Proposals aimed at shaking up Britain's banking sector received a cautious welcome from the City's leading financial services lawyers today.

However, some raised concerns about whether the reforms were realistic or went far enough.

Benedict James, a partner at Linklaters, said: “The Turner review heralds a major shake-up of the regulatory landscape for financial institutions.

“The very significant increase in the cost of capital and liquidity, coupled with bonus restrictions and caps on leverage will mean that the way banks have operated for a long time will no longer be possible — at least not in the same way."

Angela Hayes, a partner at Mayer Brown, said the proposals would give banks less freedom to choose their appetite for risk.

She said: “The most significant recommendations are for much more interventionist supervision and in particular a specific role in challenging business models and strategies, previously seen as the proper preserve of bank management.”

Some lawyers raised concerns that a more interventionist approach would create friction between banks and the regulator.

Arnondo Chakrabarti, a litigation partner at Allen & Overy, said: "The more intrusive approach to supervision in areas of business judgment may lead to more disagreements between the FSA and firms, particularly as the FSA say they will be holding senior management to account for the outcomes of those business judgments.”

Although the FSA has accepted that a lack of supervision was partly to blame for the recent banking crisis, some questioned whether the financial watchdog has the resources to turn Lord Turner’s recommendations into reality.

David Berman, a partner at Macfarlanes, said: “The challenge for the FSA will be in recruiting personnel with appropriate practical experience and insight and, crucially, a fundamental appreciation of the business models and operations of the firms they are supervising.

“Going forward, the FSA must supervise to the same standard of skill, care and diligence that its own rules require of the regulated community. Any other reforms will certainly require proper supervision if they stand any chance of success.”

However, Simon Morris, a partner at CMS Cameron McKenna, said that all the Turner proposals were achievable: "All that is needed is time and political will."

The FSA has said it plans to increase headcount by 30 per cent but Chris Warren-Smith, a partner at Fulbright & Jaworski, questioned whether this would be sufficient. “The review is certainly not lacking in ambition. The human and financial resources to turn these proposals into reality will be immense,” he said.

Many financial regulation experts commented on Lord Turner’s recognition that regulation could only truly be effective it was acknowledged as a global phenomenon that required liaison with Europe and the rest of the world.

Patrick Buckingham, a partner at Herbert Smith said: "Without a more unified global approach to financial supervision, there will inevitably be fault lines when problems begin to emerge and home and host supervisors seek to protect their own national interests.

So the success of the FSA's recipe in these areas at least will be heavily dependent on the extent to which international consensus if reached."

While many lawyers welcomed Lord Turner’s proposals, some argued they lacked detail and bite.

But Ian Burton, a partner at BCL Burton Copeland, said that any regulatory approach would face unavoidable difficulties.

“Financial regulation is like trying to catch fish with your bare hands. The root problem of the recent crisis has been an over-emphasis by the banks on achieving targets rather than focusing on the recoverability of the lending.

“The problem for any regulator is policing things as they happen, rather than after the event."

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