The reputation of the City has taken a terrible battering as a result of the financial crisis. Each time it picks itself up there is a new blow; perhaps most recently in the shape of the £1.3 billion rogue trading scandal at the London end of Swiss bank UBS.
We can be thankful perhaps that in its wisdom UBS decided some years ago to drop the SG Warburg name from its London investment banking operations, otherwise it might be Anglo-Jewish, rather than Swiss investment banking, going through the wringer.
Big Bang (used in reference to the sudden deregulation of financial markets 25 years ago) opened Britain to competition, bringing huge changes to the City of London with many of the UK stockbroking houses and traditional merchant banks swamped by universal banks from overseas. The traditional 'my word is my bond' culture of the old City was replaced by a global trading mania in which income and bonuses became more important than reputation.
It is no surprise that the handful of houses that resisted the allure of the big bucks such as NM Rothschild, Lazard and Close Brothers, have emerged from the crisis enhanced rather than diminished.
The Independent Commission on Banking (ICB), headed by Sir John Vickers with FT economics commentator Martin Wolf among its members, came up with admirably sensible proposals. Its most far reaching recommendation being that we construct firewalls between the trading (some might say gambling) arms of the universal banks and their utility banking - or retail - division.
London must be careful how it reforms the financial sector
It was almost serendipity that with the universal banks screaming foul and rejecting the casino banking charge that UBS, which lost an astonishing $50 billion in the sub-prime crisis, was found to have gambled away £1.3 billion in the newly fashionable exchange traded fund (ETF) area.
Until now we have thought of ETFs - invented by Barclays Global Investors (now part of BlackRock) - as a simple product providing easy access for retail investors to sectors such as gold, house building and soft commodities. But the 'clever' investment banks decided to mimic these real ETFs, which are transparent and easy to trade, with 'synthetic' ones, not unlike the derivative products built around sub-prime mortgages. It was trading in these ETFs - highly volatile, opaque and difficult to understand - which landed UBS and its alleged rogue trader Kweku Adoboli in difficulties.
The fact that UBS lost so much money so easily has confirmed, in the mind of the public, that the big trading houses are no more than casinos. In fact they are less safe than casinos where a combination of table betting limits, 24-hour monitored security cameras and expert floor walkers - the equivalent of compliance officers at the banks - seek to make sure that a fraud on the scale seen at UBS would be impossible.
Yet when it comes to reforming the financial sector London has to be careful. There are many critics out there who blame free-wheeling Anglo-Saxon capitalism and the large number of London-based European hedge funds for their woes. The difficult trick for the Coalition is reforming the banking system while leaving London's leadership as a financial sector intact.
Data from lobby group TheCityUK shows that in 2010 the income from the Square Mile represented 10 per cent of UK gross domestic product, generated over two million jobs across financial and professional services and was one of the few sectors in the black, contributing £40 billion to the trade surplus. These numbers together with the 11 per cent of tax receipts which come from the City perhaps tell us why the government has been so nervous about the ICB - waiting eight years before implementation.
The long lead time clearly makes little sense given public concern about the power and irresponsibility of the banks and the constant changing shape of the banking sector. Indeed, the ICB may well have caught a market trend.
Post the ETF trading scandal it is now widely expected that the Swiss authorities will call for the breakup of UBS into its traditional retail/wealth management arm and a trading bank.
The same trend looks to be underway across the Atlantic. Pressure is growing on Bank of America to spin off its investment banking arm Merrill Lynch, which was bought at the peak of the crisis three years ago.
There are even suggestions that it is time to break up the big-paying Goldman Sachs. As the regulatory pressure from America's financial reforms have built up, Goldman shares have suffered. One way to release value might be to divide it into three arms: an old style investment/merchant bank which provides corporate advice; a trading arm which will incorporate brokerage services; and perhaps an asset/wealth management arm which looks after its own funds and those of clients.
Paradoxically, investment banks such as Goldman have been the greatest advocates of releasing value by splitting vast enterprises such as the food giant Kraft, which is re-engineering itself.
Now a combination of regulatory change and shareholder interest is pushing the big global banks in the same direction. Instead of awaiting regulators to force change upon them, they might well gain advantage by beating the clock and splitting themselves.
Who knows? Some of the great old names of investment banking from SG Warburg, to Bear Stearns, Samuel Montagu and Cazenove may yet light up the City skyline again.