A year ago a complete overhaul of international standards of bank accounting practices and regulatory compliance was high on the agenda when the world’s banking system was on the brink of a complete collapse were bailed out. Politicians and oversight boards vowed to get tough and insisted that revised rules cannot wait until the current recession is over.

Banks and financial institutions would no longer be allowed to become too big, or to fail or take unnecessary risks or be rewarded with large bonus checks or take risks they did not understand. These were some of the clear statements made during the financial turmoil.

Now a year later, as some big banks show reasonable signs of improvement and once again appear profitable, the gap between what politicians and regulators said was required a year ago and what reforms continue to be on the drawing board seem to widen quite a bit.

Some of the initiatives that still have not had a complete breakthrough are:

• Alter rules allowing bankrupt homeowners to remain in their homes
• A new consumer Create a protection agency for the financial sector
• OTC derivatives trading should go through clearing houses, limiting the counterparty risk.

Another issue that continues to create widespread debate is to determine specific limits on bankers’ bonuses, even tough efforts to cap executive pay started more than a decade ago.

The Financial Stability Forum group of finance ministers and supervisors were asked to come up with specific rules for bonuses by the time of the Pittsburgh G20 summit last month and make risk-taking by financial institutions much more expensive or make banks less able to pay big bonuses for taking risk in the first place.

Some other initiatives on the drawing board are:

• Requirements for a ‘higher-quality’ capital to be held by banks as a shock absorber for the future, once the recovery is assured
• Introduction of countercyclical buffers so that banks set aside more reserves in good times to be drawn upon in bad
• Proposal from the Basel Committee on Banking Supervision, for an overall leverage ratio, setting out the maximum borrowing a bank can have relative to the capital base applied at each institution and across all its entities. (Believe it or not, US banks never signed up to the Basel II agreement on capital, but they already operate under such ratios).

Other initiative debated at Finance minster levels is to include institution-wide leverage ratios on Off-balance-sheet vehicles such as structured investment vehicles. This issue was widely responsible for the banks having very limited capital to shield them from their losses a year ago.

The US has pledged to sign up on a new and improved “Basel III” that all banks will be asked to agree on sometime in 2010. Hopefully then the banks can raise new capital and step up lending to households and businesses and once again claim that its Business as usual because reforms are much too complicated and creates an even greater problem for the oversight boards.