Since August 2007, the financial services industry has been in the grip of the worst crisis for more than a generation. Major write-downs on asset-backed securities have led to the collapse of US investment bank Lehman Brothers, the near-collapse of several other major institutions and a sustained slump in liquidity, bank lending and share prices.

Although the causes of the credit crisis are by no means straightforward, poor regulatory architecture and ineffective regulatory oversight are undoubtedly perceived as playing a role. On the former, US Treasury Secretary Hank Paulson has proposed a move away from the current, fragmented US regulatory system to one where there are fewer regulators with broader powers. On the latter, the debate continues and, to date, regulators have been careful not to jump to policy conclusions. As the Bank of International Settlements noted in its recent report: "Implementation will... face many difficulties, not least the need to avoid exacerbating near-term market tensions in the pursuit of laudable medium-term objectives."

Ultimately, however, a substantive regulatory response to the crisis seems inevitable. The respondents in our survey who represent the financial services industry expect intervention in several key areas. In their view, the most likely initiative will be to impose new liquidity standards. In June this year, the Basel Committee issued new principles for governing liquidity that include the requirement that banks should hold "a robust cushion of unencumbered, high-quality liquid assets to be in a position to survive protracted periods of liquidity stress". The regulators hope to turn these principles into binding legislation by the end of 2008, so it seems certain that a requirement for more generous liquidity buffers willsoon be in place.

Three-quarters of respondents expect higher capital ratios to take into account off-balance sheet vehicles. Since August 2007, it has become clear that regulators have been wrong-footed by the rapid development of the so-called "shadow banking" system, a sprawling network of opaque entities, such as structured investment vehicles and collateralised loan obligations, that are not recognised on banks' balance sheets. By early 2007, the shadow banking system had accumulated almost US$10 trillion in assets, which was roughly equivalent to those held by the traditional banking system at the time. Yet despite their colossal size, these vehicles fell largely outside of regulators' radar. With assets in the shadow banking system in free-fall since last August, it seems highly likely that regulators will expect banks to carry higher capital ratios that take into account the existence of these off-balance sheet vehicles.

There are also high expectations among respondents that the loan origination process will face stricter regulatory controls. Many commentators have described how the process of securitisation, whereby loans were packaged and sold to third-party investors, went hand in hand with a decline in lending standards, because loan originators no longer had an incentive to ensure the creditworthiness of their borrowers. Recent scrutiny of the sub-prime market has revealed widespread malpractice in a sector that has been, to date, lightly regulated. It seems highly likely, therefore, that loan originators will be subject to tighter controls in the future.

One potential regulatory initiative that has attracted considerable attention in recent months is notable by its lack of support among survey respondents. Just 15% expect intervention in the remuneration of banking professionals, despite widespread sentiment that the bonus culture, particularly in investment banks, has exacerbated the current situation. Although most would agree that short-termism and the encouragement of excessive risk-taking in anticipation of rewards are problematic, regulatory intervention in remuneration will not be straightforward. Indeed, regulators such as the Financial Services Industry in the UK have already stated that it is not their role to intervene in the quantum or design of remuneration systems. A more indirect route, however, whereby remuneration practices are considered as part of a bank's overall risk profile, may well be considered.