Banks and billion pound profits and losses.
We pay as taxpayers when they go wrong and as consumers when they don’t.
I am not anti-profit. Companies that serve customers better than their competitors deserve all the profits they can get.
But my personal view is that the banking market is not competitive, with high barriers to entry, network effects and inertia around switching. Our next event in the Focus on Finance debates, in September, on how we should run our financial services will focus on this issue of competition.
It is true that every market is trying to work out how to price risk, but uncertain competition in the banking market means that the cost and more is simply shuffled onto us alternatively as taxpayers and then as consumers.
As Mick McAteer from the Financial Inclusion Centre showed me recently, net interest margins (between savings and mortgages/ credit) are the widest they have been in 10 years. Banks could cut borrowing rates and maintain savings rates and margins would only return to 10 year average levels. Plumped-up margins are costing the average homeowner between £850-£1,200 a year.
Fat banks need a diet.