Last week’s systems’ failure at the RBS was symbolic of the old clearing banks and their creaking 1970’s main frames. Those that have spent the money on flashy front end structures are merely flattering to deceive, as they divert attention away from the fact that many have not invested effectively in modern integrated technology, and in the case of RBS & Natwest we see the result of trying to continuously patch ageing mainframes systems. The result is inevitable when you don’t invest effectively in your core infrastructure, and inevitably your basic process starts falling down around you. After all good commercial banking is, or rather should be, a financial utility, just as water, electricity and gas are of a similar ilk.
Barclays so far seems to be the largest bank to be grabbing the initiative by realising that technology will and should radically change their banking network structure. Far more branches will become automated and more units sited in other operations like supermarkets and malls as they announced recently with a link up with ASDA. Again it will be the power of evolution that will sort them out – reform or die. The sooner this happens to RBS by way of break up and reform, the better.
We can reflect then on the difference that we see in the US where local community banks are more prevalent. Although not in the numbers they were when back in the 1980s, when over 14,000 existed, still a healthy number of 6524 at the last count are still there. Many of these banks will clearly state that they did not get involved in the banking crisis of 2008 and only those that were involved in extended mortgaging were damaged. These local finance operations have proved vital to local businesses not necessarily in the provision of capital, but rather that vital need for a commercial bank namely the supply of cash flow. Now these are simple banks, with deposits and loans, but I see nothing wrong in that. Obviously being ‘Main Street’ banks in local America, tiresome things like foreign exchange and trade hardly applies.
The small initiatives we are seeing in the UK in Cambridge and Bournemouth are a start but we should be encouraging more local banking, and local as well as regional politicians should not be waiting for some dictate from the Treasury, but should be challenging their local leaders to come up with banking and funding initiatives. As I have mentioned before the crowd funding and peer to peer lending ideas should play a vital part here.
Where is the Newcastle and North Eastern Bank or the Greater Sheffield Finance Society?