HAVING seen their entitlement to “expenses” curbed retrospectively, it seems that MPs will now be asked by the Government back plans to give bankers a dose of the same medicine.

HAVING seen their entitlement to “expenses” curbed retrospectively, it seems that MPs will now be asked by the Government back plans to give bankers a dose of the same medicine.

Tomorrow's Queen's Speech is expected to include a Financial Services Bill giving regulators the power to block “mega bonuses” deemed to encourage undue risk-taking by ordering banks to renegotiate remuneration packages.

Critics from within the financial sector claim that the move puts the UK at risk of losing key players in the industry, so undermining London's position as a global financial centre.

They have a point but, with parts of the banking sector seemingly still in denial over the extent of its culpability for the financial crisis, the industry has a credibility problem to overcome if it to dissuade ministers from their intended course of action.

This problem was not helped last week, for example, when Matthew Wyles, chairman of the Council of Mortgage Lenders, complained that the Financial Services Authority appeared to see lenders “as the sweetshop owners - or worse, the drug dealers at the school gates - of the mortgage market, enticing innocent consumers in and then getting them hooked, for their own evil profit-driven purposes”.

He added a warning that that the FSA's planned reforms of regulation could create exactly the kind of “moral hazard” it wished to avoid, with consumers feeling they needed to take little or no responsibility for their financial decisions.

This rather assumes, of course, than consumers can currently be relied upon to borrow responsibly. Most of them can, a fact thankfully recognised by the FSA in rejecting forms of “one size fits all” regulation such as caps on loan-to-income and loan-to-value ratios.

It is a fact, however, that for every irresponsible loan by an irresponsible lender there is also an irresponsible, or at least ill-advised, borrower. The FSA would, therefore, appear to be treading a sensible middle course in its plans for mortgage market regulation.

But the plan to give the FSA power to unpick contractual relationships between banks and their staff is another matter. In practice, such powers are likely to end up being used to block remuneration packages which are deemed excessive in the level of reward they offer rather than the level of risk they encourage.

And quite apart from its long term impact on the City, the proposal would appear to be a vote of “no confidence” by ministers in other aspects of the regulatory system.

If, in order to prevent banks taking unacceptable risks, the FSA has rely on blocking contracts of employment which reward such behaviour, then the phrase which springs to mind has something to do with the bolting of horses and the shutting of stable doors.