Even where disintermediation creates new chequing facilities, as for example, in the case of money-market mutuals, these are still cleared through settlement banks. It is true that new forms of money transmission - e-money are being developed, sometimes outside the conventional banking system. But I suspect that they, too, will typically depend upon clearing through the banking system. To the extent that they come to involve the creation of what are effectively direct deposits, they will represent banking in a different form and become special, and logically subject to regulation, in much the same way as conventional bank deposits. In the payments system context, too, important progress is being made to reduce inter-bank exposures (through the introduction of real time gross settlements systems in many countries, for example, and through the netting of foreign exchange settlements) but those exposures, as well as inter-bank exposures incurred in direct inter-bank transactions - the large bulk of all of which are unsecured - remain extraordinarily large. Individual inter-bank limits can substantially exceed 25% of capital (the normal supervisory limit for large exposures), and as an example of aggregate inter-bank exposures the major UK retail banks currently place some £ billion, or 16% of their total assets, with each other or with other UK banks. Turning to the assets side, there is some evidence of a gradual erosion of the role of banks in financial intermediation.
This means that there is still a distinct public interest in the activities of institutions that are engaged in banking - as defined - whether as free-standing entities or within a broader group structure. That interest includes a micro-prudential concern to provide some measure at least of protection to public depositors, reflected in the supervision of individual banking institutions and in deposit protection schemes. But it includes also a macro-prudential concern with the stability of the banking system as a whole, because of its peculiar vulnerability to contagious - systemic - disturbance, reflected in central banks’ preparedness to provide liquidity to the system where that is judged to be necessary. Other forms of financial activity also perform distinctive functions, and have distinctive characteristics which make them special in their own different ways. And these special features equally may - and often do - give rise to special public interests. The public interest in these other financial activities may be driven by a social concern to protect consumers (for example the prospective beneficiaries of pension funds or life insurance policy holders, or investors, whether in collective funds or individually, through different kinds of intermediary, in capital markets), which is similar to the social concern relating to depositor protection. And it may extend to other aspects of the particular activity, including aspects of business conduct as well as the financial integrity of the institutions involved.