HSBC chairman Douglas Flint, earlier this week bemoaned the increasing cost and influence of regulation as Europe's largest bank reported falling profits. "There's a creeping concern that staff are clearly very focused on the penalties for getting things wrong and are building risk-aversion into the way they think," Flint told reporters. "We've got to avoid getting to the state where there's a zero risk tolerance."

He has a point, but only insofar as the bank and its peers demonstrate their ability to meet the cost of risk that goes wrong. The list of litigation and possible penalties Flint’s bank currently faces ran to 10 pages of its results statement and a separate ruling in the US the following day confirms that, for all their bleating, banks are still not facing up to the new realities.

Two US regulators – the Federal Reserve and the the Federal Deposit Insurance Corp – told 11 of the largest US and foreign banks that “living will” proposals submitted last year to show how they could be wound down in an orderly fashion without damaging the wider financial system or putting a burden on taxpayers were not credible. The banks cited were Bank of America, Bank of New York Mellon, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan Chase, Morgan Stanley, State Street and UBS.

"Despite the thousands of pages of material these firms submitted, the plans provide no credible or clear path through bankruptcy that doesn't require unrealistic assumptions and direct or indirect public support," said FDIC vice- chairman Thomas Hoenig.

If the banks do not make satisfactory changes to the documents which they are required to submit under the Dodd- Frank Act, the regulators could take action, including requiring banks to sell units to shrink and simplify their corporate structures if they failed to comply with other orders, officials of the agencies said. The banks have now been ordered to make improvements in living wills they must submit in next year.