A comparative analysis of the US and EU retail banking markets - Wsbi

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6.5 Issues of competition in retail banking 143 6.5.1 United States 143 6.5.2 Europe 145 6.5.3 Comparison 147 Abbreviations 149 Annexes 151 Annex 1: Gauging customer satisfaction via the use of an index 151 Annex 2: Statistical appendix 152 Annex 3: Bibliography 159 10
FOREWORD The temptation of looking over the neighbour’s fence when tending to one’s garden is hard to resist for any keen gardener, especially when that neighbour is a successful enthusiast in that pursuit. And so it is in Europe in the context of financial services policy: as so many commentators define their vision of what the European Union should aim to achieve, they cannot resist the temptation of mentioning what their trans-Atlantic neighbour – the US – has achieved in its own garden that is the US financial services market. And since the US financial services market has played, and continues to play, no small part in the economic success of the US, it is natural for EU policy-makers and the industry alike to want to identify best practices in order to understand what has allowed it to thrive so. Cynics might respond that the grass is always greener on the other side; that certain Atlanticist commentators are glossing over what works less well in the US to give an overly positive shine on the country’s achievements. And indeed sceptics could point out that the EU is not the US, that 25 nations deciding together on a common agenda cannot expect to replicate what one country has achieved for itself. Realists might hold the view that the US is an amalgam of things that work well, and things that work less well, to which pragmatists might respond that before we decide whether the EU should be more like the US, we need to identify and consider exactly what things it does well, and what it does less well. With the analysis that follows we hope not so much to demystify as to clarify and to inform. To respond with facts to those that state that the US banking system (or specific parts of it, such as the performance of its actors or the way that they are regulated) is either better or worse than the EU system. Thus, we carry out our analysis of the US banking markets alongside a comparable analysis of the EU and attempt to draw some conclusions on what is similar about the two markets and on how they differ. We also choose to take on a humbler task than the mammoth undertaking that would represent a complete analysis of the US and European financial services market. Instead, we attempt what we consider to be a relatively broad coverage of the main characteristics and issues of the US and European retail banking markets. In fairness, the task has not been a simple one. Not least because detailed, academic studies on even limited aspects of either the US or the EU retail banking markets are very few and far between, not to mention the lack of cross- Atlantic comparative studies. To collate the appropriate data and information has therefore been an arduous task. Not to mention that comparable information and data (sometimes even within the EU) was often very difficult to find. What has compounded the difficulty of writing this study is the fact that comparing the US to the European Union, of 25 countries, is not comparing like-with-like. This has made things problematic especially in the regulatory and supervisory section, where for instance a comparison of regulatory regimes between the US and the EU would normally require comparing one regime against 25 separate regimes (or in the case of this study: 15 – see explanation below). However, given that the comparison has been between the US on the one hand, and the agglomeration of the EU Member States on the other, it has been necessary to refer in particular either to what exists at EU-wide level, or to refer to an average between the Member States. When neither has been possible, or when it has been necessary to give a more complete picture, we have referred to what exists at Member State level. We should also point out that this study considers the EU 15. This was a necessity due to data availability. Having to take into account the ten new Member States would have seriously constrained us in terms not only of the data that we could use for this study, but also in terms of the time-series of the data. 11
Page 1: September 2006 RESEARCH A COMPARATI
Page 4 and 5: IE UK FR BE NL LU DK DE SE CZ AT SL
Page 6 and 7: The following WSBI/ESBG committees
Page 8 and 9: 4 Regulation and supervision compar
Page 12 and 13: To finish, if we had to pick from a
Page 14 and 15: In the US, credit institutions have
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Page 21 and 22: 3. INSTITUTIONAL COMPARISON 3.1 Sec
Page 23 and 24: The market share of the US banking
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Page 35 and 36: 3.2.2.2.2.2 Ownership and corporate
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Page 39 and 40: In contrast, building societies in
Page 41 and 42: The commitment of savings banks is
Page 43 and 44: 4. REGULATION AND SUPERVISION COMPA
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4.2.5.1.1.1.1 Limitation of the geo
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4.2.5.1.1.3 Recent trend: regulatio
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Another important common feature be
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The best execution rule was first m
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4.3.2.2.4 National Market System ru
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The ISD set a basis for the develop
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Best execution rules exist in both
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The decline of savings institutions
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Relative to population, the Europea
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5.2.2 Size of credit institutions 5
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5.2.2.2 European Union In Europe, t
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5.2.3 Concentration and consolidati
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5.2.3.2 European Union Average CR5
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In terms of the nature of consolida
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100% Graph 9: Structure of the asse
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In terms of growth of the volume of
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5.3.2 Efficiency of credit institut
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Table 16: Evolution of the Return o
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Finally, looking at cost-income rat
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9. The last couple of decades have
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Furthermore, the average outstandin
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Under an open-end credit, the credi
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Table 19: Evolution of outstanding
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6.2.1.2.2 Regulatory framework over
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6.2.1.3 Comparison 6.2.1.3.1 Size o
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In terms of market competition, the
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The residential mortgage market in
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Funding by retail deposits represen
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In sharp contrast, the US mortgage
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6.2.3.1.2 Lenders to small business
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The securitisation process requires
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Factoring is also continuously gain
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6.2.3.2.4 Securitisation of small b
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The above fears can hardly be allay
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- ACH credits and debits: the stati
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6.3.2.1.2 Financial intermediaries
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It should be noted that two of the
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Assuming that technology, globalisa
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The report adds: “although it bou
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Graph 19: Use of different distribu
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In terms of funding of the business
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Since then, established banks have
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MoU Memorandum of Understanding OTC
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Annex 2: Statistical appendix Table
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Table F: Share of US banking indust
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Table L: Structure of the liabiliti
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Table R: Number of ATMS in the EU a
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F - Federal Deposit Insurance Corpo
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