Some of the world's top bankers bemoaned on March 31 growing red tape which is burdening the global banking industry, and they appeared to get a sympathetic hearing from US and British regulators.
British-based HSBC, one of the world's largest banks by market capitalisation, has to comply with some 500 different regulators in the numerous countries in which it operates, CEO Stephen Green said.
Speaking at an annual gathering of the Institute of International Finance (IIF), a lobby group for 340 banks operating in 60 countries, Green said it was becoming increasingly challenging for banks to comply with all the regulations.
"Execution risk is becoming a significant risk factor in itself," said Green.
Added to the regulatory burden, US banks face considerable costs because they are based in a country with an entrenched culture of litigation, said William Harrison, Chairman of J.P. Morgan Chase.
"If you look at the litigation liabilities we have dealt with, they have exceeded our trading losses for a long time," said Harrison who called for "credible legislation to put an end to all of this".
Callum McCarthy, the head of Britain's Financial Services Authority, which oversees Britain's booming finance sector, said banks had to be free to make their case when they felt a regulator was being heavy-handed.
"What do you do if a regulator fails? Do you feel able to engage constructively with the regulator?" asked McCarthy. "We want intelligent criticism."
Regulators needed to be careful not to stifle innovation in the financial industry but at the same time there were dangers if they were too hands-off, said the outgoing Vice Chairman of the US Federal Reserve, Roger Ferguson.
"Policymakers theoretically might be quite heavy-handed, either imposing regulations on virtually every market and instrument to stop any innovations that, in their judgement, cause harm or, conversely, actively fostering or subsidising innovations seen as desirable," said Ferguson.
"Policy should have a bias toward trusting financial markets to manage the introduction of new products and the development of new institutions smoothly and without due stress to the system," he added. However, regulators "cannot take such an outcome for granted" because financial firms did not always take into account the effects of their decisions on the stability of other firms or on broader financial markets.
Although it was impossible to impose a single regulatory model on the entire banking world, bankers faced a choice between a rule-bound system and one driven more by guiding principles.
"Do you want rules-based certainty or something based on principles?" said McCarthy.
J.P. Morgan's Harrison said he was sceptical that a shift to a regulatory system away from clear rules and governed by principles could work in north America's litigious environment.
"I don't think it's too practical to go too far too quickly on that, given the environment we live in," said Harrison.