New ice age for bankers
For all the furore about Alistair Darling's bonus super-tax, and for all the disclosure overnight by Deutsche Bank that it will spread the pain across all staff and shareholders around the world and not just in the UK, there is a much bigger threat to business-as-usual for banks and bankers.
The international rulemaking body for the banking industry, the Basel Committee on Banking Supervision, has proposed a series of reforms that would change the nature of banking in a profound way (Strengthening the resilience of the banking sector [282KB PDF]).
Some will mutter about stable doors and horses: it was the inadequacy of the existing Basel rules which provided dangerous incentives to banks to take the crazy risks that have mullered the global economy.
But be in no doubt. Although its reform paper, "Strengthening the resilience of the banking sector", may seem technical and obscure, it would turn a particular kind of high-paying, securities trading, global megabank - the institutions that created and defined the boom-and-bust conditions of the past decade - into an endangered species.
If I were running Barclays, or Deutsche Bank, or JP Morgan or even Goldman Sachs, I would be more than a little anxious about the cumulative impact of the Basel Committee's recommendations on the additional high-quality capital that banks would be required to hold, the liquid assets they need to accumulate and also - oh yes - the rewards banks can distribute to employees and shareholders.
Mr Darling's raid on their cash boxes looks trivial by comparison: it's just a one-off; Basel is forever.
The Basel reforms would make it prohibitively expensive for banks to do all that wheeling and dealing in securities and derivatives that yielded bumper profits and bonuses in the boom years and brought the world to the brink of depression last autumn.
Perhaps most significant would be the proposal to limit the ability of banks to pay out bonuses to staff and dividends to shareholders as and when their respective capital resources approach the minimum allowed.
The nightmare before Christmas for bankers is the tape on page 70 of the report, which sets out the new global incomes policy for them.
It will be seen by bank boards and owners as an infringement of their basic right to pay themselves what they want and when they want.
The consequences would be profound not only for the banking industry but also for the economy - which is why they will be phased in over years.
They are likely to mean that far less credit to households and non-financial businesses will be provided by conventional banks, because the cost to banks of providing credit in any form will rise.
They are also likely to force a mass exodus from banks of the more entrepreneurial, brainier, traders and financial engineers - who may either go for real jobs in the real economy (is that such a terrible idea?) or will create all manner of new-fangled financial institutions, which won't take retail deposits, won't be banks in a technical sense, and won't be subject to such onerous regulation and supervision.
Yes, the Basel plans almost certainly mean there'll be another great sprouting of hedge funds and alternative investment vehicles.
You can decide whether that's a good thing or a bad thing.
By the way, if you want a bit more granularity on how and why an ice age just arrived for banks and bankers, look no further than the recent Financial Services Authority discussion document on reinforcing the capital strength of British banks and also today's Financial Stability Report from the Bank of England [3.95Mb PDF].
The FSA estimates that financial institutions in the UK will need to raise an additional £33bn of capital to meet new rules out of the European Union designed to reduce the riskiness of their trading activities and of securitisation (of turning loans into tradeable assets).
Now the big point about that £33bn is that it does not include the additional requirements that will be imposed by the new Basel framework. The £33bn is just a beginning.
Which gives the banks two choices.
They can try to raise the £33bn and whatever else is subsequently demanded of them. Or they can massively reduce their trading activities - which seems the more likely outcome.
Can they turn to the Bank of England for a shoulder to cry on.
It makes this helpful point to banks which - it agrees - are still chronically short of capital: "reducing staff costs [at banks] by around one tenth and dividend payout rates by around a third would allow UK banks to increase retained reserves by close to £70bn over the next five years".
Crikey: five years of stunted bonuses! Grown bankers will weep.