A Single Market in Banking

Abstract

I would like to concentrate on three aspects of the effects of the Single Market on banking:

• 1. Effect on major corporate customers. To a large extent for the multinationals, there is already a single market in banking, not only in the EEC but in the world. The marketing of banking, treasury, capital markets and securities products and the blending of different instruments is already on a global basis. Therefore in one sense a dramatic change can not be expected from 1992 and it is common to hear bankers taking this line. However, I suspect that the changes may well be greater than we currently imagine — and not always to the benefit of the banker:

  • (a) We have already experienced the move away from straight banking products to securitisation and although this has undoubtedly experienced a slight setback following the October 1987 crash, it is difficult to imagine that this is not a long-term sea change. An EEC single market in securities will give a very considerable fillip to this. We would all admit that the securities industries of Europe are at present very much less homogeneous than the international banking ones, both in respect of currency and instruments. The disappearance of all controls on capital movements will give a very considerable stimulus to our inventive national securities markets and I believe that we will see further substantial increase in the securitisation, affecting not only the multinationals but also increasingly the middle corporates. That is not to say that the banks are not likely also to be highly inventive and to be able to offer a far wider range of banking products and currencies and multi-option facilities, but the rates, which are already fine, are likely to be finer.

  • (b) While equally I doubt if any of us expect to see the disappearance of national currencies by 1992, it is difficult to believe that we will not see an increasing convergence both within the EMS and in increasing use of the ECU. Equally in time we would expect to see increasingly convergence of interest rates. Given the amount of time that most corporate customers expect to spend on minimisation of interest and exchange risk and the importance of these products for banking profits, it is a fair assumption that the corporate customer is going over time to see greater stability and the banks less opportunity for profit in these markets.

  • (c) What I find more difficult to envisage is the effect on the use of eurocurrency as opposed to national lending and deposit instruments. Given the fact that the former to a large extent arose as a result of imperfections in national markets, the disappearance of such imperfections can be expected to have a reverse movement. But here again it is certain that that will not happen overnight.