Several commentators have argued that the timeline for reform, as proposed by the Vickers Commission, is too extended. While the economic news across Europe remains febrile to say the least, 2019 feels a very long time away.
Assuming the Coalition Government sticks to its promises and introduces early legislation to give solidity to the Vickers proposals, might there be some novel ways in which reluctant bank bosses could be encouraged to move faster.
The response to proposals for ringfenced retail banking has been almost unanimously positive. Why should not bank customers bring this model about, sooner rather than later, by voting with their feet?
Building Societies already provide a model close to ringfenced retail banking. So do the bigger supermarkets. We are not obliged to keep our accounts with Barclays, HSBC, Lloyds Group or any other bank that continues to operate the universal banking model.
Surveys have shown that the UK public are very reluctant to switch their bank accounts. We worry about direct debits going astray, and about the hassle involved. Vickers has made suggestions on how switching could be made easier.
But even in advance of such measures, why not a Government-led campaign to encourage us all to switch away from the riskiest universal banks, towards existing providers closer to the ringfenced model? If the FSA were to publish, at suitable intervals, a simple list of which banks are devoting the most staff resource to indulging in the riskier end of investment banking, this would give a strong incentive to move our money to a safer haven.
It would not take long for trends in switching to become apparent. We could have a monthly update, tacked on to the televised Lottery results, through which we could keep score. The growing public anger at the behaviour of the banks would be partially assuaged by watching the results of a race in which we, as bank customers, are not wholly powerless. Barclays custom shrinks again, Nationwide forges ahead, and on it would go, month by month.
Exhortation from Government about ‘safer banking’ is urgently needed. It is the contemporary equivalent to adverts for safer sex, with individual behaviour change needed in the national interest. It is hard to see how anti-competition laws would be breached. Even were the Government to offer, say, a £20 voucher to every switcher, this would remain the exercise of individual choice, merely better informed than in the past.
The ‘nudge unit’ at Number 10 needs to be put to work. Behavioural change over our banking habits should take priority over the other worthy ideas. It cannot be an impossible challenge.