Two important recent developments touch upon a crucial issue: to what extent should misconduct or misbehaviour in the City sound in the criminal law?

First, the Parliamentary Commission on Banking Standards proposes a new offence of 'reckless misconduct' in the management of a bank. Second, the Serious Fraud Office has just charged a former UBS trader with conspiracy to defraud in respect of alleged LIBOR manipulation. This is the first criminal case that the SFO has brought arising from the LIBOR scandal. We can expect its resolution to be years away.

The natural response to the Commission's proposal is that, when we have not yet seen how current criminal law offences are applied to contemporary City conduct, it is too early to say whether a new offence is required. The advocates of reform would say that the problem is too urgent to wait for years of lengthy fraud trials, then Law Commission reviews, then consultation, all capable of being de-railed by political pressures and smart industry lobbying.

I would suggest that reform is being aimed at the wrong targets. Even if banks are broken up and made smaller, they will still be complex entities which operate in a manner independent of the actions and wishes of any single individual. Law makers have recognised the problem – reforms of manslaughter, cartel law and bribery have all aimed at producing a viable offence that can be applied to corporate entities. Why not find a criminal offence that can be applied directly to the bank, rather than produce a law that requires an expensive and often illusory search for the culpable human beings?

One answer may be that banks are so important that they shouldn't pay crippling fines, but that argument may lessen as the state reduces its ownership of banks. And surely, taken to its logical conclusion, such an argument could be applied right across the financial services industry – many firms' TCF and other regulatory objectives would be undermined if money was diverted to the payment of very significant penalties. That cannot in itself be a good enough reason to avoid a fine, although I have argued also in this blog that we need to be wary of the unthinking escalation of fines as a panacea to corporate wrong-doing.

Once one decides that sanctions are best applied to firms, recognition quickly follows that the criminal law is not the best means of achieving this. Only a handful of charges have been brought against companies under the corporate manslaughter, cartel and bribery reforms mentioned above. The burden of proof is a near intractable barrier. And companies cannot go to prison.

Let's then have a disciplinary regime for firms, reasonably fast justice, settlement procedures to encourage early resolution and the avoidance of the criminal law prosecutions that simply slow down the system and are a charter for legal wrangling.  That – of course – is exactly what we have.  And in the LIBOR context, when applied to firms at least, the evidence is that the FCA's enforcement and disciplinary process is working with quiet efficiency. Charging individual traders following LIBOR investigations poses far less of a challenge for the authorities than finding criminal liability on the part of those that oversaw the LIBOR submitting, let alone the senior management of the banks who presumably had little specific knowledge but retained overall responsibility.

Regulatory failings happen because of the limited capacities of human beings and the inherent agency problems that their involvement in business brings.  That said, when combined together in a corporate vehicle, where there is a separation between ownership, implementation and direction, the search for the culpable person or persons may, at best, be time consuming and distracting. An apparent good result can have negative consequences. For many people the FSA's action against Peter Cummings, the former director of HBOS, looks vindictive and disproportionate.  Contrary to what some may think, this will bother those who work at the regulator, who want to believe that their efforts are serving the public good.

Some of the City's practices need to be opened up to scrutiny and overhauled. But the current regimes for doing just that, and for punishing those that have made errors, seem to be holding up tolerably well.