The future of banks

People have become rightly suspicious of banks and their doings. Banks have again been the main cause of economic trouble, putting people’s wellbeing in jeopardy. Salaries and bonuses are huge as banks are milking the system without adding value. Their dealings are difficult to understand, not open to scrutiny or transparency, they move in dark places.

Banks can not be left to their own devices, and must therefore be regulated rather tightly. There is real risk that the banks’ own profit becomes more important than the profit making of the businesses they are serving.

If bank go broke they pull businesses and households down with them – if there is no system to safeguard public interest.

So the banking system must be redesigned. The running of banks, their capitalization, size, interconnectedness, ownership, geographical spread, risk control regimes including risk coverage – may be there is more – must be reconsidered and should be vastly improved.

So the list of elements to consider is long:

  • Transparency related to interconnectedness, ownership of banks
  • Adequate  capital requirements
  • Banks profitability, wage levels
  • Higher transparency related to synthetics, designed products
  • Government or other guarantees, safety nets for borrowers, lenders, minimization of damage after failure, bad banks must fail, government bailouts should be stopped, foolishness must cost investors
  • Deregulation must go for good and proper regulation regimes must be built
  • Separation of businesses – high risk, low risk, investment banking
  • Fee levels and structures
  • Evaluation of competition
  • Control of hidden or black transactions, follow-up of what goes on outside the banking system
  • Greater consciousness related to globalization, international agreements
  • Resolution systems after failure
  • Bringing banking to everyone
  • Banks in emerging markets, local versus global banks
  • Consider if regulators should play a part in the businesses of banks
  • Banks as part of a sustainable business environment
  • Overview of the flow of credit: where, who, what
  • High risk or investment banking
  • Bank sourcing – generating new money, collecting deposits, funding sources, costs of funding
  • Technology
  • Banks size – not too big to fail
  • The monetary and fiscal institutions we need
  • Single markets, local, global markets, ownership structures
  • Is there more?

Banking crises have been part of the economic system ever since money was introduced, and now there is a fantastic concentration of money with the banks and financiers, there is interconnectedness, global dealings with global consequences making the whole system liable to repeated crashes.

It has been said in the US press that 1% of the world’s people have 80% of the assets, which is totally unacceptable – and quite unnecessary. The banks play a major role in this system of greed and control of others.

We learn as we go along, but we have so far been unwilling or unable to take adequate measures or do what is right. So the process is a slow one, many more will get hurt, but hopefully good remedies – of which we of course are fully aware – will be implemented.

The future will be bright – eventually!

Until then banking will be a dirty business. The aim must be that banks should not be allowed to cause crashes in the economic system.

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