Come to London, we have tracker funds that are obliged to buy your shares and our market authorities are toothless. That, one assumes, was not the pitch used by the London Stock Exchange and other commercially minded City firms as they chased fees and flotations in the "Wild East" during the great mining boom. But it might as well have been.

As the tale of woe at Eurasian Natural Resources Corporation (ENRC) develops – the Serious Fraud Office this week launched a criminal investigation into allegations of corruption – the City's policy of opening its doors to all-comers and granting easy entry to the supposedly blue-chip FTSE 100 index can be seen to be a disaster.

Among the losers are the reputation of the City and investors in tracker funds – reckoned to own about 8% of the market these days. Most of the tracker cash comes from institutions but the many retail investors probably naively assumed top-tier status in London implied a reasonable standard of governance.

The ENRC situation is astonishing when you remember what preceded it. The various Cadbury, Greenbury, Higgs and Hampel reports and codes were designed to protect investors from greedy directors and dominant shareholders. The message in the 20 years since the Maxwell and Polly Peck scandals has been consistent: we can't have public companies run as personal empires; boardroom standards must be seen to be high for the sake of trust in the market.

So, you might have assumed, oligarch-backed businesses with less than transparent internal workings would find it hard to find a home in the 21st century City. Or, at least, these companies would be ushered initially into a high-risk section of the market reserved for consenting adults.

Wrong. All that was required to gain a main-market listing was the appointment of a few well known (and well remunerated) non-executive directors and the signing of a "relationship agreement" to protect minority investors. What if those safeguards proved insufficient? The authorities ignored the question.

So it was that ENRC remained a member of the FTSE 100 index even after spitting out two non-executives in 2011. Membership of the blue-chip collection is purely a function of market capitalisation; once you're in, the only way out is if you fall out of the top-100 ranking by value or delist.

In ENRC's case, the company is so big that it survives in the FTSE 100 even after a halving in the share price since flotation in 2007. Funds tracking the index, which includes a heap of money from pension funds, have owned it all the way down. To add to the pain, Kazakhmys, owner of 25% of ENRC, also enjoyed a run in the top league before relegation.

Could the system have been arranged better? Ken Olisa, the non-executive who described ENRC as "more Soviet than City" when he was ejected from the board, suggests a reform that deserves to be taken up by providers of tracker funds. His thought is that companies should need "a seal of approval" of good governance to get in, and stay in, a re-modelled index. Tracker funds would then have a choice of following this index or the regular version. Most, one would hope, would pick the former and some market pressure would be created.

Olisa, chairman of boutique merchant bank Restoration Partners, proposes that the Financial Reporting Council (FRC) could act as judge. It would determine whether there are enough genuinely independent non-executives and test adherence to any relationship agreement. The point is that there has to be a penalty for non-compliance. The current system, argues Olisa, is akin to erecting speed cameras and not loading them with film.

His is a bolder version of ideas within the UK Listing Authority's (UKLA) current consultation document. The similar aim there is to beef up the power of non-executives and strengthen relationship agreements. But the UKLA, which has no role anyway in compiling indices, is hopelessly vague about how non-conformers would be penalised. Constructing an alternative index would be a modest way to start.

At least it's an idea. The disgraceful part of the ENRC saga is the various City players' reluctance to admit that the arrival of so many oligarch-controlled companies has been damaging. Invited to discuss the impact on the reputation of the market, the London Stock Exchange says "we would never comment on individual companies listed on our markets". Feeble.

In the meantime, the UKLA's seven-month-old consultation rumbles on and its parent body, the new Financial Conduct Authority, has higher priorities. And are the tracker-providers outraged at how their clients have been used as flotation bait? If they are, they aren't screaming. Somebody should.

Co-op upset

The Co-op's abandonment of its plan to buy 632 branches from Lloyds has prompted much wailing in banker-land. Look, they say, it's just as we said, the regulatory and capital requirements are so onerous that nobody wants to expand in banking because nobody can see how to make respectable returns.

It's rubbish, of course, as demonstrated by a glance at this week's quarterly numbers from Swedish bank Handelsbanken, making a splash in Britain with its 138 branches. Handelsbanken, one of Europe's most conservatively funded banks, made a healthy return on capital of 11.4% in Britain. And it seems to have little difficulty in finding new business customers: lending to companies was up by a quarter on a year ago.

Here's the verdict of Berenberg's analyst on Handelsbanken: "UK profitability remains very attractive. The chief financial officer remains excited about the opportunity in the UK market. He noted that the oldest branches (eight-nine years old) have cost/income ratios of 30% (ie below the average for the Swedish branches) and very high returns on equity. Overall, the UK branches have the highest return on allocated capital of the international home markets bar Norway which is, in contrast, a mature market. The upside remains significant, in our view."

What the UK incumbents are really complaining about is the legacy of their bad loans and their rigid and centralised lending practices. Perhaps they should try copying the Handelsbanken "church spire" model of giving branch managers the authority to make lending decisions within their parish. The Swedish bank has been much praised, not least by the governor of the Bank of England, and there's a good reason why. While others grumble, it is getting on with the job.

Look again, but don't expect much change

It's amazing now to recall that the management and owners of New Look, when they were contemplating flotation in 2010, thought their business should be priced at a premium to Next. Ho, ho. Next is a stock for all seasons. New Look, as it proved with a sharp decline in profits after the float was abandoned, was part of the throwaway fashion brigade.

Some hard graft followed under ex-Matalan boss Alistair McGeorge and now the markets have the chance to price the business again. It's not the stock market this time, but the bond market. New Look wants to raise £800m of five-year debt to refinance in part the £1.1bn of borrowings in the business today.

These are staggering sums for a company that generated top-line profits (ie, before interest payments) of only £198m last year. So roll up, roll up, who wants to finance a fashion retailer with a chequered trading record at four-times leverage, or almost six-times if PIK notes are included. Private equity backers Apax and Permira will hope reports of a bubble in the junk bond market are accurate. We shall see.