Page 107 - Monocle Quarterly Journal Vol 1 Issue 1 Q4

Banking: The Last Bastion of Democracy
BY DAVID BUCKHAM
Growing up, when people started voicing opinions about politics – a take on the Tricameral Parliament, perhaps – my father, whom I knew was in violent disagreement with them, would
just sit there quietly. He was of the opinion that good company shouldn’t discuss politics and religion at the dinner table. Traditionally, I’ve agreed; I haven’t taken a political stance or commented on politics, because I do not believe that private enterprise should be engaged in political discussion. I do, however, believe that working to simply earn a salary is not going to make anyone feel self-ful lled. We have to be here for more than that; for a greater meaning. And so, when we look at the lines blurring between politics and private enterprise, it forces me to take a stance, and look more deeply at the meaning of what I do. Questions are arising about whether or not banks should be extensions of the state; utilities or independent organisations. And the answer needs to go to the heart of why we are here. What is our purpose?
e State of Banking
Since the 2007/2008 Financial Crisis internationally, banks have suf- fered an enormous loss of independence and power. ey’re no longer extremely aggressive institutions, which traded derivatives o their own balance sheets, made enormous macro-economic bets and su ered sub- stantial losses on occasion. ey are now massively beholden to their governments and regulators to comply with increased capital rules which, ironically, increase their risk of failure.
Currently, they have great di culty attracting high-quality capital because their return on equity is much lower than it was before. Banks hold capital to such a high extent that their return on equity cannot possibly exceed single digit numbers. In fact, banks’ ROEs worldwide are at an all-time low at less than 10 percent. ey can’t pick those ROEs up because they can’t get leverage, as they have to hold so much capital;
“Banks hold capital to such a high extent that their return on equity cannot possibly exceed single digit numbers.”
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