14 ms·

How U.S. Banks Took Over the World

147 points by chmaynard 7y ago

css 7y ago
Because they can threaten the people in charge of holding them accountable: > To be clear, the decision of whether to indict a corporation, defer prosecution, or decline altogether is not one that I, or anyone in the Criminal Division, take lightly. We are frequently on the receiving end of presentations from defense counsel, CEOs, and economists who argue that the collateral consequences of an indictment would be devastating for their client. > In my conference room, over the years, I have heard sober predictions that a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects. Sometimes – though, let me stress, not always – these presentations are compelling. https://www.justice.gov/opa/speech/assistant-attorney-general-lanny-breuer-speaks-new-york-city-bar-association https://www.justice.gov/opa/speech/assistant-attorney-genera...
- hanniabu 7y ago
  > a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects Isn't this what capitalism is all about? If they can't do the job then somebody else will come up on it's place.
  - dec0dedab0de 7y ago
    Capitalism is about personal responsibility, corporations are about avoiding (some) personal responsibility. If certain types of companies commonly failed harshly because of indictments then people would be reluctant to get jobs with those types of companies. So ideally the companies would have to pay more to outweigh the risk.
  - JackFr 7y ago
    The original speech which is quoted is an outline for the use of 'deferred prosecution agreements' office which are effectively corporate plea bargains by the DOJ. The public policy problem is that if a corporation is indicted, legally they are presumed innocent but the market may not see it that way. Though the company might be eventually fully exonerated in court, they might have driven to bankruptcy by the market. By agreeing to a DPA, the company can treat it as a pseudo-regulatory matter. This, of course, has critics on both sides. On the one hand some critics feel this has allowed corporations to engage in ongoing criminal behavior without ever really paying the full price. On the other hand, people have criticized the Attorney General's office for using the threat of indictments on flimsy grounds as a means to create a backdoor regulatory regime with no legislative basis.
    - arrosenberg 7y ago
      My biggest issue with it from a public policy standpoint is that we don't have any problem putting the same burden on individual people. A person accused of a crime they didn't commit runs the same exact risk of bankruptcy and financial ruin if they can't make bail (and sometimes, even if they can), despite the same presumption of innocence. How are we supposed to reconcile giving a corporation, with vastly more resources, special consideration that an individual person does not get?
  - rolltiide 7y ago
    > Isn't this what capitalism is all about? If they can't do the job then somebody else will come up on it's place. No, because the remaining corporations will be the monopoly and the government will have enshrined them by prosecuting the competitor which is the opposite result of what the government aims to do. yes capitalism is described this way and the tendency towards monopoly is why we don't do what capitalism describes. the government helps avoid monopoly so simply won't take a hand in creating it even if it means letting a competitor get away with murder
    - hanniabu 7y ago
      Yeah, but then they're always lenient with the existing major players and harsher with the smaller players, effectively creating a segment where true capitalistic nature doesn't apply. This is similar to a communist party in a way, where once you're elected, you can't be removed from power until you die under your own accord.
- graedus 7y ago
  Lanny Breuer and his then-boss, Eric Holder, both returned to Covington & Burling following their stint at the DOJ. JPMorgan Chase, Bank of America, Morgan Stanley, and UBS are clients of the firm. Breuer was estimated to take home $4m in compensation in his first year back. https://dealbook.nytimes.com/2013/03/28/once-more-through-the-revolving-door-for-justices-breuer/ https://dealbook.nytimes.com/2013/03/28/once-more-through-th... https://www.nytimes.com/2015/07/07/business/dealbook/eric-holder-returns-to-covington-burling.html https://www.nytimes.com/2015/07/07/business/dealbook/eric-ho...
- asdff 7y ago
  So don't indict the corporation, indict the executives making these decisions. The U.S. loves to issue slap on the wrist fines, but actually going after specific individuals for white collared crime does not ever seem to happen in highly publicized cases.
deleted 7y ago
[deleted]
Yuval_Halevi 7y ago
Not only the U.S bank... China aswell they loan billions for poor countries they know they son't be able to bring the loands back once they don't pay the loan they take control of strategic building/places in those countries.
- otoburb 7y ago
  All such financing under the official umbrella of the Belt and Road Initiative.[1] I'm not so sure that China necessarily wants the capital assets under their direct control because at some point they want their investments (read: loans) to return the predictable cash flows that were promised. [1] https://en.wikipedia.org/wiki/Belt_and_Road_Initiative https://en.wikipedia.org/wiki/Belt_and_Road_Initiative
  - kevin_thibedeau 7y ago
    They need supply lines for a possible future war. The loans paid off are just a bonus.
- thablackbull 7y ago
  Think about what you're saying, not only are you saying people hope deals fail (when deals that succeed benefit both parties), but also disparaging other countries as being so inept they can't spot a bad deal. The issues have been analyzed already: From, [1], > First and foremost is the realization that actual asset seizures are a very rare occurrence. [...] Instead, we find those debt renegotiations usually involve a more balanced outcome between lender and borrower, ranging from extensions of loan terms and repayment deadlines to explicit refinancing, or partial or even total debt forgiveness (see Figure 1). To address the Ski Lankan port issue, [2]: > Privatizing 70% of Hambantota to CM Ports for $1.1 billion was one way in which foreign exchange could be brought into the country, allowing a balance of payments crisis to be staved off. It was not an asset seizure. [1] https://rhg.com/research/new-data-on-the-debt-trap-question/ https://rhg.com/research/new-data-on-the-debt-trap-question/ [2] http://www.chinaafricarealstory.com/2019/07/did-china-seize-sri-lankas-hambantota.html http://www.chinaafricarealstory.com/2019/07/did-china-seize-...
otoburb 7y ago
Perhaps in the next few generations we will see similar headlines from other growing superpowers such as India and China. European and US bankers may chuckle good naturedly when this idea is mentioned, but they forget that the European banking sector was the genesis of most of our current modern-day banking system starting from the 17th century, and yet today they are eclipsed by the US banking sector, aided in no small part by the size and influence of the US economy. The tables can turn relatively quickly.
- buboard 7y ago
  US didnt exist when (european) banks began existing so i dont understand the analogy
  - otoburb 7y ago
    The point I was trying to make was that upstarts can overtake experienced incumbants relatively quickly. Perhaps it's a self-evident point to an HN audience, but the (small) set of bankers that I've spoken to don't seem to believe that anybody else can credibly challenge their dominance.
    - smolder 7y ago
      What if US banking dominance was considered a national priority by the state, and they used some mix of military might, diplomacy, and spycraft to maintain it? It's an interesting possibility, anyway.
  - __m 7y ago
    that just aids the analogy
    - buboard 7y ago
      india and china have banking since at least a century ago
- Fiveplus 7y ago
priansh 7y ago
To be fair I think this article doesn't fairly assess whether this is good or bad. From my POV as a US citizen that has been living as an expat in different countries for the last few years, US banks globalizing is a net positive. I get convenience and speed with US banks that I get nowhere else -- i.e. the most online traditional bank in the UK is probably NatWest, which sucks because you have to get a physical card reader (like an actual machine that scans your debit card) in order to use the online banking most of the time. There's Monzo which is fully online but it sucks internationally, and adding funds is a pain. In China I had to jump through so many hoops to get an account and there are hundreds of restrictions in place; likely because I'm not a Chinese citizen. This is not a pain point for any immigrants I know in the US as it's fairly easy to move money around. I'm sure US banks in control is bad at a macroeconomic level, but for the average consumer and at a microeconomic level I think it could bring about a lot of positive changes. Then again my perspective is probably skewed as an American
- spoovy 7y ago
  Not sure what your definition of "traditional" is, but I don't recognise your description of UK banks at all. I joined Smile bank (Co-op) in 2001/2, and it was even then fully online and I never needed a bank card to manage my account. I've had accounts with several others since (inc. Barclays, Santander) and never needed a card with them either. The new generation like Starling, Monzo, Revolut et al are also incredibly convenient.
- owenwil 7y ago
  We have very different experiences of the global banking system, it seems. To me, US banks are archaic, slow, and backward—and the UK has to be in for close second so it isn't a fair comparison at all. I have lived/banked in New Zealand, Canada and The Netherlands, all of which are delightfully eons ahead of the US banks almost across the board. For example: - P2P or bill payments in Canada can be made to any email address and received within 60 minutes for free. - Splitting a bill or requesting payment in Netherlands is trivial, because the banks all allow you to generate a URL and send it to anyone for instant payment. - Transfers in NZ are realtime, instant, and validated before you send to ensure its the right person. You can also create accounts online with your government login. Touch to pay exists everywhere since at least 2010. Meanwhile in the US, checks exist and people go crazy when Apple Pay is accepted at a single chain store. I've never touched a check, and I hope I never need to—and the examples of hoops to jump through are likely because you're new! KYC regulations tend to relax over time, and it can be painful at first almost everywhere. The fintech revolution in Europe between N26, Revolut and the dizzying array of others is evidence we don't need, or want, US banks to do anything. It won't help.
gniv 7y ago
I read the article but there is no insight into why. Are the US banks better run? Is the regulatory environment post-crisis better in the US? Something else?
- mola 7y ago
  They operate like the mafia. Take that offer you can't refuse, then they own you. This, on a macroeconomic geopolitical level.
- cm2187 7y ago
  I can probably provide a few elements of response. First regulations and rates. Europe is actually several major jurisdictions: - Switzerland: they went through a near death experience during the financial crisis, with two huge banks relative to the size of the economy (UBS and Credit Suisse) that would have sunk the country if they failed. Their reaction was understandly to slash and shrink these giants to a less threatening size. UBS and Credit Suisse, once major global players and dominating asset management, are the shadow of what the once were. - UK: of the major UK banks, two went really bad during the crisis (RBS & HBOS) while the others big banks were mostly healthy. Those two banks were requested to massively deleverage (RBS pretty much exited investment banking). The other UK banks (HSBC, Barclays) were comparably healthier. There was a wish for tough regulations within the EU, however the state of European banks is generally pretty bad (particularly in Germany and Italy) which severely limited how tough european regulations could go before threatening the stability of the country. The UK didn't have that problem and therefore gold-pleated all EU regulations, requiring higher capital ratios, higher coco triggers, strict ring-fencing, massive fines, massive PPI penalties, more severe rules and timing from UK banks. It forced them to retreat from many businesses and to shrink. - rest of Europe. EU regulators generally are hostile to investment banking and the new regulations make many traditional IB activities uneconomical (in particular trading and financing trading transactions, as well as imposing various degree of ring-fencing of non IB activities). In addition, the EUR zone maintained low rates for a very long time (now going deeply negative), which adds further pressure on the profitability of EUR zone banks. In the US, regulations have been less aggressive, and the rate environment (high rates) less toxic to banks (the reason why low and negative rates are toxic to banks is that 1) the bank is a net receiver of interest rate, because it has interest paying assets and liabilities, but more assets than liabilities, and 2) because if rates turn negative, it may not be able to pass on negative rates to their depositors (negative rates on current accounts) and find themselves pocketing the difference between their assets and liabilities). However some European banks have been doing OK, like BNP Paribas or Santander. Their local regulators rather shielded them from tougher regulations. They are challenged nevertheless by the rates environment. I think the second reason is culture. US banks took losses upfront, slashed bad activities quickly and put the problems of 2008 behind them within a few years, in a typical aggressive, pragmatic american way. The culture in Europe is often to try to live with problems and hope that waiting will make them go away. Even aggressive european players like Barclays, Deutsche Bank or SocGen were very slow to react to the new environment, and were still downsizing and cutting activities long after US banks went back into bullish/expanding mode. In Italy the banks were never really restructured.
alessioalex 7y ago
How did they take over the world. We barely see one US bank here in Romania for example, and its coming just happened recently. With the economical crisis starting from US and NSA scandal(s), I'd never trust a US bank over a EU one.
fnord123 7y ago
The primary component in the success of US banks over European banks is that European banks struggle to do business in the US. This is because the jingoist zeal in the US puts up massive hurdles in the way of any foreign bank. In other words, Americans only buy from Americans. This is why "Twenty-five years ago, European banks charged into the U.S. They bought storied firms like Donaldson, Lufkin & Jenrette and Wasserstein Perella and dangled big paydays for rainmakers" - to convince Americans they were buying from other Americans. This allows American banks to build up a war chest domestically and keep the fight in Europe and the developing world - while there is no fight in the worlds largest economy. China is doing the same.
- xxpor 7y ago
  I'm really not sure what you're talking about. I cant go open a bank account at HSBC or TD today if I like. And ING was a thing before they I guess got bought out by Capitol One.
  - fnord123 7y ago
    This is about investment banking. Not retail banking.
    - xxpor 7y ago
      Fair enough, I'm a lot less familiar with that side. But don't Deutsche Bank, UBS, and Credit Suisse have a large US presence?
      - fnord123 7y ago
        They are discussed in the article.
- xxpor 7y ago
  I'm also not sure having a completely foreign bank in your country (a foreign bank without a local subsidiary) is a good idea frankly. The Icesave crisis would never have happened here.
chiefalchemist 7y ago
Circa 2008 we were told there was too much power in too few hands. Then we went for eight major banks down to seven. Now those seven hands are expanding their reach? If they're too big to stop, then certainly they're still to big to fail. The queation is, will the world be willing to do the bail out next time.
- jessaustin 7y ago
  ...will the world be willing to do the bail out next time? Are the relevant decision-makers still industry insiders and others who owe their wealth and position to the industry?
treydey 7y ago
What most people in this thread are talking about is retail banking. Retail banking in the US lags far behind the EU in terms in technology and security. However, retail banking is only accounts for about 25% of total profits when compared to commercial and investment banking. This is where US banks have consistently beaten the competition. Especially since Brexit which has destabilized London as the financial hub of Europe
- qaq 7y ago
  This pretty bold statement what is this based on ? As someone who just moved from US to Ireland I def. not getting that impression. I also highly doubt there are banks in EU that can match say Chase on security side.
  - treydey 7y ago
    I should state that I'm only comparing the largest banks in terms of security. I have bank accounts both in the UK and the US. 2FA has only been recently (3-4 years?) introduced in the US and chip and pin has been in the EU for years now.
    - qaq 7y ago
      It's being more than that but regardless of how long it has being that way does not affect current state of things. Security is among other things a function of the SOC and the level of people running it.
  - neffy 7y ago
    You´ll be finding out I suspect. No idea how it is in Ireland, but in most of the EU, digital transfer between banks and countries is completely seamless. I can transfer money to family members accounts in different banks in the same country in a couple of minutes, and to another country in a day or two. I haven´t used a physical cheque since I moved back from the US.
    - qaq 7y ago
rb808 7y ago
Just another industry where European companies are slowly dying while the Americans succeed.
- lavezzi 7y ago
  A lot of UK banks chose to retreat from investment banking to focus on retail banking. That's not dying, it's risk avoidance.
  - rb808 7y ago
    OK dying might have been the wrong word, but I'd count retreating as similar to what I meant.
TheAlchemist 7y ago
That's a very misleading article. 'Took over the world' isn't exactly going from 42% to 52% of market share... Also quite funny is "Coming out of the crisis, U.S. banks quickly raised capital and shed risk" and the chart below showing that it's actually the European that cut the assets they are holding to 50%, while the US banks actually increased theirs... Granted, asset != risk, but it's a pretty good proxy here.
decasteve 7y ago
I thought this was going to be about J.P. Morgan and the World War I era. The article is not wrong but there are a number of interesting moments over the past hundred years that have shaped the world because of the financial system changes and its influences on politics.

147 points by chmaynard 7y ago

css 7y ago

Because they can threaten the people in charge of holding them accountable: > To be clear, the decision of whether to indict a corporation, defer prosecution, or decline altogether is not one that I, or anyone in the Criminal Division, take lightly. We are frequently on the receiving end of presentations from defense counsel, CEOs, and economists who argue that the collateral consequences of an indictment would be devastating for their client. > In my conference room, over the years, I have heard sober predictions that a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects. Sometimes – though, let me stress, not always – these presentations are compelling. https://www.justice.gov/opa/speech/assistant-attorney-general-lanny-breuer-speaks-new-york-city-bar-association https://www.justice.gov/opa/speech/assistant-attorney-genera...

hanniabu 7y ago
> a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects Isn't this what capitalism is all about? If they can't do the job then somebody else will come up on it's place.
- dec0dedab0de 7y ago
  Capitalism is about personal responsibility, corporations are about avoiding (some) personal responsibility. If certain types of companies commonly failed harshly because of indictments then people would be reluctant to get jobs with those types of companies. So ideally the companies would have to pay more to outweigh the risk.
- JackFr 7y ago
  The original speech which is quoted is an outline for the use of 'deferred prosecution agreements' office which are effectively corporate plea bargains by the DOJ. The public policy problem is that if a corporation is indicted, legally they are presumed innocent but the market may not see it that way. Though the company might be eventually fully exonerated in court, they might have driven to bankruptcy by the market. By agreeing to a DPA, the company can treat it as a pseudo-regulatory matter. This, of course, has critics on both sides. On the one hand some critics feel this has allowed corporations to engage in ongoing criminal behavior without ever really paying the full price. On the other hand, people have criticized the Attorney General's office for using the threat of indictments on flimsy grounds as a means to create a backdoor regulatory regime with no legislative basis.
  - arrosenberg 7y ago
    My biggest issue with it from a public policy standpoint is that we don't have any problem putting the same burden on individual people. A person accused of a crime they didn't commit runs the same exact risk of bankruptcy and financial ruin if they can't make bail (and sometimes, even if they can), despite the same presumption of innocence. How are we supposed to reconcile giving a corporation, with vastly more resources, special consideration that an individual person does not get?
- rolltiide 7y ago
  > Isn't this what capitalism is all about? If they can't do the job then somebody else will come up on it's place. No, because the remaining corporations will be the monopoly and the government will have enshrined them by prosecuting the competitor which is the opposite result of what the government aims to do. yes capitalism is described this way and the tendency towards monopoly is why we don't do what capitalism describes. the government helps avoid monopoly so simply won't take a hand in creating it even if it means letting a competitor get away with murder
  - hanniabu 7y ago
    Yeah, but then they're always lenient with the existing major players and harsher with the smaller players, effectively creating a segment where true capitalistic nature doesn't apply. This is similar to a communist party in a way, where once you're elected, you can't be removed from power until you die under your own accord.
graedus 7y ago
Lanny Breuer and his then-boss, Eric Holder, both returned to Covington & Burling following their stint at the DOJ. JPMorgan Chase, Bank of America, Morgan Stanley, and UBS are clients of the firm. Breuer was estimated to take home $4m in compensation in his first year back. https://dealbook.nytimes.com/2013/03/28/once-more-through-the-revolving-door-for-justices-breuer/ https://dealbook.nytimes.com/2013/03/28/once-more-through-th... https://www.nytimes.com/2015/07/07/business/dealbook/eric-holder-returns-to-covington-burling.html https://www.nytimes.com/2015/07/07/business/dealbook/eric-ho...
asdff 7y ago
So don't indict the corporation, indict the executives making these decisions. The U.S. loves to issue slap on the wrist fines, but actually going after specific individuals for white collared crime does not ever seem to happen in highly publicized cases.

deleted 7y ago

[deleted]

Yuval_Halevi 7y ago

Not only the U.S bank... China aswell they loan billions for poor countries they know they son't be able to bring the loands back once they don't pay the loan they take control of strategic building/places in those countries.

otoburb 7y ago
All such financing under the official umbrella of the Belt and Road Initiative.[1] I'm not so sure that China necessarily wants the capital assets under their direct control because at some point they want their investments (read: loans) to return the predictable cash flows that were promised. [1] https://en.wikipedia.org/wiki/Belt_and_Road_Initiative https://en.wikipedia.org/wiki/Belt_and_Road_Initiative
- kevin_thibedeau 7y ago
  They need supply lines for a possible future war. The loans paid off are just a bonus.
thablackbull 7y ago
Think about what you're saying, not only are you saying people hope deals fail (when deals that succeed benefit both parties), but also disparaging other countries as being so inept they can't spot a bad deal. The issues have been analyzed already: From, [1], > First and foremost is the realization that actual asset seizures are a very rare occurrence. [...] Instead, we find those debt renegotiations usually involve a more balanced outcome between lender and borrower, ranging from extensions of loan terms and repayment deadlines to explicit refinancing, or partial or even total debt forgiveness (see Figure 1). To address the Ski Lankan port issue, [2]: > Privatizing 70% of Hambantota to CM Ports for $1.1 billion was one way in which foreign exchange could be brought into the country, allowing a balance of payments crisis to be staved off. It was not an asset seizure. [1] https://rhg.com/research/new-data-on-the-debt-trap-question/ https://rhg.com/research/new-data-on-the-debt-trap-question/ [2] http://www.chinaafricarealstory.com/2019/07/did-china-seize-sri-lankas-hambantota.html http://www.chinaafricarealstory.com/2019/07/did-china-seize-...

otoburb 7y ago

Perhaps in the next few generations we will see similar headlines from other growing superpowers such as India and China. European and US bankers may chuckle good naturedly when this idea is mentioned, but they forget that the European banking sector was the genesis of most of our current modern-day banking system starting from the 17th century, and yet today they are eclipsed by the US banking sector, aided in no small part by the size and influence of the US economy. The tables can turn relatively quickly.

buboard 7y ago
US didnt exist when (european) banks began existing so i dont understand the analogy
- otoburb 7y ago
  The point I was trying to make was that upstarts can overtake experienced incumbants relatively quickly. Perhaps it's a self-evident point to an HN audience, but the (small) set of bankers that I've spoken to don't seem to believe that anybody else can credibly challenge their dominance.
  - smolder 7y ago
    What if US banking dominance was considered a national priority by the state, and they used some mix of military might, diplomacy, and spycraft to maintain it? It's an interesting possibility, anyway.
- __m 7y ago
  that just aids the analogy
  - buboard 7y ago
    india and china have banking since at least a century ago
Fiveplus 7y ago

priansh 7y ago

To be fair I think this article doesn't fairly assess whether this is good or bad. From my POV as a US citizen that has been living as an expat in different countries for the last few years, US banks globalizing is a net positive. I get convenience and speed with US banks that I get nowhere else -- i.e. the most online traditional bank in the UK is probably NatWest, which sucks because you have to get a physical card reader (like an actual machine that scans your debit card) in order to use the online banking most of the time. There's Monzo which is fully online but it sucks internationally, and adding funds is a pain. In China I had to jump through so many hoops to get an account and there are hundreds of restrictions in place; likely because I'm not a Chinese citizen. This is not a pain point for any immigrants I know in the US as it's fairly easy to move money around. I'm sure US banks in control is bad at a macroeconomic level, but for the average consumer and at a microeconomic level I think it could bring about a lot of positive changes. Then again my perspective is probably skewed as an American

spoovy 7y ago
Not sure what your definition of "traditional" is, but I don't recognise your description of UK banks at all. I joined Smile bank (Co-op) in 2001/2, and it was even then fully online and I never needed a bank card to manage my account. I've had accounts with several others since (inc. Barclays, Santander) and never needed a card with them either. The new generation like Starling, Monzo, Revolut et al are also incredibly convenient.
owenwil 7y ago
We have very different experiences of the global banking system, it seems. To me, US banks are archaic, slow, and backward—and the UK has to be in for close second so it isn't a fair comparison at all. I have lived/banked in New Zealand, Canada and The Netherlands, all of which are delightfully eons ahead of the US banks almost across the board. For example: - P2P or bill payments in Canada can be made to any email address and received within 60 minutes for free. - Splitting a bill or requesting payment in Netherlands is trivial, because the banks all allow you to generate a URL and send it to anyone for instant payment. - Transfers in NZ are realtime, instant, and validated before you send to ensure its the right person. You can also create accounts online with your government login. Touch to pay exists everywhere since at least 2010. Meanwhile in the US, checks exist and people go crazy when Apple Pay is accepted at a single chain store. I've never touched a check, and I hope I never need to—and the examples of hoops to jump through are likely because you're new! KYC regulations tend to relax over time, and it can be painful at first almost everywhere. The fintech revolution in Europe between N26, Revolut and the dizzying array of others is evidence we don't need, or want, US banks to do anything. It won't help.

gniv 7y ago

I read the article but there is no insight into why. Are the US banks better run? Is the regulatory environment post-crisis better in the US? Something else?

mola 7y ago
They operate like the mafia. Take that offer you can't refuse, then they own you. This, on a macroeconomic geopolitical level.
cm2187 7y ago
I can probably provide a few elements of response. First regulations and rates. Europe is actually several major jurisdictions: - Switzerland: they went through a near death experience during the financial crisis, with two huge banks relative to the size of the economy (UBS and Credit Suisse) that would have sunk the country if they failed. Their reaction was understandly to slash and shrink these giants to a less threatening size. UBS and Credit Suisse, once major global players and dominating asset management, are the shadow of what the once were. - UK: of the major UK banks, two went really bad during the crisis (RBS & HBOS) while the others big banks were mostly healthy. Those two banks were requested to massively deleverage (RBS pretty much exited investment banking). The other UK banks (HSBC, Barclays) were comparably healthier. There was a wish for tough regulations within the EU, however the state of European banks is generally pretty bad (particularly in Germany and Italy) which severely limited how tough european regulations could go before threatening the stability of the country. The UK didn't have that problem and therefore gold-pleated all EU regulations, requiring higher capital ratios, higher coco triggers, strict ring-fencing, massive fines, massive PPI penalties, more severe rules and timing from UK banks. It forced them to retreat from many businesses and to shrink. - rest of Europe. EU regulators generally are hostile to investment banking and the new regulations make many traditional IB activities uneconomical (in particular trading and financing trading transactions, as well as imposing various degree of ring-fencing of non IB activities). In addition, the EUR zone maintained low rates for a very long time (now going deeply negative), which adds further pressure on the profitability of EUR zone banks. In the US, regulations have been less aggressive, and the rate environment (high rates) less toxic to banks (the reason why low and negative rates are toxic to banks is that 1) the bank is a net receiver of interest rate, because it has interest paying assets and liabilities, but more assets than liabilities, and 2) because if rates turn negative, it may not be able to pass on negative rates to their depositors (negative rates on current accounts) and find themselves pocketing the difference between their assets and liabilities). However some European banks have been doing OK, like BNP Paribas or Santander. Their local regulators rather shielded them from tougher regulations. They are challenged nevertheless by the rates environment. I think the second reason is culture. US banks took losses upfront, slashed bad activities quickly and put the problems of 2008 behind them within a few years, in a typical aggressive, pragmatic american way. The culture in Europe is often to try to live with problems and hope that waiting will make them go away. Even aggressive european players like Barclays, Deutsche Bank or SocGen were very slow to react to the new environment, and were still downsizing and cutting activities long after US banks went back into bullish/expanding mode. In Italy the banks were never really restructured.

alessioalex 7y ago

How did they take over the world. We barely see one US bank here in Romania for example, and its coming just happened recently. With the economical crisis starting from US and NSA scandal(s), I'd never trust a US bank over a EU one.

fnord123 7y ago

The primary component in the success of US banks over European banks is that European banks struggle to do business in the US. This is because the jingoist zeal in the US puts up massive hurdles in the way of any foreign bank. In other words, Americans only buy from Americans. This is why "Twenty-five years ago, European banks charged into the U.S. They bought storied firms like Donaldson, Lufkin & Jenrette and Wasserstein Perella and dangled big paydays for rainmakers" - to convince Americans they were buying from other Americans. This allows American banks to build up a war chest domestically and keep the fight in Europe and the developing world - while there is no fight in the worlds largest economy. China is doing the same.

xxpor 7y ago
I'm really not sure what you're talking about. I cant go open a bank account at HSBC or TD today if I like. And ING was a thing before they I guess got bought out by Capitol One.
- fnord123 7y ago
  This is about investment banking. Not retail banking.
  - xxpor 7y ago
    Fair enough, I'm a lot less familiar with that side. But don't Deutsche Bank, UBS, and Credit Suisse have a large US presence?
    - fnord123 7y ago
      They are discussed in the article.
xxpor 7y ago
I'm also not sure having a completely foreign bank in your country (a foreign bank without a local subsidiary) is a good idea frankly. The Icesave crisis would never have happened here.

chiefalchemist 7y ago

Circa 2008 we were told there was too much power in too few hands. Then we went for eight major banks down to seven. Now those seven hands are expanding their reach? If they're too big to stop, then certainly they're still to big to fail. The queation is, will the world be willing to do the bail out next time.

jessaustin 7y ago
...will the world be willing to do the bail out next time? Are the relevant decision-makers still industry insiders and others who owe their wealth and position to the industry?

treydey 7y ago

What most people in this thread are talking about is retail banking. Retail banking in the US lags far behind the EU in terms in technology and security. However, retail banking is only accounts for about 25% of total profits when compared to commercial and investment banking. This is where US banks have consistently beaten the competition. Especially since Brexit which has destabilized London as the financial hub of Europe

qaq 7y ago
This pretty bold statement what is this based on ? As someone who just moved from US to Ireland I def. not getting that impression. I also highly doubt there are banks in EU that can match say Chase on security side.
- treydey 7y ago
  I should state that I'm only comparing the largest banks in terms of security. I have bank accounts both in the UK and the US. 2FA has only been recently (3-4 years?) introduced in the US and chip and pin has been in the EU for years now.
  - qaq 7y ago
    It's being more than that but regardless of how long it has being that way does not affect current state of things. Security is among other things a function of the SOC and the level of people running it.
- neffy 7y ago
  You´ll be finding out I suspect. No idea how it is in Ireland, but in most of the EU, digital transfer between banks and countries is completely seamless. I can transfer money to family members accounts in different banks in the same country in a couple of minutes, and to another country in a day or two. I haven´t used a physical cheque since I moved back from the US.
  - qaq 7y ago

rb808 7y ago

Just another industry where European companies are slowly dying while the Americans succeed.

lavezzi 7y ago
A lot of UK banks chose to retreat from investment banking to focus on retail banking. That's not dying, it's risk avoidance.
- rb808 7y ago
  OK dying might have been the wrong word, but I'd count retreating as similar to what I meant.

TheAlchemist 7y ago

That's a very misleading article. 'Took over the world' isn't exactly going from 42% to 52% of market share... Also quite funny is "Coming out of the crisis, U.S. banks quickly raised capital and shed risk" and the chart below showing that it's actually the European that cut the assets they are holding to 50%, while the US banks actually increased theirs... Granted, asset != risk, but it's a pretty good proxy here.

decasteve 7y ago

I thought this was going to be about J.P. Morgan and the World War I era. The article is not wrong but there are a number of interesting moments over the past hundred years that have shaped the world because of the financial system changes and its influences on politics.