“Of all the many ways of organizing banking, the worst is the one we have today.” (Mervyn King, 2010)
Today I shall not talk about the short-term challenges facing banks, such as the evolution of interest rates or taxes, the economic situation, the legacy of unproductive assets, or the changes in regulatory requirements. I will try to find out whether, within the technology-generated changes, there is one that is “disruptive”, in other words one that can produce a radical change in the banking activity of such importance that, as is happening with other industries, it forces private banks to transform themselves into companies very different from those that exist today.
Neither will I deal today with the effects that “Fintech” can have on banking, because, although they are also “disruptive”, they do not question the current banking system, which allows private banks to create money. This privilege of being able to create money is the source of the current system’s fragility and, as long as it remains unchanged, it will still be necessary to apply exceptional regulatory and budgetary remedies to avoid the disastrous consequences of banking crises.
Download the paper The Future of Banking: SecureMoney and Deregulation of the Financial System for further reading.