Another week, another banking scandal. More tokenistic contrition from bankers, feigned outrage from politicians and protestations of ignorance from regulators. Feel familiar anyone?
But this time its different. The revelation that Barclays, and pretty much every other global bank, has been systematically rigging interest rates to bolster their profits has changed British banking for good.
Most importantly, it has broken the widespread consumer apathy that characterised our retail banking market.
Since the financial crisis there has been a steady flow of consumers out of the big 5 and into mutuals such as building societies, the Cooperative and credit unions – 2.8 million all in all.
But in the wake of the Libor scandal this trend has increased exponentially with Nationwide reporting an 85 per cent week-on-week increase in new account enquiries, the Co-operative 25 per cent and some of the smaller ethical banks and credit unions an increase of over 200 per cent.
Significantly, the other big banks have not reported a similar surge in footfall. In fact, customers are starting to leave not just Barclays but all the big banks in favour of mutual and ethical providers.
A recent YouGov poll found that 83 per cent of respondents thought "the other banks are just as bad as Barclays". People realise the problems in our banking system are systemic and so they are moving to a meaningful alternative.
There are rumours that both RBS and Barclays have been called into the FSA to discuss the number of depositors moving. People are beginning to move their money in significant numbers. That hurts the big banks which are increasingly dependent on deposits for funding as the markets dry up in the shadow of the storm in Europe.
The Libor scandal has also changed the political landscape around banking reform. This banking scandal is swiftly becoming a political crisis as the Bank of England, senior regulators and politicians from both sides of the House become embroiled.
No one should be surprised that greed and self-interest in the City has had a corrosive effect in Westminster. The sheer concentration of wealth and power in such a small number of institutions means that the establishment must do whatever it takes to keep the gravy train going – irrespective of how destructive the banks' behaviour has become. And not least of all because we rely on the banks to keep our speculative housing market inflating and thus home-owning voters feeling wealthy, despite their stagnating real incomes.
The defence mechanism on both sides of the House has been mindless mud slinging and political point scoring. Last week both parties have tried to pull back from these playground spats as it becomes apparent that they are only further eroding any remaining trust the public have in politicians to fix this problem.
This is the background against which Miliband’s speech earlier this week must be judged. In his description of "stewardship banking", Miliband cited "a banking system where no one bank feels either too big to fail or too powerful to be challenged. But where all banks face real competition and customers have proper choices."
His solution? To force banks sell off branches to create more "challenger" banks. Miliband is right to argue that there must be more competition in our retail banking sector as more competition means more choice for consumers – but it must be meaningful choice. Banks continue to close branches in low-income areas because they’re costly to run, their main value being as a sales floor for more complicated and profitable products. The only "challengers" able to buy up branches will be the ilk to Tesco Bank, or more of the same.
The traditional banking model is not working for swathes of our society. Not only small businesses but also entire communities and geographical areas, which are becoming credit deserts.
These can be profitable markets to serve. It is this market opportunity which high cost and payday lenders, which are becoming all too ubiquitous on our high streets, are taking advantage of. But there is another way.
The UK has a thriving sector of local and mutual financial institutions, from the big building societies down to local community finance institutions and credit unions. These institutions have already proved that there is a different way of doing things, and don’t need public subsidies that run into hundreds of billions.
Reforms must be focused on supporting and growing the socially responsible financial institutions already out there and already working. It must also enable consumers to drive change by making it easier to switch and forcing the banks to be fully transparent in terms of both their lending and investments and the way they market their products.
Politicians, local authorities, business and the third sector can all play an active role in this. Leading by example and moving their own accounts in order to strengthen socially responsible financial institutions as well as build trust and confidence in them.
The public have woken up to what a better banking system looks like. It may not be radical but it could be revolutionary Now its time for our politicians to do the same.