What’s the point of banks?

A plane flies past the HSBC building in Canary Wharf, London April 17, 2015.  HSBC and Standard Chartered are looking at the viability of quitting London for a new home in Asia because a big jump in a tax on UK banks makes staying in Britain increasingly painful. Several investors told Reuters they want the two banks to do a thorough analysis on whether it makes sense to move after Britain raised the bank tax by a third last month. REUTERS/Cathal McNaughton

HSBC and Standard Chartered are looking at the viability of quitting London for a new home in Asia because a big jump in a tax on UK banks makes staying in Britain increasingly painful.

News that the HSBC is to slash it’s costs by $5bn. spells trouble for 6,000 British workers and their families. It will probably be seen as good news to the shareholders of the bank but what of the customers?

There was a time when people were defined by the bank they used, nowadays, I carry cards for several banks who I variously use for immediate credit, business banking, day to day cash management and for my mortgage.

I’m looking forward to Apple Pay – so I can use my phone to settle bills. It has been a long time since I have been in a banking hall – it’s been a long time that I’ve banked a cheque.


Hoare 2

Hoare & Co


If I take the bus up Fleet Street, I pass the of C Hoare & Co (founded 1672). It represents the way banking used to be, at least for the privileged who had something to bank.

The Bank has a nice garden, it is an extension of a Gentleman’s club.



It’s easy to see the point of such a bank, it’s hard to get into , but once you are a customer, you remain one for life.

Anyone who watched Channel 4’s dispatches “Where to save” last night, will have witnessed the Golden Peanuts being dished out to banks who choose to reward savings with interest rates of 0.1% pa.

The program was not very successful to my mind, it made no attempt to question the systemic problems of a retail banking system that still emulated C Hoare & Co in positioning branches in the poshest of locations , staffing them with people who spend most of their time telling you how to use the cashpoints and advertising on TV how much we trust them.

We only get the small amounts of interest we do because of the need to pretend. Banks are really not interested interested in retail customers. Since PPI we have become just another item on the risk register.

And Britain’s savers do not need banks; – and Britain’s borrowers are increasingly frustrated by banks that cannot lend them the savings of others. The program did take a tangential swipe at crowd funding (in a similarly superficial way), but it ignored the  steps being taken by credit unions and organisations like Zopa. Peer to peer lending is doing to banking, what Betfair does to betting. Zopa makes saving and lending relevant and proitable. I love it.




In terms of providing liquidity to capital markets , banks are being challenged by Hedge Funds. I don’t know much about wholesale banking but it appears to me , it too is caught in a horrible crunch of high labour costs and ever increasing regulatory costs, casting doubt over the future of European and North American operations.

The combined fines dished out to the banks in Europe and America are making the Far East a safe haven for bankers and their shareholders and no-one would be surprised if HSBC moved its HQ there by the end of the year.


So what’s the point of banks?

To me First Direct and  Metro-Bank do all I want from the banking system. Ironically First Direct is part of HSBC but it operates in an altogether more customer focussed fashion.

Metro Bank is just fun, like First Direct- it’s open when I want it to be and it’s pleasingly funky. It’s a place I like to go – a bit like C Hoare & Co would be, had Pater sent me to Eton.

The point of banks for most of us, is nothing to do with the announcements this morning by HSBC who seem to have more or less given up on any sense of purpose other than to deliver 10% return on shareholder capital.

And finally a poem, penned by my father to win him a bottle of scotch

I’m afraid that I’d better be frank

I’m not at my best in a bank

I can’t cope with oddities-

Stocks and Commodities

If that cheque is mine- leave it blank

That’s a pretty accurate summation of our relationship with banking these days. Poor old Captain Mainwaring.


Stupid boy



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to What’s the point of banks?

  1. Con Keating says:


    The point of banks is that they are credit institutions and this is why we need them. The financial system does not revolve around the on-lending of deposits taken – see the recent Bank of England Working Paper No. 529 “Banks are not intermediaries of loanable funds — and why this matters” —
    and that leads to recognition that these various internet lending arrangements will never be full substitutes and as for hedge funds being the source of market liquidity – they get this liquidity through their repo lines with the banks.


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