THE effects of the credit crunch and the liquidity squeeze that have been all-consuming for the financial markets, central banks and governments for the past 15 months have now become the centre of attention in "main street" Scotland.
And the impact of the global financial crisis has been brought home to us with the announcement of the demise of HBOS as an independent entity.
The causes of the global financial crisis, which has hit home in Scotland with the Lloyds TSB move for HBOS, are complex, but one aspect that deserves greater consideration is regulation.
Financial regulation has failed in as much as the regulators had a duty to protect the consumer from the risk of systemic failure. Make no mistake: it is systemic failure that is taking place.
But the liquidity crisis that has taken HBOS to the brink could just as easily take many established banks around the world over the edge.
Why? Quite simply, confidence and trust in the whole financial system has been broken. Banks have no faith in their competitors and as a consequence the inter-bank market has become dysfunctional.
There now needs to be a far-reaching debate on how regulation should work and at what level. These are global problems and they require global solutions. Capital, after all, is mobile.
And that regulation must respond to the changing face of business. Our financial institutions – in Scotland, the UK and globally – have changed beyond all recognition on the back of enormous financial deregulation that began with the "big bang" in the mid-1980s.
Banks such as Deutsche, UBS, Morgan Stanley and Merrill Lynch sought to become global players in investment banking and poured billions of dollars into their businesses as they sought to build trading platforms.
The new world became all about trading capabilities as the brightest and the best in the City came up with ever-more complex derivative products and strategies.
The balance shifted from being a trusted adviser with a research and sales service to the evolution of complex trading models where more often than not banks traded on their account and with other banks as they chased high returns.
The hedge fund world that saw explosive growth was an important part of this, with those funds driving high commissions and high turnover relative to the "traditional" long-only investor.
Banks were making large profits off their trading platforms; large bonuses were being generated and senior management of those banks continued to throw capital at those businesses to generate even higher returns.
But ask one question: did the board members of those banks fully understand the liabilities that were being created through the creation of complex financial instruments? In my view, few understood these risks.
In the environment of easy credit for the consumer, banks and investment banks alike, what have the regulators being doing?
Financial regulation has weakened around the globe over the past 20 years, leading to the risk of systemic failure in an already flawed system.
Governments and central banks are taking the initiative to stave off this failure by injecting liquidity and initiating rescue packages.
But looking ahead, our political leaders now have a responsibility to put in place regulation that prevents this crisis ever happening again.
Within Europe this means the European Central Bank must have greater powers of regulation and supervision.
There must be stricter limits on capital ratios but also on maximum leverage ratios for all financial institutions.
And given the importance of global action, we must ask whether the time has come to revisit the option of the UK joining the euro, allowing regulation and supervision to take place at a European level.
Having an independent central bank is essential and granting the Bank of England independence was an astute move by Gordon Brown when Labour came to power in 1997.
But we now have three separate bodies in the UK that have an influence on our financial structure – the Bank of England, the Financial Services Authority and the Treasury.
The time has come to strengthen and streamline the structure of regulation. The Bank should regulate financial services and assume the responsibilities of the FSA.
Granting full regulatory autonomy to the Bank would make the system more efficient and would have to come with political backing.
We must also consider where this leaves Scotland and ask: could HBOS have been saved as an independent entity?
But the rescue package for Fortis, where the Dutch, Belgian and Luxembourg governments injected capital into the bank, shows what has been done in other countries
The same has happened in the UK with Bradford & Bingley, where the government intervened directly. Why has it not taken similar action over HBOS?
If the Scottish Government had control over fiscal policy, I am sure that no stone would have been left unturned to save Bank of Scotland as an independent entity.
In the Benelux countries a political decision was taken by three governments to retain Fortis as an independent bank. The same should have happened with HBOS.
• Ian Blackford is a former managing director of Deutsche Bank and head of its Dutch equity business