Banks have a long history of being regulated. Let's look at the US as an example. Capital adequacy. In other words, the minimum amount of capital or shareholders' equity that a bank should hold as a buffer against losses has always been part of the regulatory environment. Since as long ago as the early 1900s, Regulation Q was created in 1933, it regulated the interest rates Banks used as well as set minimum capital buffers for US banks. US banks were severely restricted from having branch networks, which crossed state boundaries up until 1994. The slow erosion of this led to the creation of the largest banks in the US such as JP Morgan Chase, Citi, and Bank of America.

The Glass-Steagall Act of 1933 came into force after the Great Depression and separated the perceived more risky investment banking from the everyday deposits and loans business of commercial banking. This resulted in JP Morgan and company splitting into JP Morgan commercial banking and Morgan Stanley investment banking. By the late 1980s, an increasingly globalized financial system needed a more coherent and systematic regulatory framework. There were two issues that needed solving, firstly to easily understand the capital adequacy of a counterparty bank operating in another country, and secondly, to put banks on a level playing field when they were competing to make loans in the global markets.

Basel I was first finalized in 1988, but wasn't implemented by US Banks until 1992. Basel I focused on the credit risk that banks faced from their loan portfolio. The main criticism of Basel I was its risk weighting was too simplistic. It ended up penalizing banks who engaged in high quality lending to corporates and benefiting banks who lent to much weaker credit quality counterparties, since most loans had the same risk weighting and attracted the same capital charge.

The large commercial banks saw margins being eroded, which resulted in many of them migrating to investment banking in the 1990s. Basel II was developed in 2004 with full implementation by 2008. Its aim was to be a more sophisticated system, which made better use of risk for different credit qualities, also allowing internal calculations of risk by banks, and introduced assessments of market and operational risk as well as credit risk. These three risks were referred to as pillar one. Basel II also required that banks had an ongoing internal regulatory review carried out by business units, pillar two. And also required an increase in the amount of disclosure about the risks faced by banks, pillar three. The increased disclosure requirements were used to effectively delegate some of the responsibility for regulation to the stock market and to the credit market via rating agencies. Basel III was a response by regulators to the 2008 global financial crisis. It includes enhanced capital requirements and more rainy day capital for when there is a downturn in the economic cycle, as well as a charge for being a too big to fail bank and funding and liquidity regulation, which were critical factors in the failure of firms like Lehman Brothers and Northern Rock. There has been some important banking regulation implemented in the European Union, the markets in financial instruments Directive MiFID is a European regulation that increases the transparency across the European union's financial markets, and standardizes the regulatory disclosures required for firms operating in the European Union. It came into force in 2007 and was replaced by MiFID 2 in 2018. The purpose of the Capital Requirements Directive, CRD and the Capital Requirements Regulations CRR, are to implement the Basel three capital Accords. They were first introduced in 2014. At a September, 2009 summit in Pittsburgh, G20 leaders agreed that all standardized over-the-counter OTC derivative contracts should be cleared through central counterparties CCPs. The EUs response to this commitment was the regulation on OTC derivatives, central counterparties and trade repositories, commonly referred to as EMIR or emir.