Too Big to Retail?

The BIS released came out with a list of 'systemically important' banks.http://www.bis.org/publ/bcbs207.htm

So, we now officially acknowledge that whatever happens, even if some countries go down, these banks cannot afford to fail. It reallymeans that whatever these banks do, we have to accept with grace and humility. It doesn't help that many of these giant institutions are actually owned by the governments of their country.

I found a fascinating common theme across all these banks; they are all pruning down their retail banking business. Once would have thought that with the great credit crisis brought about by the investment banks would take these banks back to the basics of retail and conventional banking. But no, almost all of them are scaling back on retail banking!

Biggest examples are HSBC, Barclays and RBS who are engaged in a fire sale of retail portfolios across the world.

Me thinks this is the worst trend in recent times and somehow the analyts don't seem to be getting it. Any slow down in retail banking only means less credit to the SMEs and consumers and only will prolong the recession.

I think it is time for the G 20 and BIS along with Central Banks of its member countries, to mandate minimum levels of growth in retail banking and retail lending/credit. Even better, should think of proportion of revenues that should be compulsorily coming out retail banking and not from investment banking.

Too big to fail cannot translate to Too big to Retail.......

How big is the US Regulatory 'Sink Hole'?

Was it just a coincidence or some kind of a 'karmic connection'? A giant 200 feet sinkhole appeared in Guatemala City last month. A few days later the Regulation II of the Dodd-Frank Amendment, slashing debit interchange fee by half, came into existence. The debit interchange 'blow out' starts from Oct 1, 2011 for banks with more than $ 10 B in assets.

Retail bankers must have had the same feeling as the residents of Guatemala; a huge abyss which nobody knows how to fill!

The post 'great recession' era has been one of 'great regulations' in the US banking system. The CARD Act, Durbin, Dodd-Frank Amendment have all carpet bombed the retail banking landscape. Every bank's financial report is splattered with tens/hundreds of millions of dollars in 'lost revenue'. While we still can't comprehend the exact numbers, it looks like the combined regulatory 'sinkhole' confronting the retail bankers adds up to $ 60 Billion.

Clearly, bank CEOs have to figure out how to address this enormous challenge in retail banking; after the relentless battering on Mortgage, Investment banking and credit losses they are still reeling under.

One school of thought feels that the 'easy revenues' from interchange on Credit/Debit cards, Overdraft fees, 'innovative fees' was too good to last. Now banks have to really prove they are worth existing and do add genuine value to the economic system.

The coming months will separate the cliched 'men from the boys'.

Disaster recovery time continues....