Simon English: The real problem with our banks? Too fast, too competitive

 

Outlook Do we want more competition in banking? John Fingleton at the Office of Fair Trading thinks so. The banks must do better for customers, or he'll sort them right out (he imagines).

We've been here before, what seems like scores of times. Certainly, the market for investigations into competition in banking is red hot.

Don Cruickshank, the bloke who made everyone panic about what turned out to be the near-non-existent millennium computer bug, had a crack about 12 years ago.

He said banks were bad, but nothing much happened. It was midnight on New Year's Eve 1999 all over again.

They knighted Mr Cruickshank in 2006, just as the seeds of the credit crunch he entirely failed to foresee were being watered.

There have been several investigations since, but they have changed little.

"For too long, competition in the banking system has not functioned well," says mr Fingleton.

The OFT boss is one of thegroup-think crowd that imagines competition to be the answer to everything and its absence to be a human tragedy.

He's just wrong. For most people, for most of the important things in life – health, housing, education – one choice that mostly works would be perfectly good enough. Indeed it would often be an improvement.

When it comes to banking, it seems perfectly possible to argue that what we really need is less competition rather than more.

Banks overcharging for overdrafts its irksome but where they really do for us is when they get big and go bust.

Northern Rock didn't get into trouble because it lacked entrepreneurial drive. It turned into a disaster for the rest of us because it was borrowing like fury on the money markets to offer 125 per cent mortgages to unsuitable borrowers. It was way too competitive.

The problem with finance is generally is that it is far too efficient, far too fast.

So a crisis in New York or Hong Kong hits London in about three seconds. If there were a way of slowing money down, we could all prepare much more easily for its sudden ebbs and flows.

James Tobin, the 1981 Nobel laureate behind the financial transactions tax that is named after him, proposed this levy precisely to "throw some sand in the wheels of our excessively efficient international money markets". His point was that fast finance makes it hard for companies to grow gradually, sensibly. They must move apace, or the money will seek other homes.

If you're a simple account holder – the area where Mr Fingleton intends to focus his inquiry – our banks really aren't so bad. (Try banking abroad for a bit if you don't believe me. American banks suck. All of them.)

So let's advise mr Fingleton of how little we really expect from our banks. Just that the ATMs work and that the banks don't go bust at our expense. If they need to collude on fees a little to prevent another financial crisis, well, we'll live with that too.

Banking should not be fashionable. It need not be dynamic. Mr Fingleton wants to make our banks interesting. He has it upside down. As boring as possible, so dull we don't even notice them, would surely be a relief to everyone.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Web Developer - PHP

£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Day In a Page

Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

Auschwitz liberation 70th anniversary

Woman sent to three Nazi death camps describes surviving gas chamber
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea