Just how many banks do we need?

Creating more banks is not necessarily the answer.

According to Greg Clark, financial secretary to the Treasury, the current number of banks in the UK is unacceptable. Says Clark: “we need more banks.” The co-founder of Metro Bank, Anthony Thomson, is singing from the same song sheet. Speaking at a conference last week, Thomson forecast that we will see between five and 15 new banks over the next three to five years. Let’s get real. There are immense barriers to setting up a new bank – as indeed there should be. If we witness two or three new banks over the next three years up and running, that would be a result.

Love them or loathe them, Tesco is one of the world’s most successful retailers, if you forgive it their disastrous foray into the US and the millions lost on its Fresh & Easy project. Even Tesco has found the launch of a current account product in the UK a major challenge. For the past year or more, Tesco has been working on rolling out a current account. We are still waiting to see what the Tesco Bank current account will look like. And this from a banking unit with deep pockets and led by Benny Higgins, arguably one of the leading retail bankers of his generation.

There are currently 17 separate providers of current accounts in the UK. The Tesco Bank launch, slated for the third quarter, will take us to 18. Additional competition is also coming from Bank of Ireland; it is to run three current accounts on behalf of The Post Office. The Post Office is currently trialing its new current account products across 29 branches across Essex and East Anglia ahead of a nationwide launch.

Within government, there seems to be a belief that making it easier for new banks to launch will somehow improve standards as a result of an increase in competition. What the country certainly could with is more responsible banks….an increase in innovation, perhaps. More transparent pricing would help for a start.

If the banks are really to serve the economy, the government has no option but to ensure that they are well -capitalised banks: by its nature, the need to be well capitalised will make it more difficult for new entrants to launch. The argument that we simply need more banks seems to this writer to be not proven.

 

Douglas Blakey is the editor of Retail Banker International

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The problems with ending encryption to fight terrorism

Forcing tech firms to create a "backdoor" to access messages would be a gift to cyber-hackers.

The UK has endured its worst terrorist atrocity since 7 July 2005 and the threat level has been raised to "critical" for the first time in a decade. Though election campaigning has been suspended, the debate over potential new powers has already begun.

Today's Sun reports that the Conservatives will seek to force technology companies to hand over encrypted messages to the police and security services. The new Technical Capability Notices were proposed by Amber Rudd following the Westminster terrorist attack and a month-long consultation closed last week. A Tory minister told the Sun: "We will do this as soon as we can after the election, as long as we get back in. The level of threat clearly proves there is no more time to waste now. The social media companies have been laughing in our faces for too long."

Put that way, the plan sounds reasonable (orders would be approved by the home secretary and a senior judge). But there are irrefutable problems. Encryption means tech firms such as WhatsApp and Apple can't simply "hand over" suspect messages - they can't access them at all. The technology is designed precisely so that conversations are genuinely private (unless a suspect's device is obtained or hacked into). Were companies to create an encryption "backdoor", as the government proposes, they would also create new opportunities for criminals and cyberhackers (as in the case of the recent NHS attack).

Ian Levy, the technical director of the National Cyber Security, told the New Statesman's Will Dunn earlier this year: "Nobody in this organisation or our parent organisation will ever ask for a 'back door' in a large-scale encryption system, because it's dumb."

But there is a more profound problem: once created, a technology cannot be uninvented. Should large tech firms end encryption, terrorists will merely turn to other, lesser-known platforms. The only means of barring UK citizens from using the service would be a Chinese-style "great firewall", cutting Britain off from the rest of the internet. In 2015, before entering the cabinet, Brexit Secretary David Davis warned of ending encryption: "Such a move would have had devastating consequences for all financial transactions and online commerce, not to mention the security of all personal data. Its consequences for the City do not bear thinking about."

Labour's manifesto pledged to "provide our security agencies with the resources and the powers they need to protect our country and keep us all safe." But added: "We will also ensure that such powers do not weaken our individual rights or civil liberties". The Liberal Democrats have vowed to "oppose Conservative attempts to undermine encryption."

But with a large Conservative majority inevitable, according to polls, ministers will be confident of winning parliamentary support for the plan. Only a rebellion led by Davis-esque liberals is likely to stop them.

George Eaton is political editor of the New Statesman.

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