Q&A: What new banking regulation means for you

Coincidence or not, excuse or not – the recent correction in the stock markets came as President Obama launched the latest round of discussions on how banks should be regulated in the future.

Although his plans were potentially the most far-reaching to date, this is not the only issue unnerving the banks. And with elections looming he is not the only one hoping new rules can help build his reputation.

But what is going on, what is being planned, what will actually happen and what will it mean for us all?

What did Obama say?

In short – and the speech was short and thin on detail – Obama said we need to make sure banks are never again so big that they could bring the world to the brink of collapse. Among the scant detail was a suggestion that banks would not be able to trade the markets for themselves, would be limited in their ability to grow and would not be allowed to be active in activities such as hedge fund investments and private equity.

Until we get the detail no-one knows how much that will hobble the banks or impact their future earnings. But the plans come just weeks after the recently launched Financial Crisis Responsibility Fee and plans by the Basel Committee to determine how much more capital banks need.

That has raised concerns the banks will have to do more fund raising and will have to put more of their earnings into their war chests.

The proposals could hobble profitability for many years.

So why did the markets fall?

Obama's new proposals certainly seem to have been a trigger but they weren't the only reason.

The announcement came just as the first signs of tightening in China re-sparked fear about the country's future growth trajectory and wider concerns about how markets will fare once policy makers across the world begin to withdraw stimulus en masse.

There was already some nervousness around as markets had not corrected despite the sharp rise from March lows and had continued to rise despite the threat of increased regulation.