The annual 'Banana Skins' survey of 440 bankers conducted by the CSFI, the independent City of London think tank, and sponsored by PricewaterhouseCoopers finds over-regulation a growing worry for bank executives. The survey taps a sense that regulatory overkill saps bank resources, reduces risk diversification and creates a false sense of security.

The greatest worries about excessive regulation are voiced by bankers from the UK and US, where the effort invested in developing advanced risk control systems has conversely led to fears that banks may be becoming too complacent or process-driven.

John Hitchins, UK banking leader at PricewaterhouseCoopers, says: "Bankers have thrown down a challenge against too much prescriptive regulation. Many are worried that it is beginning to stifle innovation and judgement across the industry. While few challenge the objectives of regulators, there is a clear need for further debate on how these are implemented."

Other fast-rising risks identified in this year’s poll are hedge funds (5th) and electronic fraud (6th), as well as currency risk (7th) due to the shaky US dollar. Closely linked to overregulation is the high place given in the rankings to corporate governance risk (3rd).

Other high level risks include credit risk (2nd) and derivatives (4th), both of which featured prominently in last year’s survey. Unrest in the Middle East also gave a strong boost to commodities (up from 26th to 14th), where potential instability in the oil and gold markets is seen as threatening.

David Lascelles, the CSFI’s co-director comments: "It is ironical that people now see the greatest dangers in regulation when new types of risk are emerging all the time: hedge funds, derivatives, electronic fraud. Banks should not be distracted from these risks by box-ticking and form-filling."