The Labour leader, Ed Miliband, has come out today and attacked Britain's banks for being too big (story here). He argues that too much power has been concentrated in the hands of a few banks and, as a result, these big banks have been poor servants of the real economy for decades. Miliband wants to place a cap on the market share that any one bank can enjoy.
British banking hasn't always been dominated by big banks. In 1900, banking in the UK was competitive, with the top five banks having less than 25 per cent of the deposit market. By 1921, however, the top five banks had close to 80 per cent of the deposit market. What happened? Between 1900 and 1921, there was a series of mergers which resulted in banking behemoths. Fabio Braggion, Lyndon Moore and Narly Dwarkasing have a nice paper which looks at this merger movement - click here.
The big question, however, is have big British banks failed the real economy for the past century? I feel a new book coming on!!
