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July 22, 2010


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"It’s so darned complex that you have to hire a consultancy to advise you how to do it."

Or you can buy a bank, which is cheaper.


and why Paypal went to Luxembourg for it's banking licence...


"These controls are needed, as loose control is what caused the crisis..."

This is what the powers will tell us (to obtain more power) and the media will happily repeat it. But think it through, the opposite is actually true:

1. Some of the most heavily regulated institutions played a major part in the crisis (Fannie Mae, ...)

2. Most affected institutions in Europe were government controlled or influenced (Hypo real estate, IKB, Landesbank).

3. It was precisely strict regulation FORCING banks to invest in what rating agencies deemed Triple A, rather than to go by their own, independent credit judgement.

4. Arguably what really caused (=motivated) the crisis is tax law (interest deduction for US mortgages).

We can refute the argument "bad controls caused (!) the crisis" because rather tax laws and "inappropriate regulations" were the key causes, without which this crisis would not have happened.

The sentence on top is thus revealed to be a fake argument to promote anti-competitive self-interest.


(... which of course supports the good thinking in your blog about the powers' real attitude to competition ...)

Chris Skinner

I think you're agreeing with me Hubertus

'Loose controls' is a reflection of 'inappropriate regulations', e.g. you control what you regulate. If you don't regulate appropriately then the controls will be off course.

I also think there's a failure of regulators in recent times too, e.g. they weren't enforcing the regulations they had created.


Jonathan Charley

Getting the FSA Approval and the Banking licence are only the first of the msny hurdles for new competitors getting into the market. You either have to build the infrastructure for a bank from scratch (branches, technology, call centres, processing centres, etc) or buy them (e.g. Northern Rock, Lloyds Banking Group's branches) with all the complications of separation from the mother ship. Combine these two together and you can see why it can take several years and a lot of capital before a new competitor can enter the market. Then the fun starts, trying to persuade customers to transfer their banking relationship to the new bank whilst still making a profit. You really, really need to want to do it if you're to enter the UK banking market.

James Brookes

I am more interested in finding out how to remove a banks license; I have just about had enough of the incompetance of Santander - it's time that bad news story was ended once and for all.

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