The Changing Nature of Banking and Why It Matters

Abstract

Banks have been a ubiquitous feature of almost all successful civilisations. When asked what they understand a bank to be, most people describe an institution that accepts deposits and makes loans -- what we generally understand as a ‘retail’ bank. However, the banks at the centre of our global financial system are utterly different. Entities such as JP Morgan Chase, UBS or Deutsche Bank do a great deal more than take deposits and grant loans.Banks have changed from a relatively local institution working in the client’s interests, to a far more complex organisation that is intent on maximising profits and the number of products it can sell to customers. The implications of these changes are profound, especially if we think of the economic consequences of the allocation of much of our most talented human capital away from high value-added roles in the real economy to the banking sector. This chapter will seek to explore the full dimensions of this transformation and analyse why it matters for how we think about banks today, and the regulations we pass to govern them.