of the decade.

Now there is growing optimism the UK's Independent Commission for Banking will also stop short of recommending the splitting up of retail and investment banking. Instead, there is growing confidence that political and practical realities will lead it to focus on other, less radical solutions to the problem of too-big-to-fail banks and the risk faced by taxpayers from the implicit guarantee of risky investment banking activities.