David Stoughton of ValueKinetics writes:
There is a spat going on between the chancellor, Alistair Darling, and the governor of the Bank of England, Mervyn King, about banks and their regulation. King says that a bank that is 'too big to fail' is too big, full stop. Alistair Darling merely wants tighter regulation.
Meanwhile Lib Dem treasury spokesman, Vince Cable, has properly identified a much bigger problem, the systemic risk to retail customers - and given government guarantees, the general public - of mixing retail and investment banking in the same organisation.
There is yet another big issue not yet specifically identified by any of the parties to the current ding-dong, that of convergent business models. Banking in the West has become altogether too samey. There is a lack of diversity in the financial services sector that is in itself a huge risk, given the strong likelihood of disruptive change on top of recession. In short, as I have observed elsewhere, there is no longer sufficient variation in strategy and configuration for new business models adapted to changed circumstances to emerge - they, and we, all sink or swim together.
Alistair Darling is going to win on this round - government machismo is at stake almost as never before - but we should not be exposed to such systemic risk any more, and certainly not because a beleaguered government finds it impossible to back down.
Over to you
So here's the thing, vote with your money (or your overdraft). Move any accounts you have to institutions with alternative models. The only big UK bank that, perforce, has a different model is HSBC (given their extensive holdings in areas of the world that do business differently) but one alternative is not enough. Santander, which once looked as if it might offer another has now conformed to the norm. There are options though, retailers with banking facilities - the supermarkets and a growing range of others - offer a real alternative. They have high asset ratios based, often, on extensive property portfolios, and they have a mixed risk profile that is less likely to experience systemic failure.
There are real signs that the bankers are ready, and rarin', to get back on the roller-coaster; time for us to get canny and step off it. Think before you bank!
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