So they're asking them to increase their capital requirements and tighten up their lending criteria.
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Sadly, about one-third of our audience is still struggling with their capital requirements.
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"The banks weren't lending as much to small businesses because they were focusing on building up their capital requirements, " he said.
The expectation is that once both companies get their capital requirements squared away they will have lots of excess earnings to deploy elsewhere-and returning capital to shareholders would be at the top of the list.
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Safe banks are easy enough to create: just push up their capital requirements to 90% of assets, force them to have secured funding for three years or tell them they can invest only in Treasury bonds.
What will happen after tomorrow's announcement is that the FSA, to be superseded next Monday by the Prudential Regulation Authority - see my piece from last night's 10 O'Clock News (below) for more on this - will then go off and have yet more talks with each of the banks, to determine their individual capital requirements.
The FSA is doing this by putting pressure on wholesale banks, which it also regulates: those that lend to hedge funds against slim collateral will have their capital-adequacy requirements made more burdensome.
Canada's banks face high capital requirements and a cap on their leverage, such that their assets cannot exceed 20 times their capital (a lot less than the corresponding figure for many Wall Street firms and European banks).
Not so, say the investment banks, which could well face higher capital requirements to redress their follies.
The BOE's Financial Policy Committee has also insisted prudential regulators forbid banks from meeting new higher regulatory capital requirements by reducing their loan books.
Until recently, the banks found it more expedient to roll over loans to insolvent borrowers rather than recognise losses, which would require them to increase their capital in order to meet regulatory requirements.
One is to try to rein in the agencies, by keeping them to their narrow lending remit and imposing tougher capital requirements.
As for the banks, no doubt the bailouts kept them on life support, but owing to continued federal meddling in their ability to be profitable (think the Volcker Rule, capital reserve requirements, and the aforementioned mortgage modifications to name but three), their decline has merely been delayed.
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Allison would no doubt agree that banks today are politically connected in the worst way, so if their ability to generate profits were constrained by nosebleed capital requirements, the latter would eventually be relaxed in order to keep those same banks in operation.
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High capital requirements may prompt foreign firms to choose their local partners with extra care.
Banks have traditionally been the biggest players in the secondary market and often sold their stakes in buyout and venture funds as regulators made capital requirements more stringent.
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Insurance companies' response to the crisis has been depressing: as well as demanding, reasonably, compensation for their losses on state bonds, they also want laxer capital requirements and an extension of the ban on foreign-controlled insurers.
The regulator could establish minimum capital requirements for the two companies and limits on their portfolios.
As banks in Europe and America scrabble to meet stricter capital requirements, made necessary by the failures of their own exotic lending practices, Mexico is offering some a lifeline.
In the UK, the Vickers Report recommended that UK retail operations of domestic banks be fenced away from their trading activities by 2019, and subject to higher minimum capital requirements.
High savings should ensure a healthy demand for bonds, which will also be snaffled up by Japan's distressed banks, as they cut their loan-books in the struggle to meet capital-adequacy requirements.
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The most significant changes, of course, involve Fannie and Freddie, which just five months ago were still subject to 30% capital surplus requirements, a punishment of sorts for their accounting scandals earlier in the decade. (Those surplus limits were lowered to 20% in March in order to marshal the companies' aid in dealing with the mortgage crisis).
High reserve requirements, which force banks to park much of their capital with the Central Bank, helped too.
She said that developing countries needed to respond by beefing up bank supervision, restricting credit to fast-growing areas, imposing capital requirements that changed with the economic cycle and monitoring their foreign exchange exposures.
The first priority for these restructuring candidates will be to satisfy minimum solvency requirements, but tapping new sources of capital will strain their capabilities.
Hard hit by the global financial crisis, a series of well-publicized lending and trading disasters, and now saddled with new regulations and capital requirements, once proud American banks have lost much of their luster.
Mr Romney has backed higher capital requirements, so banks would get little relief from one of their main complaints.
We may also see an increase in micro-entrepreneurs, as reduced capital requirements and more easily accessible markets enable more people to start their own businesses.
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