The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( TheStreet) -- The banking industry has had a tough time of late. Wall Street is crammed with protesters challenging high wages paid to bank executives. Threats of default by Greece have wreaked havoc with the stock prices of banks that invested in European debt. UBS ( UBS) lost its equities chief executives after revelations that a single UBS trader allegedly racked up $2.3 billion in losses through what the bank called unauthorized trades. A series of lawsuits has called into question the legitimacy of various practices that banks have reportedly used to maximize profits.
3. Hedge their credit and investment risks. The proposed regulations to implement the Volcker Rule, if adopted, would prohibit banks from engaging in proprietary trading, a previously significant source of profit that may have put depositors' funds at risk. (According to news reports, Goldman Sachs ( GS), Morgan Stanley ( MS) and JPMorgan Chase ( JPM) have already started winding down their proprietary trading desks in anticipation of the new rules.) The proposed regulations wouldn't tie bankers' hands altogether, though. Trades designed to hedge credit risks, interest rate risks and other specific risks would be permitted. Although, bankers and their attorneys complain that it's not clear which investment activities would be permitted under the new rules, it is clear that banks will still be able to hedge their risks, thereby protecting their profits, even after the new rules are adopted. 4. Set and enforce realistic lending standards. The news has been full of stories since the crash of 2008 about how easy it was for prospective homeowners to take out mortgages they had no hope of repaying. Mortgage bankers apparently didn't care -- their goal was not to be repaid, but to repackage the subprime mortgages and quickly sell them to somebody else. If banks instead presumed (even if only in theory) that they would hold the mortgages they issue until they were paid back in full, they'd be a lot more careful about their mortgagors. Ultimately, those mortgages would be more valuable and banks would make more reliable profits on them. 5. Establish a culture of compliance. The proposed Volcker Rule regulations would require CEOs and directors take a more active role in establishing and monitoring detailed internal programs to insure banks' compliance. CEOs would be responsible for "setting an appropriate culture of compliance" and boards would be required to ensure that bankers' compensation was aligned to the rule. While bankers might initially wring their hands at the thought of meeting still more regulatory requirements, it's worth noting that most of the trouble facing banks stems from someone playing fast and loose with ethics and common sense in order to make a quick or excessive profit. (For example, if UBS had been paying closer attention to its traders, it might not have lost $2.3 billion dollars.) Compliance programs and ethics training cost money, but they're essential to the successful long-term viability and profitability of any business. Banks are no exception to that rule.