Share
Housing bubble not down to big banks
Some people argue that there is too much power concentrated in the hands of too few players in Britain’s banking sector.
They say Britain’s banking system is uniquely concentrated and that the housing bubble is down to a monopoly situation in the industry. They are wrong.
Using the World Bank’s measure of the assets of the largest three banks as a share of total bank assets, then the top three have a 60% share of the banking system.
This is similar to the European average, above the US and Japan, but well below the highest countries. For example, the top three banks in Belgium, Ireland and Sweden have a 90% share.
Australia has similar levels of banking concentration to us yet avoided the iceberg we hit thanks to prompt action by its central bank.
That’s why the disposals forced on some of Britain’s state-backed banks will be meaningless in the long term. They are too small to make much of a dent in UK banking concentration, and that wasn’t what got us into this mess.
I am looking forward to seeing Cheltenham & Gloucester and TSB as standalone businesses and it’ll be like Life on Mars when Williams & Glyn’s returns to the high street.
But had these three been independent before the bubble burst it wouldn’t have made any difference. Only gently rising interest rates could have slowed down the housing boom.
The concentration of Britain’s banks doesn’t have any impact on credit availability or interest rates.
PAUL HUNT, MANAGING DIRECTOR, PHOEBUS SOFTWARE
If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat
Readers' comments (1)
Anonymous | 20 Jan 2010 12:57 pm
"Housing Bubble Not Down To Big Banks"
There are lies, there are outrageous lies, and there are statistics." ...
It all depends on what you mean by "not down to big banks".
The bubble was caused by the greed of the banks and arguably the subsequent greed of the borrowers. The banks (big and small) allowed easy access to mortgage funds, far too easy in most cases and the availability of mortgage funds fuelled the bubble so to say that the housing bubble was not down to big banks is somewhat disingenuous
The other thing to point out is that a large majority of the finance houses who were supplying mortgage funds (centralised lenders) were in fact funded by the "big banks" so once again, we see their involvement.
Unsuitable or offensive? Report this comment