EU's single banking market programme not fit for purpose says new Global Vision paper

In a paper for Global Vision, Professor Kent Matthews and Dr Simon Norton, both of the Cardiff Business School, argue that the EU's Single Banking Market Programme (SBMP) has failed to produce the desired results and conclude that the programme is virtually meaningless for the UK banking industry.

In a paper for Global Vision, Professor Kent Matthews and Dr Simon Norton, both of the Cardiff Business School, argue that the EU's Single Banking Market Programme (SBMP) has failed to produce the desired results and conclude that the programme is virtually meaningless for the UK banking industry. 

Representing the vanguard of the Single Market Programme for services, the SBMP was designed to foster competition and greater efficiency in the EU banking market through the principles of limited harmonisation, national treatment, and mutual recognition. 

Whilst Matthews and Norton admit that the programme has improved efficiency through greater consolidation and merger within continental Europe, after nearly 20 years, the EU is still some distance from its goal. Improved competition has proved to be more elusive because of the existence of informal barriers to entry such as language, culture, brand name identification and the difficulty in acquiring a branch network because of unofficial government opposition.
 
The UK banking system - which operates in a competitive environment, with a fairly light regulatory touch and in the context of a shareholder value maximisation model of bank management - enables UK banks to adjust relatively quickly to changes in global conditions as well as to respond to external non-EU originating threats.  The UK banking sector also facilitates and encourages internal consolidation, and welcomes the competitive pressure presented by external non-domestic threats.

In contrast, continental European systems are predominantly ones of stakeholder value maximisation, and are fragmented, with small-scale highly concentrated networks bedevilled by excess capacity and lack of competition.

Matthews and Norton conclude that it would be a hindrance only if the EU attempted to harmonise financial regulation around the continental model of stakeholder value.

Professor Matthews stated,

"The result of the SBM has been to deregulate individual country banking markets, which can only be positive for bank efficiency. However, it has failed to produce a level playing field.  Furthermore, deregulation is a global trend that would have occurred independently of the SBM programme.

In short, the Single Banking Market Programme is not fit for purpose." 

He added,

"The UK banking system already works under a competitive environment with a relatively light regulatory touch.  Thus there is very little advantage - if any - for the UK from the SBM programme."

Global Vision is a new campaign group backed by economists and business leaders that argues for a looser British relationship with the EU, based on free trade and mutually beneficial cooperation, whilst opting out of economic and political union. Global Vision believes that this is the right relationship for Britain in the 21st century's rapidly changing world.