Its hard to work up much enthusiasm for the latest banking reform announcement- and knowing that the banks are already warning of the usual huge costs, worse outcomes, mayhem if it goes ahead, does not mean that we should automatically be on the opposite side to them on this one.
The latest attempt to get to grips with our failing banking system comes from the Competition and Markets Authority(CMA). Its going to look at breaking up the Big Four Banks, and possibly doing away with free banking.
The Big Four- Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland have a 77 percent share of personal current accounts and 85 percent of small business accounts. Nobody really thinks they do these well. Small businesses still struggle to get financial backing when they need it, and individual customers struggle to find local branches, can’t get humans on the end of a phone to sort out problems, and can’t-still- easily change banks.
The Vickers reforms have still not been enacted – and HSBC, quick off the mark, have already asked that they be put on hold till the CMA investigates.
So far so obvious. But because banking reform is so vital, we can’t leave it up to a reluctant Government, narrowly defined investigations, and a banking industry too big, too regulated, too used to Government subsidy, to do what is clearly needed.
So here are some modest suggestions.
Start with the customer.Banking used to be and can be again, a personal service that enables individuals and communities to trade, invest and survive. It should not be an investment industry which invests in finance.
So if the Big Four can’t do this- and maybe with the best of intentions, they can’t- lets set up a banking system which will help local small businesses, the 22 percent of working people earning less than the living wage, the people who want financial planning to be part of their banking relationship,the people who want to save small amounts, the people who want to borrow but not at payday loan company rates.
If a Government wanted to do this it could make use of the Post Office network and create a Post Bank.We’ve banged on about this for years. But it is still a good idea( and lots of European countries have Post Banks which work).
Or local authorities could set up local banks – perhaps in partnership with TSB which wants to come back into the market.
The problem is that the modern recipe of regulation and more regulation when a problem appears is strangling the big banks’ ability to change. Regulation indeed is now a bit like anti-biotics.It’s over-used and rapidly losing its effectiveness.
We could still have a responsive and fair banking system- and one that, crucially, helped our local economies. But don’t look to this Government, or this latest inquiry, to provide it.