The CMA's inquiry into banking is coming to an end.
The challenger banks have written, Letter from 8 challenger banks, to say the main problem is their disadvantaged funding, via a regulatory formula that means they have to set aside much more capital than a large bank, something they thing is tied up in the Too Big to Fail Category. They say
In reply, Letter from Professor Alasdair Smith to 8 challenger banks, the CMA say two things.
First, "it is an important provisional finding of the CMA investigation that the funding advantages of the incumbent banks derive in large part from the inertia in the customer base. I believe that the remedies package we have put forward will create a more fluid market"
But second, in response to the regulation question they delegate it to others.
"In our view the issue should be taken forward by the bodies which have primary responsibility for the safety and soundness of the banking system"
and
" It would be in no one’s interests to create ambiguity about regulatory responsibility in this area in particular given the international context in which reform will be required. This is also the case for addressing the ‘Too Big To Fail’ issues you raise, which are being tackled by the Bank of England and the Financial Stability Board’s reforms to the resolution regime for global systemically important banks."
I had hoped the CMA inquiry was going to be a chance to address the Too Big To Fail issue. It would seem not.
(See also this exchange of letters with Sir John Vickers, Sir John Vickers (11.7.16) CMA response to Sir John Vickers (11.7.16)).
