Regulation

I am convinced that the single factor most responsible for the banking crisis was loose regulation. Gordon Brown almost admitted it in his interview with the Guardian; his excuse was the the rest of the world was de-regulating and he didn't want London to miss out.

Lord Turner, in his evidence to the Treasury Select Committee, voiced concern that the mood for regulation may be running out of steam. The suggestion of re-introducing the separation of retail banking from its investment counterpart has fallen on deaf ears. Turner is arguing for tougher capital requirements based on size and, presumably risk.

My question is: will regulation based on capital requirements work, when the experience is of massive values evaporating overnight?