"The costs of complexity: just because it's difficult to quantify, it does not mean its zero !"

Complex environments (the western financial systems, arguably) can be very costly. That's the reason why  big is not necessarily better in complexity economics: there is a “clear trade off between the benefit of scale and the coordination costs and constraints created by complexity” (Beinhocker: 151). These are costs inherent to any system and applying complexity economics theories to financial systems requires a level of abstract thinking I am not willing to do on a sunday afternoon. That would be a "too big to fail" metaphor, but at the level of entire financial system. Regulatory costs are easier costs to reflect upon.

It is necessary to point out right away here that deregulation does not mean less rules, but the contrary. The British financial revolution of the 1980s illustrate that very well. The Financial Services Act (FSA) passed after the Big Bang gave birth to a myriad of regulatory agencies. He also noted a change in “regulatory culture”: “The FSA may have revolutionized life in the City even more than the Big Bang, for in matters of regulation it replaced the informal with the formal, the flexible with the rigid, and the personal with the legalistic” (Vogel:93). This shows as well that financial regulation also is embedded in broader social and cultural structures that evolve over time.

But as regulation are getting more complex, it becomes - irony -  a source of risk in itself too. I believe the regulatory problems that Barclay's LIBOR fraud (for the latest development of the saga, go there) are actually symptomatic of a problem of discipline within the financial sector that the multiplication of rules did not help to ciment. Yes ! FT Philipp Augar is right "Banking supervisors would be well advised to leave as little as possible to management discretion and to go for bold, simple rules that are easy to understand and possible to enforce". The "too big to regulate" has to be considered too.