Think Paul Volcker's being too tough on banks? Volcker is a pussycat compared to U.K. regulators.

In its latest move, the Financial Services Authority is threatening to revoke the licenses of banks that fail to comply with its demands regarding bonuses.

As investment adviser and former banker Yves Smith points out on her website, Naked Capitalism, this shows once again that regulators really have all the power they need to make sure banks don't pose systemic risk. Again, it isn't a matter of legal authority, but the will to use it.

And that truth applies in the U.S. as well. Still, it's worth noting that this is not the British counterpart of the Federal Reserve talking, but the separate agency that regulates banks.

Come to think of it, when Ben Bernanke and other Fed officials argue that stripping the Fed of that authority and vesting it in a separate agency, as Senate Banking Chairman Chris Dodd originally intended to do, would harm its ability to set monetary policy and serve as a lender of last resort, they typically cite the Bank of England's failure to anticipate Northern Rock's collapse as an example of the potential problem.

However, as Levy Economics Institute president Dimitri Papadimitriou observed to me a while back, Northern Rock is not a very good example of the British dual-regulatory system's weakness, since the bank's problems stemmed from trouble in the U.S. housing market.

The FSA has also been criticized for its lack of enforcement power like that of the U.S. Securities and Exchange Commission, but its simple but powerful threat to revoke bankers' licenses seems like enforcement power enough to me. Oh, and as for U.S. bankers threats' to leave for greener pastures as a result of the Volcker rule, scratch London off the list. And I'd wager they wouldn't find alternatives like Switzerland or Singapore all that attractive. (I've read that schooling is even more expensive in the former, and their kids are likely to hate the latter.)

In any case, the Fed has looked the other way at banks' risky practices ever since the Greenspan era, so one has to take its assurances on faith that it will treat those practices more seriously when overseeing the economy going forward.

I, for one, remain skeptical that it will do so, though this report that Bernanke has won Volcker's confidence seems designed to overcome such skepticism. Yet the financial crisis has only deepened that skepticism, so I can't help but think  the article was planted precisely to deflect such concerns.

Sad but true.