Wednesday, 19 June 2013

A broken model

My latest article at Pieria is on the contradiction at the heart of banking:

"In my article on the slow death of banks, I suggested that banks maintained on life support would eventually become redundant as new forms of financial intermediation took their place. This is the first of two posts in which I discuss what those new forms might look like.

The key change that we are seeing is what we might call "disintermediation" - flight of both lenders (depositors) and borrowers from traditional deposit-taking lenders to other types of financial intermediary, many of them specialists in particular aspects of financial management networked to other providers that do different things. This has already happened to a large extent in the US, but the UK and European models of banking are founded on universal banks and it is difficult for many people even to imagine what a banking system deconstructed into its component parts looks like. But when you break down the traditional banking model, it becomes apparent that there is a fundamental conflict at the heart of universal banking that makes it untenable as a business proposition in the current climate....."

The remainder of this article can be found here

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