Banking is dead. Long live the Shadow.
The UK used to have hundreds of banks offering choice, competition and relationships. Move forward to today and it has 5 dinosaur like cost machines that do not provide a useful function to society except leach tax payers money to pay for the out dated concept of bonuses. Bonuses historically were paid because salaries were low but now they are paid on top of big salaries with no risk or [Ed: Enough]
While the tail between the legs FSA seeks to bolster its coffers by fining "names" and pumping out consultation papers and opinions without guidance like Goldman Sachs used to pump out subprime parcels, the real world is struggling and is having to play with fire.
Banks no longer lend or sell anything useful so in its place we have Shadow banking. Lightly or not at all regulated with high fees and APRs because when you need something you will pay anything for it.
Banks used to like short term lending - now they prefer to lend to the ECB than help real people live their lives and allow SMEs to prosper and pay tax.
Take Wonga.com. Thousands of bips and happy customers who live day by day. Shocking.
Take Fundingcircle / Zopa
There is an angling shop wanting to expand. Banks are not interested and so Mr Fisher has to resort to peer to peer lending. Isn't this some sort of collective investment scheme? Or unauthorised money lending? The FSA are nowhere to be seen despite fees of 3% and a bunch of credit crunch causing private equity spreadsheet jockeys tapping into a new market and encourage retail punters to spread the risk.
Independent Financial Advice.
IFAs are no more thanks to RDR. Gone are commissions to be replaced by hefty admin / management fees and no free advice. Punters now have to rely on unregulated websites to work out what to do with their money.
Take Moneyvista.com / ThisIsMoney.co.uk. Nice but its run by journalists. Shocking.
A nightmare. Taxes here, trade reporting there, suspicious transactions there, exchange arbitrage here, monopolies there.
So what do we have instead? Spreadbetting. Basically its trading but its not. Unregulated and a few have gone very wrong.
Yep, bets are not trades. Bets means no tax and no regulation. Spread bets on stock exchanges, commodities, bonds, fx, property are not the same as playing with options and futures apparently which are becoming highly regulated.
And what about the opaque trillion dollar Repo market? The rise of Credit Unions? The collateral lending of Pawn Brokers?
Capitalism likes to plug the gaps and it does. The unexpected consequences of printing money, creating false banking models and banks funding governments who tell them tier 1 capital should be increased and that means banks buying more debt is leading to a distorted unregulated fee fest.
One step beyond....
Repo man (reuters)
China shadow (forbes)
Shadow Banking lender of last resort to be Apple.