Right now, the FPC is playing its part in trying to cushion the effects of the credit squeeze I mentioned, by freeing up banks’ capital and liquidity reserves to enable loans to be made to companies and households. If these sound like small steps for mankind, then they are giant ones for regulators. This is the first time in the Bank’s 318-year history that it has attempted such “macro-prudential” regulation. Of course, it is impossible for the FPC or anyone else to eliminate mini-booms and mini-busts in credit. But the FPC can legitimately aim to head-off the maxi-booms, such as the pre-crisis one, and the maxi-busts, the like of which we are currently experiencing. That should be good for medium-term growth, by preventing a build-up of excessive leverage. And because financial booms and busts are inherently inequitable, it ought also to be good for the distribution of this growth across society. Fifth, we really must do a much better job of promoting competition in financial services. The most shocking statistic is that, up until 2010, no new bank had been set up in this country for a century. We need to raise our levels of ambition when breaking down barriers to entry into banking, to ensure bank customers get a fair and efficient deal. Although there is no silver bullet solution to the competition problem, I am attracted to recent proposals which would place some core banking services in the hands of a shared utility, storing customer account details.
Their business model is fascinating, Quaker-even, in its orientation. They offer only basic banking services, mortgages and small business loans, to people in a tight, locally-defined catchment area. All credit decisions are taken locally by people, not centrally by a computer. No bonuses are paid and no one has a sales-target. When the whole firm out-performs, a contribution is made to a pooled fund which is invested on employees’ behalf. The fruits of success are distributed equally and gratification is deferred. 6  BIS central bankers’ speeches  For banking, this is back to the future. If that sounds attractive, then it is down to us – not regulators, not politicians, you and I – to deliver it. If as bank customers we want to change the culture of banking, then we should start by supporting those banks who are delivering that change. Putting your money where your mouth is would deliver far greater and more durable change than any amount of banker-bashing. Already there are some encouraging signs of the winds of change blowing through the system, not just from the new entrants but among the UK’s oldest banks too. The new heads of the UK’s biggest banks have committed to restoring trust in their institutions and improving their social usefulness. And those words are beginning to turn into actions. Barclays and today Lloyds are seeking to change their sales-oriented culture, returning to their Quaker roots. There is the quiet, but unmistakable, sound of a leaf being turned.