It is odd to hear a Prime Minister apologise for not getting banking regulation right and for listening to banks too much in terms of regulation.

That is all well and good in so far as it goes. The admission is welcome. But we really have to be careful what we take from it.

Perhaps we should consider what the opposite of light touch regulation, which I suppose is heavy touch regulation, would have meant. 

Apart from not sounding very pleasant perhaps the best way to test it would be to consider what it would have prevented.

For example where does ‘heavy touch’ fit with mortgage regulation when it was only getting up to speed. OK you could argue mortgage regulation never got to an adequate speed. But would it have stopped big LTVs? Would it have prevented say the Together Mortgage or frowned upon the fasttrack mortgages from Abbey.

It might have taken a bit of the heat out things.

As for increased capital requirements, yes that would have slowed things down – a bit. But heavy regulation of capital.

What view would a heavy touch regulation have taken of securitisation, in its simplest form, of books of mortgage business moving between institutions say GMAC to B&B?

That is long before we get to complicated toxic assets. Would a heavy touch regulator have understood them? 

This site has also often argued that to really see what went on and went wrong, regulators needs to also look at things on a firm by firm basis. 

What would a harsher UK have meant for HBOS, Northern Rock, or RBS? Maybe Rock would have been caught out or slowed down. But would heavy regulation have caught HBOS’s triple or quadruple bet on property i.e in terms of residential and sub prime mortgages, its funding, its commercial lending to the property sector.

Would a heavy regulator have frustrated RBS’s zeal for a deal?  

Would Lehmans have made such a commitment to the UK if it hadn’t been given such a welcome? 

Some of these questions actually suggest that it is very difficult to stand up to a boom. It even suggests that to a limited extent, Brown and Britain was really caught out by the global crisis. Much of it would have happened anyway but not all of it and not as badly.

So the apology is a good thing but I’m not sure it adds to our understanding and I don’t see many IFAs saying ‘apology accepted’ very fast.