Reply to: Miliband promises two challenger banks amid major branch sell off

[Paddy]

And already the Bank of England Governor has announced that if Labour wins he's off.

No loss to the UK then.

[Zero Liability]

He is spot on about the size of banks. We should not have companies "too big to fail". More competition can only be a good thing. How to achieve this is another matter.

Oh, no doubt. However, what the frack does Milliband know about banks, other than how to schmooze them up when he realises on which side his bread is buttered? Politicians sans banksters = rather ugly actors.

I think Daniel Hannan (and yes, Godfrey Bloom) have a far better appreciation of how banks work and how the overall system functions than this toff.

What should be looked into is also the role of bank regulation contributing to their current shape and form, and how competent the regulators actually are. The "competition" thing is the latest stick with which to beat industries that are out of favour. It's being wielded against the Big Four, where there is very little real support that there isn't "enough" competition (and to the degree that it is true, it's due to restrictive covenants by the banks, which again enjoy a very privileged position politically speaking, not least of all due to the TBTF paradigm and central bank support in coordinating FRB.)

Of course, it is probably not difficult to get the OFT to pass such a verdict, based on highly idealised models of how the economy works, or ones which require significant bureaucrat discretion to be identified and applied.

In a nutshell, neither regulators nor politicians have much exposure to competition themselves, so I fail to see what they understand about it or what qualifies them to plan a complex system like the economy without adverse effects; even in those cases where they do possess a good theoretical or practical understanding of it, what makes them think they can plan it? Paying lip service to "more competition" without going into the economics of it is all too easy. It may very well be that banking does exhibit too "little" competition (too apathetic a consumer base too, maybe?) but then it's an industry insulated from it, anyway.

Also agree with the sentiment that market forces will have their way with banks, regardless of what Milliband (or Cameron) is ranting about.

The BBC news today pointed out that there are already 9 challenger banks

EDIT:
and that people don't like changing banks, which is why they don't. Not lack of competition.

Yeah. Besides the stuff I mentioned, I am really not sure what he's on about, and I doubt he has anything like that in mind.

[AtW]

Miliband lost it, strange Balls is silent, perhaps he wants Ed to get backstabbed soon.

[v8gaz]

Thats a brilliant electioneering statement from Milliband. Read Bank 3.0 - every bank is going to be closing branches soon enough, and he will take the credit for tje obvious. Retail/small business banking is a millstone around every bank's neck (see every 'where can I get free banking' thread passim) - why would you pay for a high street presence with costly staff to service old ladies and debt-ridden small businesses when people with real disposable income are internet savvy and in fact wouldn't be seen dead in a branch. When was the last time you were in a branch? Prolly 6 years for me.

Banking is going to change, but not because Milliband makes idle threats.

[KentPhilip]

Milliband is a liar and a hypocrite.
As someone on the radio put it rather well: "Listening to the Labour party is like taking advice on fire-fighting from an arsonist"

[VectraMan]

There must be a successful model we can copy which didn't go bang because of casino style banking.

Communism?

[Platypus]

The BBC news today pointed out that there are already 9 challenger banks

EDIT:
and that people don't like changing banks, which is why they don't. Not lack of competition.

[vetran]

And the problem with that is it would inevitably lead to higher charges and less lending.

instead of randomly lumbering everyone with debt?

Less lending or lending at a higher rate to the less credit worthy? W@nga mortgages at only 3000%.

Of course it would slow the housing bubble.

If we increase competition then are we sure then the result will be significantly higher charges?

There must be a successful model we can copy which didn't go bang because of casino style banking.

[VectraMan]

The big thing is to separate stock market gambling from normal bank activities or force the banks to hold the reserves to pay for defaults if they fail.

And the problem with that is it would inevitably lead to higher charges and less lending.

[vetran]

There's no need to encourage competition. All that is needed is to not discourage it.

The purchase of smaller banks by the big five was part of the problem, it was easier to sell than compete with the big 5.

[vetran]

I'm not sceptical at all, I know that not only is he incapable of delivering, but that this sort of rhetoric would disappear without a trace in the event they get back into power.

The High Street banks would probably love to get rid of a fairly large number of their branches, to sell off the expensive premises and lose the staff headcount must be very appealing.
Many of their customers never set foot in them and I'd be very surprised if the profit to cost ratio brought in by the branch activities is proportional.

This is true, they are afraid to sack all their staff for fear of losing customers or bad press. But I suspect they would dump the lot if they believed they could get away with it.


What they need to do is encourage local banks like Germany to build a branch infrastructure that competes. Currently the only time you go to a branch is to undertake 'big' transactions.

MetroBank opened in Slough and its branches are open late. They seem quite popular.

The big thing is to separate stock market gambling from normal bank activities or force the banks to hold the reserves to pay for defaults if they fail.

[SpontaneousOrder]

Arguably both parties should have encouraged competition long ago.

There's no need to encourage competition. All that is needed is to not discourage it.

[TykeMerc]

I'm just a bit sceptical about Mr Miliband's 'ability to deliver'.

I'm not sceptical at all, I know that not only is he incapable of delivering, but that this sort of rhetoric would disappear without a trace in the event they get back into power.

The High Street banks would probably love to get rid of a fairly large number of their branches, to sell off the expensive premises and lose the staff headcount must be very appealing.
Many of their customers never set foot in them and I'd be very surprised if the profit to cost ratio brought in by the branch activities is proportional.

[MicrosoftBob]

I agree that banks should not lend to just anyone and a good track record should be provided but I also feel that certain banks still discriminate unfairly against self employed clients. A lot of lenders will still take an average as I say of the last 3 years and will not work on the latest years figures. The first year being self employed is not normally that great, the second year tends to pick up and by the 3rd year it should be in full swing. That means from the point of going self employed, you could have to wait upto 5 years before you can buy your home so that you have 3 good sets of accounts to show an underwriter.

How can this be treating clients fairly when you can have a PAYE client apply for a mortgage with one payslip, no experience and be in a probationary period.

They just haven't moved on from the old job for life image of permiedom, the perceived risk is presumably less for permies still

[Martin@AS Financial]

I think the problem is if you get a job as a permanent employee its fairly hard for things to go wrong. But for a newly starting out one man band, there are plenty of things that can screw them up. So I am not surprised that banks might want to stay out of their way for a few years to prove that they are a safe investment.

I agree that banks should not lend to just anyone and a good track record should be provided but I also feel that certain banks still discriminate unfairly against self employed clients. A lot of lenders will still take an average as I say of the last 3 years and will not work on the latest years figures. The first year being self employed is not normally that great, the second year tends to pick up and by the 3rd year it should be in full swing. That means from the point of going self employed, you could have to wait upto 5 years before you can buy your home so that you have 3 good sets of accounts to show an underwriter.

How can this be treating clients fairly when you can have a PAYE client apply for a mortgage with one payslip, no experience and be in a probationary period.