Speculation is mounting that the Eurozone’s Euro 1.85 billion stimulus package allowing the ECB to purchase Eurozone member banks bonds in the order of Euro 95 billion per month will soon face demands for tapering and winding down the programme in the face of rising inflation as the COVID recovery starts to kick in. As in all things European this will likely cause a political backlash as the bond purchases are largely from the club med grouping of European states leaning on the back of the more creditworthy northern states such as Holland and Germany. A quarterly meeting of the ECB’s governing council takes place on Thursday 10th June and there is a possibility that demands from some of the more hawkish Northern states could lead to a surprise tightening of liquidity as early as next week. The smart money will however follow a further easing followed by a tightening in the September quarter. Any tightening now would seriously impact the ability of Spanish and Italian banks in particular in assisting the recovery in those countries. Yet again this will probably be a kick the can down the road and hope for the best exercise and will continue to be so until either the German’s agree to total debt consolidation or alternatively the whole flawed structure falls to bits. Best not to be close to it when it does
If you want to know why the UK decided to leave the EU and why Switzerland pulled out of negotiations with an EU framework agreement only last week then this story will tell you what it is all about. Naked protectionism. In the real world business clients want to get their services from the best people possible under the best laws, convenient time zones, best legal frameworks, most recognized language, whatever. It could be New York, London, Singapore, Hong Kong. It doesn’t matter. The EU however believes that the most important thing is where the people sit and it has to be in continental Europe. The world is a big place and the EU is becoming an increasingly small part of it. London will succeed on its own terms and should forget equivalence. The EU is in a hostile frame of mind. When JP Morgan tried to move 15 London traders to Paris recently half of them resigned on the spot. The Euros are coming up. Let’s see who can score the most own goals.
A group of 19 newcomer banks have written to the Competition and Markets Authority (CMA) amid fears that the control of the Open Banking Initiative which is intended to make switching accounts easier is being hijacked by the nine largest banking institutions in the UK. This is ahead of an important meeting taking place today. The newcomers mostly Fintechs take the view that their voice should be heard and taken into account saying that giving the ultimate say to the larger houses would be like “putting foxes in charge of a henhouse”. Who can blame them innovation is always a force for good and the larger banks have an appalling track record at almost every level of service provision as well as forgetting completely about where their core business is. I wish the Fintechs well they have enough problems with their business models, zero interest rates and over zealous regulation without their major competitors trying to unfairly control them. Instead of plotting to control the market they should instead try and improve their dismal service and focus on their customers needs. The SME and middle UK market in the whole of Europe has lost considerable expertise on the lending side. Innovation can only help matters. Getting the basics right rather than trying to strangle competition might be a good starting place.
Howard Tolman is a well-known banker, technologist and entrepreneur in London,
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