Following arrests of a number of traders and an investigation that generated banking fines of more than £1.5 billion, the Treasury decided that the process of setting Libor, a set of market-standard interest rates used to determine interest rates in a large number of finance transactions across the globe, needed shaking up. In September 2012, Martin Wheatley, chief executive of the Financial Conduct Authority, published a 92-page report on how to improve the way in which Libor rates are set.
The Wheatley Review recommendations, which include a ten-point plan, came into effect on 1 July 2013. The most significant change was to the way Libor submissions operate. Now banks can no longer see other banks' estimates of their borrowing costs, which are used to create Libor rates, helping to prevent any further rate-rigging.
Another key change is to who sets Libor rates. From early 2014, the NYSE Euronext will take over the administration of setting Libor rates from the British Bankers' Association (BBA), which has set the rates since 1986.
2. The abolition of the FSA
The Financial Services Authority (FSA) was once the sheriff of the UK's financial services industry. Operating independently of the government, the FSA was responsible for regulating banks and other financial services in the UK.
However, the financial crisis of 2008 exposed serious weaknesses in the running of the FSA and in 2010 chancellor George Osborne announced its abolition. In April 2013, the FSA was replaced by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
The PRA is part of the Bank of England and is responsible for setting standards, supervising and regulating the financial services sector. Meanwhile the FCA's aim is to protect consumers by ensuring firms operate within the law and conduct their business in a fair way.
*3. The big bail in *
Five years on, attempts to prevent another large-scale financial crisis have led to increased banking regulation. One key focus has been making sure banks have enough capital to cover any heavy losses and unexpected events, making the banking system more stable.
The Basel Committee on Banking Supervision, which has 27 member countries including the UK, US and China, has been a key driving force in banking supervision in Europe and the US. Its recommendations - known as Basel I, II, III - affect how countries regulate their banks.
The latest recommendations, known as Basel III, will soon become part of EU and UK banking law, but the higher capital requirements have left many British banks exposed. A recent report by the Prudential Regulation Authority, which will help enforce these new rules, has revealed a £120 billion capital shortfall at UK lenders.
Banks will have between 2014-19 to shore up capital. In order to do so, many banks will be forced to restructure or, as Barclays recently did, issue more shares.
While some commentators think the new requirements will make banks less likely to lend money, others are confident this is the right way to manage banks so that they and the UK economy are as protected as possible in the event of another financial crisis.
4. New governor at the bank
On 1 July 2013, King became Carney. Former governor of the Bank of England Sir Mervyn King stepped down and in his place stood former investment banker and George Clooney lookalike, Mark Carney.
Carney is the first governor of the Bank of England not to hold British citizenship, and probably the first to receive an annual salary of £624,000 - that's £100,000 more than Sir Mervyn King. Carney built a strong reputation for himself during his time as governor of the Bank of Canada - his monetary policy there saw the country suffer less than the UK and the US during the financial crisis.
His big challenge as governor of the Bank of England is to get inflation, the rate at which the prices of goods and services increase, below the government-set 2 per cent target rate, which has remained elusive for some time now. It has yet to be seen whether Carney will be as radical a force as some predict he will be, but his promise to be more transparent with the Bank's monetary policy has so far pleased some.