Clear Property Investment is aware that banking has undergone one of the biggest changes in decades. The economy has already suffered the resultant turmoil while the public are currently gearing themselves up for public sector cuts.

New world-wide regulations banks must adhere to include the amount of capital and liquid funding they should retain. This results in constrained profits and strict lending guidelines. Meanwhile, interest rates are expected to rise in the near future.

Talking to the Financial Times, Bob Penn, regulatory law partner at Allen & Overy said: "There are large black clouds on the horizon. What we don't know is whether there will be a hailstorm or whether they will blow over and we'll get blue skies again."

Analysts at investment bank Nomura, paint a rather more bleak picture: "We believe that impetus towards co-ordination of financial sector reform has largely stalled and that the consensus among governments is that there is no consensus.

"Instead, individual countries look likely to do their own thing. This is likely to increase the trend towards prioritising economic recovery over financial sector reform and lengthening the timescale for reforms to be implemented," they added.

"At the same time, it is also likely to accentuate the differences between countries and increase the competitive disadvantages of banks operating in countries with more hawkish regulatory tendencies, for example the UK."

Banks in Britain will be expected to hold more capital while the Financial Services Authority (FSA) also wants banks to hold more government bonds next year.

Banks who are expected to be worst hit are the part-nationalised Lloyds and the Royal Bank of Scotland. They will be struggling to manage the new guidelines unless they cut back on lending or slap on huge interest charges. However the government have set lending targets, especially to small business. Other banks such as Barclays and HSBC don't have the same pressure.

The government-appointed Independent Commission on Banking will decide over the next 12 months whether the structure of British banking should be changed. This could involve breaking up huge conglomerates such as Lloyds who have Halifax, Bank of Scotland and Cheltenham & Gloucester.

They may also look at global banks such as HSBC and Barclays. However there are fears these may shift their headquarters from London to overseas if this happens.

The commission is expected to publish its findings in September 2011.

For investment and borrowing advice please contact any of our Clear Property Investment staff.

View other news from September 2010