Banks could be forced by law to focus on deposits

Banks could be forced to concentrate on deposits as a prerequisite for lending, claims HSBC’s chief executive.

Michael Geoghegan, chief executive of HSBC Group, forecasts that laws will be introduced which require banks to base lending on core deposits.

As a result he says that the reliance on wholesale funding will fall away.

He says: “Every single month in every single country around the world we look at our asset and liability ratio and we always take deposits first and then we lend.

“I think that’s something the banking industry is understanding more and more now.”

Geoghegan adds: “I suspect the dependency on wholesale funding will reduce, possibly because of legislation that will be introduced to ensure that banks do focus on core deposits as a prerequisite to lending.”