There's a very good article in the FT this morning, by Francesco Guerrera, its finance editor. In it he says (and I'm quoting at length using a public interest defence, because it is of significance that a paper such as the FT states these views through an editor):

Dura lex sed lex. The law is harsh but it is the law.

Thus spoke the Romans who, not for the first time, stole a good idea from the Greeks and turned it into a pillar of modern jurisprudence.

The principle of the rule of law is so pervasive to have become common sense: if you don’t like a law, you can try to change it but until then, you must abide by it. Common sense, that is, unless you are a bank faced with the regulatory cacophony arising from the financial crisis.

In moves that would have made a Roman centurion proud, Wall Street and the City of London have enrolled legions of lawyers to exploit the many holes in the regulatory net being crafted by authorities around the world.

Exactly as some of us have said for a long time. It's not by chance that I define secrecy jurisdictions as places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.

As Guerrara then notes:

The demise of regulatory arbitrage during the crisis was greatly exaggerated. After a brief period of contrition, the art of shopping around among different regimes in search of the most lucrative and least policed environment is alive and well among finance’s finest.

He provides ample evidence and encodes to support his case before noting that:

The problem is not new. In recent times, London, Hong Kong, Zurich and Shanghai have all trumpeted their “light-touch” regulatory regimes to lure business away from less permissive centres. But after a crisis that underlined just how perilously interconnected global finance is, the idea that strengthening national rules will make the system safer is both disingenuous and dangerous.

He uses the issue of bankers pay to demonstrate his point, at which stage his article appears predictably depressing. It's the twist that he then adds that makes it interesting:

To be fair, national watchdogs are talking about greater co-operation. But talk is a blunt weapon against an industry that has a strong incentive for seeking the lowest regulatory denominator: money.

Banks do not engage in regulatory arbitrage because they are evil but because it makes sense. In an ultra-competitive sector, shaving millions off the cost base courtesy of a relaxed regulator can make a big difference.

To combat that, the authorities should be just as ruthless, sharing information and singling out those centres that make a living out of “light touches”. Global financial regulation may be a utopian goal but deterring offenders by naming and shaming them would be a start.

Low-ball regulators should become as notorious as offshore tax havens, lending a stigma to companies that operate there.

Inaction or empty talk will only play into the hands of banks that have perfected the ancient Roman tactic of “divide and conquer”.

Now he's talking complete sense. The idea that states must not cooperate to restrain abuse is absurd. This is not the action of powerful nations acting in their own self-interest to suppress poor little tax haven locations, or to oppress business as those on the American Right argue. Far from it in fact. Cooperation between states to uphold the rule of law, to ensure that markets work to best effect, to protect banks themselves from the externalities of their own behaviour, and to sustain the market economy into the future is not an action designed to undermine the market system, but action that is designed to reinforce and sustain it In the form in which it can, undoubtedly, be of benefit to society at large.

So yes, we need substantially enhanced international cooperation to bring banks to heal. And we do need to know precisely where banks are locating their activities to ensure that we can draw attention to those who are undertaking regulatory arbitrage.

In that sense country by country reporting by banks is an absolute essential component of the future regulatory regime.