Retail banking
(Mis-)selling for return on equity
in The end of the experiment?
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Investment banks compete for funding in capital markets and those within a universal bank generally benefit from a higher credit ratings and excess liquidity from retail banking operations. A more imaginative public utility approach to banking needs to recognise that mis-selling is the nearly inevitable result of ambitious return on equity (RoE) targets. Pressure to reduce the costs of the branch network, while increasing the revenue generated by each branch are key elements of the retail bank business model. Retail banking is different from chain retailing. Banking requires a back office to process and service products and a high street front office to make sales. The declining productive economy limits the possibilities of small and medium size enterprises (SMEs) lending, while the retail bank business model emphasises selling over relationships, especially with SME customers.

The end of the experiment?

From competition to the foundational economy

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