Incoming London Stock Exchange chairman Don Cruickshank's recent review of the banking sector honed in on the need to regulate the banks' payment transfer systems. Yet, left alone, the bank payment transfer systems will soon be rendered irrelevant by internet-based payment schemes. There is a danger that PayCom, the proposed regulator, could merely stifle new competition by raising a barrier to new entrants. As the economist Hayek observed, regulations always benefit the regulated.

I was chairing a conference on internet banking last December at which a speaker from Barclays surprised me by declaring: 'We have to remember that our core business is managing the money transmission network.' At the time I thought that was just another example of how our clearing bankers had forgotten what banking is all about - taking deposits and multiplying the money to lenders. Now I realise that he was spot on.