33 ms·

Unsurprisingly, highly regulated sectors like banking where entering is extremely hard display cartel like behaviors. There is no incentive coming from the comp

by brmgb 3y ago

Unsurprisingly, highly regulated sectors like banking where entering is extremely hard display cartel like behaviors. There is no incentive coming from the competition so why would anyone lower the net interest margin. In this context, I think a windfall tax somehow makes sense. Then again, I'm pretty sure it's going to be misused by the government. I would much rather see regulation forcing banks to raise interest rate on deposits but well at least this goes somewhat in the right direction.

nequo 3y ago
> I would much rather see regulation forcing banks to raise interest rate on deposits Regulation that increases competition would be even better. It seems like that would be the underlying problem.
- johngladtj 3y ago
  Regulation is what prevents competition so...
  - nequo 3y ago
    That is fairly shortsighted. Regulation also prevents customers from being defrauded. Beyond that, antitrust action is regulation but it increases competition.
- l33t7332273 3y ago
  But what does regulation that makes it easier to start a bank look like? It seems hard to do without reducing requirements for cash on hand which, which can be a disaster.
  - gruez 3y ago
    > But what does regulation that makes it easier to start a bank look like? https://en.wikipedia.org/wiki/Narrow_banking https://en.wikipedia.org/wiki/Narrow_banking
    - l33t7332273 3y ago
      I have to wonder how competitive these banks are. Without being able to invest in anything other than government bonds, they lose out on a lot of money that bigger banks get.
- brmgb 3y ago
  I am not sure myself. The past two decades have shown that banking is a sector which needs to be tightly regulated and bankers can never be trusted to not do utterly stupid things if there is even the slighest hint of profits. Honestly, I would be fine with the banking sector being nationalised at this point at least for the retail part. We are already bailing out banks when they fail so let's be coherent. It's entirely technologically possible for central banks to take over retail banking at this point and Brazil has demonstrated nicely that taking over payment processing would be a net improvement for everyone. Honestly, I don't understand why we haven't done it already but I suppose entranched interests are partly to blame.
  - userabchn 3y ago
    I think the more coherent thing to do would be to treat banks like other industries and not bail them out. Customers would then place their money in safer banks, discouraging banks from engaging in risky behaviour.
    - brmgb 3y ago
      Sure, I'm convinced that no one is going to riot when they get their their lifetime savings casually wiped out. I bet on them fully understanding that they just made a terrible decision when they chose the wrong bank, it's entirely their fault and that it is what's best for the economy as a whole.
  - imtringued 3y ago
    If you think about running your own bank, guess what, the entire business model is inherently fragile. The payment services banks offer do not pay for themselves. People expect bank accounts with zero fees. This means that the payment infrastructure has to be cross subsidized from something unrelated to the payment infrastructure and that in turn means that the availability of the payment infrastructure is dependent on the actual cash cow of the bank. Lending to borrowers and diverting interest means your payment infrastructure is now tied to the creditworthiness of debtors. Even worse, what if the margins are so thin the bank does investment banking instead? Now your payment infrastructure is tied to the erratic stock market! The obvious solution is to stop the cross subsidy and start demanding that people pay for payment services separately. This doesn't guarantee proper and competent management. It merely makes it possible in the first place. Of course the problem is that various consumer protection agencies lobby for legislation that appears on its face to protect consumers but only by making the entire system less stable.
- bastardoperator 3y ago
  What kind of competition would you like to see in the banking sector? All banks look exactly the same from this vantage point...
  - gretch 3y ago
    Banks compete on customer service, atm networks and fees, locations, app and technology infrastructure, among other things.
  - all2 3y ago
    The fractional reserve system and its associated fiat currencies will always drive "banking" as a service in the same direction: loans that become increasingly predatory. The root problem isn't the banks, per se, rather the problem is the underlying system that modern banks are incentivized by. Remove usury (loans at a profit) and base the national currency on something (anything is better than nothing, but the Socialists in Germany used production, and before the 1970s the US used gold) and I think you'd see that banks as a business would radically change.
    - imtringued 3y ago
      They wouldn't because you literally changed nothing. The USD is on a failed gold standard. We are still living the aftermath of a failed gold standard. Also, in theory a gold standard does absolutely nothing. All the theoretical benefits you think that come from a gold standard can be implemented today. The only difference is that a gold standard collapses when you go out of its modus operandi. The obvious problem is the concept that money from this period should be valid in any future period with no decay or costs associated with holding the money. This leads to a compression of the economy along the time dimension. It manipulates time preferences because money can be transported into the future at no cost which artificially subsidises low time preferences. The market no longer properly integrates the time preferences of all participants and this then leads to people who met their needs to assert their low time preference over people with unmet needs who by mere necessity, and not because of psychological or personal failure as many claim, have a higher time preference. A recession can be viewed as shifting production into the future even as people have unmet needs in the present. The only known solution is to get rid of cash or to introduce some sort of time bound money like demurrage currencies. A demurrage currency cannot be carried into the future at no cost. This binds the currency to a specific time period which in turn means that people with excess money can no longer impose their patience onto people who are impatient by circumstance.
toomuchtodo 3y ago
I trust governments more than banks and the people who run banks. More regulation is welcome, and occasionally, one off policy hacks are needed vs slowly tightening the regulatory regime (which gives banks time to adapt and avoid or evade; not good!). Move fast and regulate systemic systems.
gruez 3y ago
>Unsurprisingly, highly regulated sectors like banking where entering is extremely hard display cartel like behaviors. There is no incentive coming from the competition so why would anyone lower the net interest margin. In this context, I think a windfall tax somehow makes sense. Then I'm not sure what the banking market is like in Italy, but in the US it's trivially easy to find banks that pay close to or above fed daily funds rates[1]. Sure, your average main st or wall st bank might still be paying 0.1% interest, but there isn't exactly lack of competition either. [1] first result on google: https://www.bankrate.com/banking/savings/best-high-yield-interests-savings-accounts/ https://www.bankrate.com/banking/savings/best-high-yield-int...
- brmgb 3y ago
  > I'm not sure what the banking market is like in Italy Significantly less competitive than in the USA.

by brmgb 3y ago

nequo 3y ago

> I would much rather see regulation forcing banks to raise interest rate on deposits Regulation that increases competition would be even better. It seems like that would be the underlying problem.

johngladtj 3y ago
Regulation is what prevents competition so...
- nequo 3y ago
  That is fairly shortsighted. Regulation also prevents customers from being defrauded. Beyond that, antitrust action is regulation but it increases competition.
l33t7332273 3y ago
But what does regulation that makes it easier to start a bank look like? It seems hard to do without reducing requirements for cash on hand which, which can be a disaster.
- gruez 3y ago
  > But what does regulation that makes it easier to start a bank look like? https://en.wikipedia.org/wiki/Narrow_banking https://en.wikipedia.org/wiki/Narrow_banking
  - l33t7332273 3y ago
    I have to wonder how competitive these banks are. Without being able to invest in anything other than government bonds, they lose out on a lot of money that bigger banks get.
brmgb 3y ago
I am not sure myself. The past two decades have shown that banking is a sector which needs to be tightly regulated and bankers can never be trusted to not do utterly stupid things if there is even the slighest hint of profits. Honestly, I would be fine with the banking sector being nationalised at this point at least for the retail part. We are already bailing out banks when they fail so let's be coherent. It's entirely technologically possible for central banks to take over retail banking at this point and Brazil has demonstrated nicely that taking over payment processing would be a net improvement for everyone. Honestly, I don't understand why we haven't done it already but I suppose entranched interests are partly to blame.
- userabchn 3y ago
  I think the more coherent thing to do would be to treat banks like other industries and not bail them out. Customers would then place their money in safer banks, discouraging banks from engaging in risky behaviour.
  - brmgb 3y ago
    Sure, I'm convinced that no one is going to riot when they get their their lifetime savings casually wiped out. I bet on them fully understanding that they just made a terrible decision when they chose the wrong bank, it's entirely their fault and that it is what's best for the economy as a whole.
- imtringued 3y ago
  If you think about running your own bank, guess what, the entire business model is inherently fragile. The payment services banks offer do not pay for themselves. People expect bank accounts with zero fees. This means that the payment infrastructure has to be cross subsidized from something unrelated to the payment infrastructure and that in turn means that the availability of the payment infrastructure is dependent on the actual cash cow of the bank. Lending to borrowers and diverting interest means your payment infrastructure is now tied to the creditworthiness of debtors. Even worse, what if the margins are so thin the bank does investment banking instead? Now your payment infrastructure is tied to the erratic stock market! The obvious solution is to stop the cross subsidy and start demanding that people pay for payment services separately. This doesn't guarantee proper and competent management. It merely makes it possible in the first place. Of course the problem is that various consumer protection agencies lobby for legislation that appears on its face to protect consumers but only by making the entire system less stable.
bastardoperator 3y ago
What kind of competition would you like to see in the banking sector? All banks look exactly the same from this vantage point...
- gretch 3y ago
  Banks compete on customer service, atm networks and fees, locations, app and technology infrastructure, among other things.
- all2 3y ago
  The fractional reserve system and its associated fiat currencies will always drive "banking" as a service in the same direction: loans that become increasingly predatory. The root problem isn't the banks, per se, rather the problem is the underlying system that modern banks are incentivized by. Remove usury (loans at a profit) and base the national currency on something (anything is better than nothing, but the Socialists in Germany used production, and before the 1970s the US used gold) and I think you'd see that banks as a business would radically change.
  - imtringued 3y ago
    They wouldn't because you literally changed nothing. The USD is on a failed gold standard. We are still living the aftermath of a failed gold standard. Also, in theory a gold standard does absolutely nothing. All the theoretical benefits you think that come from a gold standard can be implemented today. The only difference is that a gold standard collapses when you go out of its modus operandi. The obvious problem is the concept that money from this period should be valid in any future period with no decay or costs associated with holding the money. This leads to a compression of the economy along the time dimension. It manipulates time preferences because money can be transported into the future at no cost which artificially subsidises low time preferences. The market no longer properly integrates the time preferences of all participants and this then leads to people who met their needs to assert their low time preference over people with unmet needs who by mere necessity, and not because of psychological or personal failure as many claim, have a higher time preference. A recession can be viewed as shifting production into the future even as people have unmet needs in the present. The only known solution is to get rid of cash or to introduce some sort of time bound money like demurrage currencies. A demurrage currency cannot be carried into the future at no cost. This binds the currency to a specific time period which in turn means that people with excess money can no longer impose their patience onto people who are impatient by circumstance.

toomuchtodo 3y ago

I trust governments more than banks and the people who run banks. More regulation is welcome, and occasionally, one off policy hacks are needed vs slowly tightening the regulatory regime (which gives banks time to adapt and avoid or evade; not good!). Move fast and regulate systemic systems.

gruez 3y ago

>Unsurprisingly, highly regulated sectors like banking where entering is extremely hard display cartel like behaviors. There is no incentive coming from the competition so why would anyone lower the net interest margin. In this context, I think a windfall tax somehow makes sense. Then I'm not sure what the banking market is like in Italy, but in the US it's trivially easy to find banks that pay close to or above fed daily funds rates[1]. Sure, your average main st or wall st bank might still be paying 0.1% interest, but there isn't exactly lack of competition either. [1] first result on google: https://www.bankrate.com/banking/savings/best-high-yield-interests-savings-accounts/ https://www.bankrate.com/banking/savings/best-high-yield-int...

brmgb 3y ago
> I'm not sure what the banking market is like in Italy Significantly less competitive than in the USA.