If you eat a dodgy chicken tikka masala bought from one of our best-known supermarket chains, and you feel violently sick afterwards, do you blame the supermarket - or will your ire be directed at the anonymous manufacturer of the product which made the tainted meal?

We expect the supermarket to take responsibility for the actions of its contractors and suppliers.

And so it is with BP and its findings released today of what caused the calamitous explosion on the Deepwater Horizon rig, which in turn led to 11 deaths and the worst oil spill in US history.

BP's highly technical report uncovers a whole series of accidents, misjudgements and system failures that contributed to the disaster. And says that no one event can be held as the prime cause.

It also points the finger at two of its contractors in particular: Halliburton, responsible for what BP describes as the inadequate cementing of the well; and Transocean, owner and operator of the Deepwater rig, whose employees are alleged to have made a series of misjudgements in the fateful hours before it all went wrong.

BP also concedes that its own employees made mistakes, particularly when it came to interpreting the results of pressure tests.

But I think it is in BP's recommendations for change that many will see the real story, because there BP makes clear that it needs to exercise far better oversight of those who work for it when trying to extract oil from deepwater fields.

It's a nerve-wracking countdown for BP this morning, till the publication at 12 noon of the results of its own investigation into the tragic events of 20 April, when the Deepwater Rig exploded, leading to 11 deaths and the worst oil spill in US history.

That said, BP is confident that it can prove that its design for the well was not flawed.

Also, as I mentioned on Friday, one important implication is that there are flaws in safety systems prevalent in the oil industry as a whole.

But even if much of what went wrong may be laid at the doors of those BP contracted to work on the well - such as Transocean which owned and operated the rig and Halliburton which cemented the well - BP as their employer is well aware that it cannot shirk responsibility for the disaster, especially if there is even a hint that safety was compromised by BP's attempts to control costs.

I asked a leading member of the government what he thought about Bob Diamond's appointment as chief executive of Barclays.

This is not to suggest that he and his ministerial colleagues are implacably opposed to all bankers.

After all, the government will confirm this afternoon that arguably the UK's most prominent banker, Stephen Green, is joining their ranks as the new trade minister.

But Barclays is the bank that causes most angst to ministers, central bankers and regulators.

In one way, it looks like a great British success story.

Thanks to the well-timed purchase of the US arm of bankrupt Lehman Bros in the autumn of 2008 and years of recruitment and investment, Barclays now owns one of the world's biggest and most successful investment banks in the form of Barclays Capital.

What's more, Barclays weathered 2008's worst financial crisis in living memory far better than RBS and Lloyds: although Barclays needed to raise a colossal amount of new capital to protect itself against losses, it obtained the necessary funds from Middle East sovereign investors rather than British taxpayers.

That said, Barclays benefitted from emergency loans and guarantees provided by the Treasury and the Bank of England.

It was, in that sense, a beneficiary of the government's assessment that Barclays is too big and important to the UK economy to be allowed to fail.

And that, for prominent politicians in all the main parties and the Bank of England, is what matters.

Their view is that Mr Diamond has built the success of Barclays Capital in part on the ability of the investment bank to raise finance at cheaper rates than would be available if creditors didn't believe that Barclays as a whole would always be rescued in a crisis by taxpayers.

So they argue that taxpayers are - in effect- subsidising Barclays Capital's more speculative activities.

And they would say that it is wholly wrong for the state to facilitate what they see as gambling by Barclays Capital.

Even if Barclays Capital has a record of winning far more often than it loses, it sticks in the craw for many that the huge bonuses earned by Mr Diamond and his colleagues are arguably generated to an extent thanks to the state safety net.

Barclays will argue that the importance of the protection provided by taxpayers has been overstated.

Which, in part, is why the Chancellor, George Osborne, has created a high-powered commission, to adjudicate on whether so-called universal banks, which like Barclays combine retail and investment banking, should be broken up.

One uncertainty has been cleared up by the appointment of Mr Diamond, the living, breathing, Chelsea-supporting epitome of the modern investment banker: if there were a scintilla of doubt about how Barclays sees its future, it's clear that (left to its own devices) Barclays would grow and grow as a universal bank, with the bonus-culture of investment banking increasingly dominant.

Were the banking commission to recommend the break up of the bank and were that recommendation to be accepted by the chancellor, then I would expect Mr Diamond to relocate the bank's domicile and head office to New York and the traditional UK retail bank would be demerged in whole or in part.

Barclays preference, I am told, would be to retain majority control of its British high street banking business. But Barclays in the round would in those circumstances be an institution much more focussed on providing services to big companies and Investors rather than millions of individuals.

Oh, and there's another unavoidable implication of Diamond Bob's triumph. A banker who has pocketed £100m from the day job may find it tricky to heed the call from the Mayor of London that bankers should subsist on meagre rations till we're all back in the money.

It's all change at the top of the UK's biggest banks.

The announcement of his appointment will be made this afternoon.

And Bob Diamond is replacing John Varley as chief executive of Barclays.

I'll write a longer note in the morning about what it all means.

But it is significant that the individuals perceived to have steered these two giant banks through the worst financial crisis in living memory are moving on.

In the case of Barclays, the appointment of Diamond confirms that the bank sees itself primarily as an international investment bank.

It'll generate speculation that Barclays might voluntarily spin off its historic British retail operation, even if not forced to do so by the government.

And the departure of Green may well prompt even greater talk that if HSBC doesn't like the reforms to be proposed by the government's banking commission, the group's domicile may be moved away from the UK (and, as I said in my note yesterday, bankers tell me that the most likely new home for HSBC would be Australia).

UPDATE 06:30: During the general election campaign, the three main parties were united in their condemnation of the tens of millions of pounds earned by Bob Diamond, who runs Barclays investment bank, Barclays Capital.

So in appointing Mr Diamond (who is thought to be worth around £100m in total) as the new chief executive of Barclays, the bank's board is taking the risk that the bank's relationship with many leading politicians - which hasn't always been close and friendly - could deteriorate.

This matters, at a time when the government has set up a high-powered commission to examine whether big universal banks such as Barclays - which combine an investment bank and a retail bank - should be dismantled.

Barclays has argued that it is a safer and more successful organisation for the way that it combines services to investors, businesses and individuals.

But if commission and government ultimately disagree, the appointment of Mr Diamond will be seen as proof that Barclays is prioritising investment banking, for the future.

Why is Mr Varley going? Well I was told many months ago by a member of Barclays' board that Mr Varley wanted to go before too long, while he was young enough to do other things.

Barclays, in an official sense, denied that Mr Varley had any such plans.

But now that he has decided that enough is enough, the bank's non-executive directors had no real choice other than to appoint Mr Diamond: even Mr Diamond's most jealous rivals would concede that he has done in impressive job in building up Barclays Capital or Barcap; and that it's the growth at Barcap which has turned Barclays into a leading global financial institution.

But this extraordinary expansion of Barcap has also transformed the group's culture. It is now the British bank which pays the biggest bonuses and the most bonuses. Which doesn't endear it to everyone.

UPDATE 07:19: This is what Barclays says about Mr Diamond's new pay arrangements.

"Bob Diamond will continue to work under his existing compensation arrangements for 2010.

"With effect from 1 January 2011, Bob Diamond's compensation arrangements will reflect his new responsibilities. The compensation arrangements have been benchmarked against a peer group of global universal banks, industrial companies and financial services institutions. Bob Diamond's salary will increase to £1,350,000 and his annual incentive award opportunity will be up to 250% of base salary. It is intended to award a long term, performance-based share incentive of 500% of base salary in 2011."

This implies that his annual remuneration could be as much as £11.5m.

At a time when the economy remains weak, this package is likely to spark widespread criticism.

Connaught, the property services group that specialises in social housing, is on the brink of going into administration, according to bankers close to the company.

An announcement is expected tomorrow, I have learned.

Connaught, which employs 10,000 people, has £220m of debt, provided by half a dozen banks and a quartet of other creditors.

The lead bank is Royal Bank of Scotland, which recently provided Connaught with a further £15m in an attempt to keep the group going.

Connaught ran into serious difficulties over the past couple of months, after it emerged that a series of contracts would be lossmaking.

The management, under a new chairman, Sir Roy Gardner, the chairmen of Compass, the catering giant, has tried to put together a rescue plan.

However its bank creditors have decided instead to put the business in administration, under UK insolvency procedures.

In spite of the severity of the economic crisis that engulfed the UK in 2008, few listed businesses have collapsed. In that sense, Connaught, a FTSE 250 company which at one stage had a market value of well over £500m, is unusual.

Andy Haldane of the Bank of England gave a compelling talk last week about the perennial, epic battle between patience and impatience in the psyche of investors, business leaders and the rest - and what that means for how we should regulate or tax markets and companies (you can read the speech here[321KB PDF]).

Of course, if you buy the market and never sell, then that's probably the best investment strategy. But our nature makes it almost impossible for many of us to sit on our hands forever. Our instinctual preference is to be doing something - especially when we're bombarded with information on the performance of individual investments and specific companies, and also when there's excess liquidity in markets, making it seemingly cheap and easy to buy and sell.

Which is why Haldane concludes that it's quite possible to have too much of a good thing, in the form of information and easy ability to trade. So whether we're managing a portfolio of investments or on the board of a listed company, impatience and irrationality are the victors - as perhaps evinced in the trend over the past century by which dividend payments have become increasingly disconnected from the financial performance of companies.

These days, dividend payments increase, even when profits fall, which is not what happened in the 19th century. The reason? Well it must be that investors are increasingly unable to wait for the jam.

Now if you want to see management impatience at full throttle, perhaps the place to look is at the lobbying by bank executives against the Banking Commission, which has been set up by the government.

The commission - a quintet of bankers, economists and regulators, all of them pretty distinguished and impressively heterogeneous in opinion - has a year to make recommendations on how to improve the stability and security of the banking system, and how to stimulate competition between banks.

But even before the commission has published the scope of its enquiry, bankers - such as Stuart Gulliver of HSBC - have been muttering that they and their institutions may have to relocate elsewhere if the commission comes up with recommendations they don't like (such as that they must formally separate their investment banking operations from retail banking).

This is to assume that Australia (for example) - which, as I understand it, is the most likely destination for HSBC were it to choose to emigrate - would be flattered to become the new home for a bank whose structure would have been ruled by the UK government (in Mr Gulliver's personal nightmare) to be anti-social and too risky.

There is something slightly odd about the idea that banks perceived to be malign for the UK economy would be seen as wholly benign in other territories.

It would be better, surely, for Mr Gulliver and his peers at the other big banks to show a bit of patience (that virtue again), and have a debate with the commission, rather than threatening slightly implausible retribution before the verdict is even a twinkle in the commission's eye.

There has also been another recent manifestation of bankers' impatience: they hoped that the new coalition government would drop the commitment of the previous government to force the publication by banks of statistics showing how many of their respective executives earn between £1m and £2.5m, how many earn between £2.5m and £5m, and how many earn more than that (in bands of £5m).

These pay disclosures - in banks' annual reports next year - were an important recommendation of Sir David Walker's "Review of Corporate Governance in UK Banks". And they are giving the heeby-jeebies to top bankers, because they fear that more than a few of you will be a bit bemused that bankers can pocket such magnificent sums when job insecurity and flat pay is the order of the day elsewhere.

So bankers rather hoped that the chancellor would kill the new disclosure requirements: one of the weekend newspapers even reported that George Osborne was likely to do that.

The Treasury, however, tells me this is not so. Mr Osborne is committed to implementing Sir David Walker's proposals, it says.

Which poses something of a dilemma for bankers.

Either they must demonstrate to the rest of us that paying a few million squids each to their star performers is a sensible long-term way of generating incremental wealth for their institutions and for the economy; or they should concede that these pay deals are another manifestation of animal short-term appetites and irrational impatience, which should (in that case) be reformed and restrained.

How important will be BP's report into the causes of the Deepwater Horizon oil disaster, which is due to be published in the coming week or so?

And some will refuse to believe any analysis by BP, on the basis that it can't help but be tendentious.

But even if you see the report as the case for the defence, it still matters - partly because it is the first detailed evaluation of what went wrong.

And (call me naive) but I don't see how it can be an utter whitewash. It is imperative for BP's owners - its shareholders - to understand the risks their company runs when drilling in deep waters: any attempt to disguise those risks would not be tolerated by them (surely); it would be seen as grotesque negligence on the part of BP's executives.

So I would expect a long, detailed, technical evaluation - which, even if it's not the final word on BP's culpability, will have implications for how oil companies endeavour to extract hydrocarbons from fields deep below the ocean.

In that sense, it should matter to more than just investors in BP. It should influence estimates of how much more tappable oil exists in the world - and what kind of price (direct financial, environmental) will have to be paid to tap it.

The investigation for BP was carried out by Mark Bly, BP's Group Vice President for Safety and Operations, and a team of more than 70 engineers, technical specialists and business people, some from outside the company.

For what it's worth, he has assured colleagues that he has felt no pressure from senior BP executives to cover anything up or deliver a particular verdict. And he feels he has had the resources to do the job (or so I'm told).

That said, he hasn't had all the relevant data he requested from the important contractors, viz Transocean, which owned and operated the Deepwater rig on behalf of BP, and Halliburton, which cemented the well. So he has been forced to make some assumptions in reaching his conclusions.

What has he found?

Well we know he has not concluded that BP produced a shoddy design for the well or forced its contractors to cut corners in a significant way.

How so?

Well BP's chairman, Carl-Henric Svanberg, said in July - when BP was announcing its second quarter results - that he was confident BP won't be found guilty of gross negligence.

Now it's impossible to know whether he'll be proved right as and when BP's culpability under the Clean Water Act is finally determined. But he couldn't possibly have made the claim if his own colleague, Mark Bly, had uncovered proof of grotesque dereliction of duty.

That said, any report which doesn't raise questions about safety practices would not be believable.

So as the named party on the relevant oil lease - for Mississippi Canyon Block 252 - BP (which owns 65% of property) will be embarrassed (at the very least) by its own investigation.

Even if there turned out to be important errors by employees of Transocean as operator of the platform, that would not absolve BP of blame: regulators and BP's owners (and presumably the rest of us) would expect BP to assess, monitor and correct the quality of its contractors' performance.

In a perverse way, the best that BP can hope for is that Bly has found systemic safety failures. Because it is unlikely those systemic problems would apply only to BP's management of this one new well.

If questions are raised about the quality of safety kit, or the robustness of procedures for monitoring performance or about the skills of employees, these would probably be questions for the oil industry in general when drilling in deeper water, not just for BP.

One lesson from the debacle is that the catastrophic potential of drilling in deep water is (arguably) only marginally less than what can happen when a plane falls out of the sky or a nuclear power plant goes badly wrong.

Are the safety practices in oil on a par with standard practice in nuclear generation or the airline industry? I would be very surprised if that reassuring conclusion will be drawn from Mr Bly's report.

So how big has been the recent boom in some parts of the banking industry?

Big enough, according to new figures released this morning by the Bank for International Settlements (the central bankers' central bank, as if you didn't know) and the Bank England.

According to the results of their latest triennial survey, global foreign exchange turnover rose 20% to $4trn per day on average (yes, that's each single day) in April 2010 compared with April 2007.

Or to put it another way, a sum equivalent to the entire output of the global economy is traded around once a fortnight on currency markets.

What's more, London's portion of this business has increased even faster, by 25%, so UK based banks' share of forex business is a market-leading 37%.

So no evidence as yet that the reality and threat of horrid new bank taxes and heinous regulation has seriously damaged UK based banks.

As for over-the-counter interest rate derivatives (transactions that are largely bets on the direction of interest rates), these rose 24% globally to $2.1 trn.

And Britain's share of these trades was a striking 46%, up from 44% in 2007.

I presume that warms your patriotic cockles.

What is there to say about an industry that deals in numbers that boggle the typical human brain?

Well, the first thing to point out is that a tiny fraction of this business is carried out on behalf of "non-financial" businesses - or what some would describe as "real" companies (you know the sort of thing I mean - businesses that make cars, or create music, or sell advertising, rather than trading in dematerialised, electronic money on a screen).

These non-financial companies were responsible for just 13% of forex transactions, their lowest proportion for 12 years.

By contrast, "other" financial institutions - such as hedge funds, insurers, mutual funds and so on - contributed a record 48% of the business.

And there's a similar story on the origination of these massive flows of money in the OTC interest rate derivative business.

What does that mean?

Well some would view these statistics as evidence that the banking industry has become more than slightly detached from the "real" economy, that many of its activities are either pure speculation, or attempts to hedge speculation, or attempts to hedge the hedges.

Also, it would be pretty difficult to argue that the net effect of all this financial business has been to reduce the volatility of markets, or to improve the stability of the global economy, or to increase the growth rate of the global economy.

Many might well dispute that the great banking meltdown of 2008 happened because of this explosive growth in financial trading - but the trading certainly didn't prevent the crash.

And there is a massive disconnect between a global economy that has less than doubled in size over 12 years and - on the other hand - OTC derivative transactions that have increased eight fold while foreign exchange transactions have almost trebled in value.

What's more, as I've pointed out before, the global economy was growing quite as fast in the 1960s when much of this financial business barely existed.

So those who can't see the point of all these financial trades may (ahem) have a point - unless, that is, you believe the enrichment of financial traders and hedge fund managers is a social good in itself.

Which is why, some would say, it's slightly odd that when no less an authority than the chairman of the Financial Services Authority, Lord Turner, questions the social utility of much activity in financial markets, and also suggests that it might be no bad thing to levy a tiny Tobin tax on all this frenetic trading in electrons, well it's curious that the chancellor of the exchequer (who could use a bob or two) doesn't lick his chops and demand a bit of that.

My analysis of the latest cash-flow figures for the two main political parties yields two stark conclusions:

1) Labour is dangerously dependent on funding from a tiny number of wealthy individuals and trade unions;

2) The Tories still rely on contributions from the City of London and financial services, especially hedge funds and fund managers, to a considerable extent.

In the crucial second quarter of this year, from 1 April to 30 June - the general election quarter - the Tories and Labour received almost identical cash donations, according to figures supplied to the Electoral Commission. The Conservatives received £10.23m and Labour £10.3m.

The cash was much more important for Labour, because for some years now it has been lagging well behind the Tories in fund-raising. But when Labour's late surge came, some 68% or £7m of that £10.3m was provided by just four extraordinarily wealthy individuals and four trade unions.

Lakshmi Mittal, the steel magnate, Nigel Doughty, the private-equity pioneer, Lord Sugar's private company and Lord Sainsbury collectively donated £2.75m, with Mittal and Doughty each handing over £1m.

A further £4.2m came from the GMB, USDAW, Unite and Unison.

Now it's very doubtful that Labour's new leader, whoever that turns out to be, will believe it is good either for Labour or for democracy that Labour's financial fate - and by extension, its political fate - is in the gift of a quartet of plutocrats and a quartet of trade unions.

That said, it is not at all obvious how the new leader will be able to significantly broaden the party's sources of funding. And making the case for state funding would not be easy, under the long shadow of the parliamentary expenses scandal.

The Tories, by contrast, didn't receive a single seven-figure donation. In fact, six of the gifts to Labour were bigger than the largest single contribution to the Tories, which was £750,000 from JCB Research, an arm of the Bamford family's construction equipment business.

But the Conservatives would be considerably poorer if they hadn't received substantial financial support from City firms and individuals.

My estimate of what the Tories were given by City interests of various sorts is £2.5m, or almost a quarter of their cash receipts.

In that estimate, I've only included the names of donors whom I recognise. So my hunch would be that the actual amount of City money received by the Tories would be a bit more.

Why does it matter that the City is a substantial prop of the Conservative Party?

Well, there is an important debate taking place about whether the British economy is too dependent on the financial sector - and if it is too dependent, whether that dependence should be lessened by shrinking the relative size of the City or the absolute size of the City.

To state the obvious, those important City donors to the Conservative Party would presumably not be pleased if the coalition government became converted to the view that the absolute size of the City is too great.

However, it is striking that the Conservatives are not beholden in any way to the big banks. Neither an executive of a big bank nor a big bank as an institution has made a meaningful contribution to the Conservative Party.

So if the coalition were to bash the big banks - through additional taxes or by way of breaking them up - that would not (in theory) cost the party a penny in lost donations.

On the other hand, hedge funds and investment managers are a very important source of finance for the Tories.

Here are some of the well-known hedge fund names who have donated in the three months to the end of June, with their donations in brackets next to them: Jon Wood (£500,000), Michael Farmer (£258,000), Moore Capital (£200,000), Michael Hintze (£123,000), David Harding (£50,000), Michael Alen-Buckley (£25,000), and Manny Roman (£15,000).

The names of Wood and Alen-Buckley are particularly resonant, because their funds - SRM and RAB respectively - lost colossal sums as investors in Northern Rock after the previous government nationalised the Rock.

Of course that doesn't mean that David Cameron and George Osborne will bend over backwards to help hedge funds.

But the prime minister and chancellor do have a financial incentive to listen carefully to the hedge funds, in this the final stages of important negotiations on new European rules governing hedge fund regulation and remuneration.

I wish I could say I was overjoyed to be back in the supposedly real world, after a few days being revitalised by the benign winds and periodic sunshine of the Welsh coast.

But everywhere I look this morning there are gloomy stories about pensions (see the front pages of the Daily Mail and Telegraph, for starters) - and, of course, there is a direct relationship between the perceived salience of pension issues and age (which is why they oppress me and my contemporaries, and why younger people can't be bothered to save for a pension at all).

But here's the good news: the devastation of the savings of those like myself who have put money into pension pots for 20 or 30 years can be seen as healthy "natural justice".

Readers of this blog will be well aware - if they weren't already - that the distributional impact of the economic boom and bust of the past decade has been uneven and (in the view of many) deeply unfair: younger people have suffered the most in respect of rising unemployment, and even those lucky enough to have a job still can't afford to buy a home, because house prices remain high relative to earnings (and 100% mortgage-finance is no more).

But at least there's one less reason for impoverished youth to take to the streets to overthrow the pampered baby-boom generation, which arguably created the economic mess we're in.

Unless you happen to be the chief executive of a FTSE 100 company (most of whom have succeeded in retaining the most lavish, platinum-plated pension arrangements), or a senior public servant (with their gold-plated pension schemes), the pensions outlook for those aged 45 and over no longer looks quite as spectacularly good as it did.

It's mostly to do with the slashing of interest rates and the unprecedented easing of monetary conditions, engineered by the Bank of England (and other central banks) to prevent the Great Recession turning into a depression.

The point of near-zero Bank Rate and the creation of £200bn of new money was to ease the pain of those who had borrowed too much and prevent the credit tap from being turned off completely: but, as many of you are painfully aware, in the process the thrifty have been punished, whether they had their money in a savings account (whose interest rates have fallen to derisory levels) or a pension pot.

This has had a devastating effect on the sustainability of final salary savings schemes and on the returns for those putting cash into defined contribution schemes.

Low interest rates and thus the low returns available from high quality government and corporate bonds means that the income available from annuities - which savers in personal pensions have to buy when they want their pensions - has dropped by more than 6% over the past year and 45% over the past decade (according to Moneyfacts).

To translate, if you retire today with a pension pot identical to that accumulated by your older brother when he retired 10 years ago, your pension will be around half what he receives.

And the same phenomenon of plummeting bond yields - and reductions in the so-called "discount" rate - has the effect of massively enlarging the net liabilities of final salary pension schemes (think of falling bond yields as a reduction in the return available from the supposedly safest investments, which means that companies have to invest more cash each year in their pension schemes to cover a specified quantum of pension commitments).

According to the KPMG Pensions Monitor, the deficits of FTSE 100 companies have increased by £15bn this year to £65bn and by more than 60% since 2008.

And - as the Institute of Consulting Actuaries has helpfully reminded us this morning - employers are soon to face an obligation to "auto-enrol" all their staff into funded pension schemes, which will introduce an additional pension burden on them.

Here's what most of you don't need telling: more and more businesses and institutions are looking at these swelling liabilities and concluding that they're unaffordable - so many of them are devising strategies to scale back what they pay to future pensioners (a big hello to my own employer).

This is true of both the public sector and the private sector.

So if there's a faint smell of unrest and insurrection in the air, it may be that common cause for protest is being found by the two groups who would see themselves as the innocent victims of the Great Boom and the Great Bust: those so young that they haven't had time to build either career or savings; and those with retirement on their minds, whose savings income and pensions, they might say, have been deliberately squeezed to bail out the feckless.

For me, the most interesting bit of RBS's 303 pages of info on its first half results (a case, I fear, of more is less - lots of duplicated and baffling detail) is the stuff on the asset protection scheme (APS).

This is the insurance contract written by the government to protect RBS against losses greater than £60bn on more than £200bn of poor quality loans and investments.

Now RBS accounts for the contract as though it were a credit derivative.

What this means is that when conditions in the credit market deteriorate, it books a profit on the APS contract. And when they improve, it books a loss.

The logic is that the contract becomes more or less valuable according to perceptions - as reflected in interest rates paid by riskier borrowers relative to those paid by risk-free borrowers - of whether life is becoming easier or tougher for borrowers.

Because it's such a huge contract, the impact of the changing valuation of the contract is material.

In the first quarter of 2010, RBS booked a £500m loss on the APS. But as conditions in credit markets deteriorated (a big hello to the eurozone and its woes) the value of the contract rose for RBS, so it booked a £500m profit.

The corollary, of course, of the rise in the value of the contract for RBS is that it represented a notional loss for taxpayers.

So the chancellor will be relieved that the public sector doesn't use mark-to-market accounting, so he doesn't have to declare this loss.

In fact as and when the APS contract is unwound, the chances are that the public sector - the taxpayer - will be sitting on a fat profit, based on data provided by RBS today.

The amount insured under the contract has fallen from £231bn to £216bn, due largely to "maturities, amortisation and repayments" of loans (yes, some of RBS's troubled borrowers are paying their debts).

More relevantly though. RBS expects to incur just £20bn of losses on some £37bn of loans covered by the scheme where the borrower has gone bankrupt or cannot repay for other reasons.

So for the taxpayer to incur any loss on this insurance contract, RBS would have to suffer more than £40bn of additional losses on the remaining insured loans and investments, which have a gross value of less than £200bn.

Now unless we tip back into severe recession, that looks unlikely to happen.

So the chances are that the taxpayer will pocket the handsome fee for the insurance and never pay out a penny to RBS.

Assessing the health of Royal Bank of Scotland is always tricky, because of the complicated way it bought the rump of the Dutch bank ABN in 2007, its desire to shed certain low-quality assets and the eccentricities of accounting rules.

That said, the semi-nationalised bank does appear to be on the mend - although it's a long way from full strength.

In the first half of this year, it went from more-or-less break-even to a profit of £1.1bn - thanks to a £2.4bn drop in the charge for loans and investments going bad, and a rise in the gap between what it charges for loans and what it pays to borrow.

That said, the bad debt charge in the operations it wants to keep, its so-called core business, hardly fell at all, and remains at £2.1bn (compared with £2.2bn last year).

As for the rise in the so-called interest margin at most of the banks, that may be the next front in politicians' and journalists' attacks on the banks - because it's ammunition for those who complain that banks are charging households and businesses too much for credit.

In RBS's retail operations, for example, the interest margin widened from 3.57% to 3.77% (still a long way from the 2004 peak of 4.7%).

What of the current preoccupation of many bank critics, that they are not lending enough to small businesses? Well, RBS - like the other banks - insists that in the current climate it can't lend faster than its customers want to repay their existing debts.

So although it provided £14.4bn of gross new loans to small business, net lending to that important part of the economy fell.

Update 0744: On the widening of the interest margin, RBS would of course point out that regulators are forcing it to hold more capital relative to assets, which forces it to charge relatively more for loans to maintain its return on capital...

George Osborne's Banking Commission - set up to review whether big UK banks should be broken up - could, I suppose, have been called the Barclays Commission.

Because probably the biggest dilemma for that commission will be to determine whether Barclays epitomises the dangers or the benefits of combining retail banking and investment banking.

Barclays' chief executive John Varley is in no doubt about what the economist Sir John Vickers and his team ought to conclude.

He argues, in a statement accompanying today's half-year results from Barclays, that:

1) customers are better served by a global "universal" bank offering retail and investment banking services;

2) "the history of banking in the last 100 years reveals a broadly based structure to be the banking vehicle most resilient to extreme climates or shocks";

3) that the mix of Barclays' operations has the effect of diversifying risk rather than concentrating it, as manifested in Barclays aggregate pre-tax profits of £25bn since the financial crisis began almost exactly three years ago.

I'll leave for another occasion a comprehensive assessment of whether the economy would benefit from dismantling universal banks such as Barclays. For now, three counter-arguments are worth considering:

1) it was touch and go in the autumn of 2008 whether Barclays could survive without a direct investment from taxpayers, without being rescued by government;

2) arguably Barclays' investment bank has had an unfair competitive benefit from being married to a retail bank, in that its cost of funding has been lower than would otherwise have been the case, thanks to creditors' correct perception that the government would always bail out the retail bank if it got into difficulties (this is an argument that the Bank of England would make, for example);

3) there are plenty of examples of universal banks - from UBS, to RBS, to Citigroup - which were less successful than Barclays at diversifying risk and which therefore needed to be bailed out by taxpayers on a mindboggling scale.

Do Barclays' latest figures settle the argument decisively in one direction or another?

In respect of the issue of the moment, whether the banks are providing enough credit to smaller businesses, there's no evidence that Barclays is providing a significantly better or worse service to the British economy than its peers.

Stripping out the impact of the takeover of Standard Life Bank and of Barclays' increased market share of mortgage lending, loans to retail banking customers - which include small business customers - were broadly flat over the past six months.

And in corporate banking, which serves medium-size companies, loans and advances to customers in the UK and Ireland fell over the same period from £55.6bn to £52.8bn - because of what the bank describes as "lower customer demand".

Barclays, like Lloyds and HSBC, is saying that you can take the corporate horse to the water, but you can't force it to drink.

That said, the corporate horses which talk to me complain either that the price of the water is too steep or that the banks see them (unfairly) as old nags and sickly foals which don't deserve nourishment.

What's relevant, however, is that universal Barclays doesn't seem to be behaving markedly differently in respect of how much credit it provides to small and medium size businesses than narrower Lloyds.

Some would argue, I suppose, that Barclays' sheer size and diversity allows it to cope better with economic life's little misfortunes.

So, for example, it has had a bit of an embarrassment in Spain, where there was a £443m increase in the charge for bad or impaired loans, which was "driven by the depressed market conditions in the property and construction sector".

That would be enough to sink a medium-size Caja, or Spanish savings bank. But the loss is just a pimple on the face of Barclays' overall pre-tax profits of £3.95bn for the six months to 30 June.

By the way, for those of you who remain deeply anxious about the prospects for the eurozone, you'll note that Barclays has £18bn of Spanish mortgages and personal loans on its books, and a further £19bn of Italian and Portuguese retail loans. As for its wholesale exposure to Spain, Italy, Portugal and Ireland, that's £41bn.

Which is not a trivial exposure to economies widely seen as susceptible to further shocks - although Barclays, of course, insists that these loans and investments are decent quality.

What else to flag up?

Well, like all the big investment banks, Barcap suffered a significant fall in "top line" income - down from £10.5bn to £7.1bn.

But total income was flat, after deducting credit market losses (which diminished from £3.5bn a year ago to almost nothing in the latest period).

So it looks as though it will be a decent year for investment bankers' bonuses at Barcap, rather than a bumper one. And for the first half, average remuneration for Barcap's 25,000 employees was a bit less than £120,000 per head (or, at least, Barclays has made a provision to pay salaries and bonuses of that magnitude).

As for Barclays as a whole, the basic story is the same as we've seen elsewhere: profits have risen sharply driven by a sharp drop (of 32%) in the charge for loans and investments going bad; but with the economies of the UK and eurozone still pretty weak, Barclays is not finding it easy to generate extra income.

Which takes us back to the question of the moment, which is whether the banks themselves could and should be doing more to strengthen those economies.

Update 1254: I asked Barclays for more precise information about its net lending to small business (that's new loans minus repaid loans), because of the political sensitivity and economic importance of this statistic.

It said that net lending to businesses with turnover of less than £5m rose slightly and that net lending to businesses with turnover greater than £5m was flat.

Which is pretty similar to what Lloyds said.

Barclays also insisted that it was approving more than 85% of all applications for loans - which looks a bit better (according to conventional wisdom) than what Lloyds is doing (which said it was approving four in five applications).

Eric Daniels has no intention of quitting, even though there are some who feel that the disastrous loan losses incurred by Lloyds - stemming from the controversial takeover of HBOS in late 2008 - mean that he's not the right chap to lead the bank in the longer term.

Or at least that's what he told me.

Daniels says he wishes to stay at the helm to build on the recovery under way at the bank.

How firmly based is that recovery?

Well some would argue that Lloyds is still too dependent on funding from taxpayers and also from unreliable wholesale sources.

Only 61% of Lloyds' loans to customers are financed by deposits from customers, the lowest ratio for any big British bank.

The remaining 39% comes from wholesale sources - and, as banks learned the hard way after the credit crunch started on 9 August 2007, these wholesale providers of funds can vanish overnight.

Also £132bn of this wholesale finance comes directly or indirectly from taxpayers and central banks.

Most of that £132bn comes from the Treasury's Credit Guarantee Scheme and the Bank of England's Special Liquidity Scheme - both of which need to be repaid by 2012.

Lloyds insists it can repay most of this by shrinking its balance sheet, by reducing how much it lends and invests - which of course has the effect of reducing its borrowing requirement.

The big question, that matters to all of us, is whether it can shrink its balance sheet in this way without starving businesses and households of vital credit, without precipitating what I've called Credit Crunch 2.

As 41% shareholders, it matters to taxpayers that Lloyds makes a profit.

So after £13bn of losses over the past two years, it will be hard not to breathe a sigh of relief that Lloyds made a pre-tax profit of £1.6bn in the first six months of this year.

Why the big recovery? Well losses on loans and investments going bad have halved to £6.6bn and the ongoing running costs of the business have been reduced by £1.1bn, largely through job losses.

But it also matters whether big banks like Lloyds are doing enough to support the tentative recovery of the British economy.

There the evidence is more mixed. Lloyds says that it has provided £4.1bn of credit to small businesses, and says that it is ahead of targets agreed with the government.

But its total net loans to all households and businesses have dropped 1% to £368bn and it is charging more for that credit relative to what it pays for funds (the next interest margin has widened 24% to 2.44%).

By the way, this is only my first take on Lloyds' figures, and I will be filing more when I have time between interviewing Lloyds chief executive, Eric Daniels, and doing assorted live broadcasts.

Update 0848: In his interview with me, Eric Daniels insisted Lloyds is making ample funds available to small businesses.

But - and this is what other bank chief executives also say - many borrowers are choosing to repay their debts.

Which is why Lloyds net lending figures are flat.

Now there is a contradiction between what Mr Daniels and his peers say and the complaints of many small businesses that they can't get credit at the right price.

As I've pointed out before, the only way to reconcile this contradiction is on the basis that banks' assessment of whether a small business is credit worthy is harsher than the wannabe borrower's view of its own prospects.

PS I pointed out to Mr Daniels that the fall in the bad debt charge was greater than the swing from loss to profit. He nonetheless maintained that there has been an across-the-board improvement in the bank's basic operational performance.