It was on 24 February 1995 that Baring’s executives first informed the Bank of England of the discovery of massive trading losses from derivatives dealing in Singapore. Within three days, administrators had been called in and the City’s oldest merchant bank was on the brink of collapse.

The £800 million black hole in the bank’s accounts was caused by the activities of a single rogue dealer who exploited lax controls and oversight failings to cover his tracks and hide escalating losses from senior management.

Ten years on and the echoes from the Baring’s affair can be heard in the FSA’s salvo at the fast-growing credit derivatives business. The UK watchdog believes that City institutions are once again failing to keep their back office operational risk procedures up-to-speed with front office developments.

In particular the FSA is concerned at the high level of unsigned confirmations outstanding between counterparties for OTC credit derivatives with, in certain cases, transactions remaining unconfirmed for months.

The potential for problems first surfaced with the collapse of Italian dairy conglomerate Parmalat, which had bankers rifling their filing cabinets to check the outstanding paperwork on credit default swap agreements and collateralised debt obligations.

The fall-out from Parmalat has led the International Organisation of Securities Commissioners (Iosco) to call for more transparency in OTC corporate debt and bond trading. The securities regulatory body is concerned that "different levels of disclosure for debt and equity securities may lead to regulatory gaps or create artificial preferences for one type of security over another, regardless of economic merit".

Risk management practices may have moved on considerably since the demise of Barings, but the market appetite for risk taking and innovation has not diminished. The urge to turn a blind eye to the antics of the profit-making "knuckleheads" on the trading floor is as strong today as it was ten years ago.

After all, it was barely a year ago that National Australia Bank lost A$360 million to unauthorised dealings at its market division. A PwC report into the affair criticised management for a tendency to suppress bad news, helping to create a culture that enabled the traders to "incur losses, conceal them and escape detection despite ample warning signs".

Yet most bankers today seem to view over-regulation as the biggest single threat to their business. A recent poll conducted by the Centre for the Study of Financial Innovation taps a deeply-felt resentment, a sense that regulatory overkill saps bank resources, reduces risk diversification and creates a false sense of security. Indeed, bank complaints about the rising compliance burden were a key feature of Finextra’s annual financial markets survey and Finexpo conference in January.

These rumblings reached a flashpoint recently when the Centre for Policy Studies issued a stinging critique of the FSA's "heavy-handed" compliance regime. The fiercely critical open letter, published with the implicit support of City business leaders, marks the first step in a guerilla campaign to undermine the authority of the watchdog and stem the tide of regulation.

Banks like to bleat about the regulatory overhead - at times with some justification - but in the absence of a strong ethics-based culture the compliance rulebook will continue to get thicker. Yes, compliance costs. But complacency is an expensive luxury that few can afford.