ALEX BRUMMER: All change in the Square Mile

Updated: 17:53 EST, 12 February 2010

One of the most useful things about the British constitution is that it is so flexible.

So when governments are determined to do things, as the Tories are when it comes to City regulation, they can get on with the job.

In much the same way as Gordon Brown decided in his first year in office to shift banking regulation out of the Old Lady of Threadneedle Street to the Financial Services Authority, so George Osborne - should he become Chancellor - would shift the whole operation into reverse in his first year, even if legislation has to wait.

If the Tories are going to make the change, the argument for doing so early is powerful.

Mervyn King, who has been responsible for turning the Bank into one of the world's most respected monetary authorities

The next year will see great changes in global rules on banking, including new capital requirements settled in Basle and potentially some kind of global bank insurance.

This, however, is not just a case of shifting the deckchairs on the first class desk. There are some big egos and reputations involved.

When Brown robbed the Bank of England of regulation he came close to tipping the late Lord George into the raging seas. 

The big personality issue when it comes to bank regulation is whether Lord Turner, currently in sole charge of the Financial Services Authority, would relish finding his role cut in half - if the FSA were simply to become a consumer regulator - or would be happy to become a deputy governor under Mervyn King.

Moreover, it is not entirely clear that King, who has been responsible for turning the Bank into one of the world's most respected monetary authorities, really wants to take charge of the nitty-gritty of banking. If he wants it, however, his job is safe until 2013.

What if he does not welcome the new arrangements? The Tories already are thinking what comes next.

A beefed up and more complex Bank will need management skills as well as understanding of markets and monetary policy.

It is thought that someone like HSBC's Stephen Green, with McKinsey background and strong ethical bearings, might be suitable.

All of this remains uncertain. But with its decision to shift banking regulation back to the City and restore the Governor's eyebrows to their former grandness, Osborne and his team could stir up a hornet's nest.

Stateside chaos

If we thought we had problems with post-panic banking regulation in Britain, then we should cast our eyes across the Atlantic where absolute confusion reigns.

Matters have not been helped over the last week by the extraordinary blizzard which has brought Washington DC to a frozen halt. As matters stand there are several possible routes to reform. The House has passed a doorstop of a banking bill which comes in at 1,279 pages.

So it is no wonder that there are City traders rubbing their hands in glee at the thought that the Americans will overdo it as they did after the Enron collapse.

The Senate Banking Committee does not much like the over intrusive House bill and particularly the idea of a new consumer-protection agency which - in the manner of our own Financial Services Authority and the OFT - would write rules for distributing products from mortgages to credit cards.

Then there is the President. There is a view that amid all this chaos the so called 'Volcker rule' could be tagged onto existing law and might be much simpler to deliver.

Certainly Paul Volcker himself is uncompromising in what needs to happen and has view of bankers not dissimilar to that on main street.

In an interview with the FT he said of bonuses: 'They've gotten obscenely large in terms of the discrepancies between the average worker and the leaders.' That is language which everyone can understand.

As for the fightback by bankers against his restrictions on proprietary trading (as well as hedge fund and private equity lending), he is uncompromising: 'The implication for Goldman Sachs, or any other institution, is: do you want to be a bank?'

Over to you Lloyd Blankfein.

Bright sparks

Another day and another private equity rebound, as the fashion retailer New Look bites the initial public offering dust.

This does not mean it is necessarily over for all floats.

There is still a great deal of confidence that the Northern-based educational technology firm Promethean, which is revolutionising the classroom with whiteboards, interactive displays and learner response devices, has a place on the public markets.

Advisers JPCazenove and Goldman Sachs believe that they might get the £400-500m offering away as soon as next week.

The difference, advisers argue, is that Promethean is a story of innovation and growth rather than heated up old assets. That makes some sense.