Enhance Banking Compliance with Online Signature Lawfulness in the United Kingdom

How to eSign a document: online signature lawfulness for Banking in United Kingdom

um I just want to have you to have a look at this this graph to frame it it's UK private debt since 1880 you can see what happens around the Great Depression uh and then suddenly Thatcher comes the Power private debt takes off Richard uh financial sector a bloated or a dominant financial sector its effect in your view on the real economy first of all it's interesting that um the national income accountants who think a lot about the overall economy how to measure it and how to you know structure the dat they actually have been struggling for decades with uh the question what to do with the financial sector why because uh GDP is actually created by national income accounting by adding up value added activities and that's where the financial sector has a problem what is the value added um and it's it's been so difficult that essentially the um National accounting statistic have to make up a fictional value and just add it on to GDP and say okay that's we can say that maybe is is what the financial sector is doing because essentially there is no value added there's value extracted and so really you need to subtract it from GDP has the finance sector the fire sector has it become a cost center because is is the as you know is there a sweet spot where it's actually serving Humanity Society and facilitating business and when it becomes a profit generator in and of itself it becomes detrimental to The Wider to The Wider World start with you well exactly um even the mainstream textbooks in finance Banking and macrom monetary economics will will show Banks as Financial intermediaries now there's there's a problem with that it's clear there is a high price that we're paying for this what should be a humble intermediation service that's being performed and the salaries that are being paid uh you know famously very high which is very strange if they're just intermediaries Lally where does that end up I think there's a structural problem that is the concentration of the banking sector so in the UK five banks account for 90% of deposits which is one of the most concentrated banking systems in the world in Germany um those High Street Banks account for 12% of deposits and 70% of deposits are accounted for by 1,500 local not for-profit Community Banks there is a general tendency when an organization gets large and larger and larger and gets very big um essentially decisions are made without accountability and The Temptations of power strike Lord Acton famously put it this way you know um power corrupts and absolute power corrupts absolutely so when you have very large Banks and only five of them dominating the economy and through the political mechanism and the already financial sector centered political system and political infrastructure you know the city of London having a person in Parliament that is not elected the remembrance and in know all these rights of this square mile as a sovereign state you know all these things and the queen needs permission to go there right exactly and so what you will get is large Banks only wanting to deal with large customers in order to do large deals and that's also where you get the large bonuses we've done a study on the US which has the biggest banking sector in the world over 15,000 Banks of all sizes and shapes the very large Banks deal with the very large customers give very large loans the medium-sized banks give medium-sized loans who is lending to small firms it is only the small Banks now the UK doesn't have those so the structure has become too concentrated and what is badly needed in the UK is decentralization one has to break up the the financial sector and um have much smaller units because small Banks Community Banks are locally accountable you can't suddenly do a crazy project or corrup you know big corruption because people see what you're doing but I think you'd argue for decentralized banking system wouldn't you even though you're a city devote without a doubt but because it's anti Richard Like Richard to comment on this because I am and as I'm sure Richard is but we've had our Metro Banks we've had our older malls we've had our one savings Challenger Banks all the Challenger Challenger Bank we've had handles bank or handles bank and done a fantastic job but it's still tiny exactly now they will stay tiny the ones um that are UK Challenger Banks and that are profit oriented and you you know why cuz the moment they get a bit bigger yeah they will be bought up and they will disappear this is exactly what happened over the last 100 years Richard when you think about inequality inequality in the UK and it's a Hot Topic and you think about as you'd like the banking sector to be uh decentralized flatter structure more resilient how do you begin to uh talk to the public or the political class about achieving those goals essentially you know if if um we want to produce something we need funding so there was a role for Bank s in almost everything that's happening in the economy but what exactly is that role I just quickly I'd like to reflect on that banks are being thought of as intermediaries but this is not really what's happening Banks what are they then the creators of the money supply so you're firmly of the view that Banks create money out of th a yes well I I produced the first empirical studies to prove that um in the 5,000 year history of banking banks are thought of as uh deposit taking institutions that lent money the legal reality it is Banks don't take deposits and Banks don't lend money so what is a deposit a deposit is not actually a deposit it's not a bailment it's not held in custody U at law the word deposit is meaningless the Law Courts and various judgments have made very clear if you give your money to a bank even though it's called a deposit this money is simply a loan to the bank that's true yeah so there is no such thing as deposit you name then so Banks borrow from the public okay so that much we've established what about lending surely they're lending money um no they don't Banks don't lend money Banks again at law it's very clear they're in the business of purchasing Securities that's it so you say okay don't you know confuse me with all that legal E I want a loan I want a loan y fine here's the loan contract here's the offer letter and you sign at law it's very clear you have issued a security namely a PR Miss note and the bank is going to purchase that that's what's happening at put it in layman's terms what does that mean it means that um what the bank is doing is very different from what it presents to the public that it's doing how does this fit together so you say fine the bank purchases my promissary note but how do I get my money I want you know it's a lo I want Grand don't care about the details I want the money the bank will say well you'll find it in your account with us that would be technically correct if they say will transfer it to your account that's wrong because no money is transferred at all it's already from anywhere inside the bank or outside the bank why because what we call a deposit is simply the bank's record of its debt to the public now it also owes you money and its record of the money it owes you is what you think you're getting as money and that's all it is and that is how the banks create the money supply the money supply consists to 97% of Bank deposits and these are created out of nothing by Banks when they lend because they invent fictitious customer deposits why they simply restate slightly incorrectly in accounting terms what is an accounts payable liability arising from the loan contract having purchased your promissary note as a customer deposit but nobody has deposited any money I wonder how the FCA deals with this because in the financial sector you're supposed to not mislead your customers um anyway I I don't have the so so the banks create the money supply by inventing these claims on themselves the you know the fictitious deposits that can be actually positive for the economy as long as this money creation is in line with the creation of new goods and services uh implementation of new technologies and therefore adding value and adding value in the economy is funded by this money creation if that happens and we're talking about um business investment productive loans productive Bank credit you will have no inflation these loans can also be serviced and repaid you have a stable economy without problems and with low inequality and so countries that achieved this that the banks L mainly for productive purposes whether it's Germany in much of its 200 year history or um in the last century the East Asian economies where Bank credit was largely for productive purposes then you're fine but there's two more cases I quickly need to point them out because that's the contract just just just clarify that that inequality is is significantly lower lower inflation is low yes and the real economy booming yes that's when Bank credit creation is focused on um productive lending for productive purposes as opposed to speculation and and asset price as opposed to there's two other types if banks create credit for consumption it's obviously what's going to happen you suddenly have more money create created and more demand for goods but it's the same amount of goods and services so you're creating Consumer Price inflation that's well understood and and central banks are watching that a little bit but what what's less well understood is and what's the biggest in UK um it's probably more than 70% of all lending um actually way more than that um is Bank credit creation so money creation uh for financial transactions for asset transactions for purchasing ownership rights now then you have a problem why because you're creating new money but you're not creating new goods and services you simply they're constant aren't they you're giving somebody new purchasing power over existing assets and therefore you must push up asset prices so this you can you can draw a chart where you show you know asset prices land prices property prices in the UK and it will match very closely as as I've shown in in Japan and other countries and that also creates the inequality when the the banking sector has focused too much on unproductive lending and the UK is dominant it strikes me that what you're telling me and tell me I'm wrong is that lending in order to get round this deposit stroke loan situation needs to be categorized you're right exactly is that right that's right um we need to look at where the money is going that makes a whole world difference so if money is is Bank credit is extended for productive purposes you're fine you get a good economy no inflation and financial stability and also you don't have this inequality problem and do you think there should be different Capital ratios towards each Capital the whole Basel Capital approach doesn't work why because it's it's premised on the idea that banks are just Financial intermediaries but they're not they're money creators we need Bank regulation that recognizes reality of how the banks actually operate so what you're saying this is a regulation problem clearly yes it's a regulation problem that's right we need a different regulation and the only regulation that actually has succeeded in in history and we have good data for the 20th century in particular in preventing asset Bubbles and banking crisis which are all driven by this bank credit for financial transaction you leads to this asset boom and it's it's a game of musical chairs you know you have to play it it's rational to play it while the music is playing which is how asset priz are driven by ever more Bank credit for financial transactions the moment it stops asset prizes fall you get the first bankruptcies Banks get risk revers the whole thing goes into reverse and Banks go bust but you can avoid this and the only regulation that has succeeded in avoiding this is guidance of bank credit simple rules um the simplest form of bank credit guidance is to Simply ban Bank credit for um Financial transactions it doesn't mean Financial transactions are banned no let the speculated speculate and let them even borrow money but not from banks that would make a whole world of difference who do they borrow it from well they can issue bonds or you know borrow in the markets whatever they want but they shouldn't get access to the public privilege of money creation you see I you mean and that creates the problem that creates the boom Cycles but in some countries they've succeed eded in preventing this asset inflation which ones such as Germany without even credit guidance by having a banking structure banking system that's dominated by banks that don't want to do this financial speculation in the first place these are the Community Banks so Germany with 70% of Bank call the lers Banks being no not the L Banks the smaller ones the 1,500 FKS bank and R Eisen Bank they're actually the main banks in Germany there's so many of them each is small and they lend mainly for productive purposes to small and medium sized Enterprises the middle stun which has been the backbone of German economic success for the last 200 years despite Wars and disasters has only been successful because they also have to have local small Banks funding them all the way through that doesn't exist in the UK and that's been why the small and medium-sized Enterprise sector always has has had a problem in the UK so we're stuck with speculation and horrific property renovation shows well the solution is of course to create these small Banks we need to create small Banks they're the natural lenders to small firms the public wants stable growth none of those boom bust cycle banking crisis public money used to bailout Banks people don't want that in Germany these Community Banks it's very because they've never used public money in these 200 years not a single one has ever been bailed out with public money and no depositor has lost any money although Richard your argument is complex principles are terribly simple it is very simple and although you although you're a little defeatist I'm not maybe I'm defeatist but but I like it but it's just the idea of how can I put it getting getting through the regulatory they are so reluctant but that's why hard work that's why we that's why we got you in we're going to we're going to have you I think I have to say this has been brilliantly explained has the UK got a finance C is it a trick question cuz the UK doesn't have Finance the city of London has and is not part of the UK good answer good answer it's International he's right the city of London is outside the United Kingdom do you know that it's it's really shocking and therefore it's also not part of the EU which explains the although it couldn't be part of the EU because you have to have Democratic elections and the city of London doesn't right it's it's the banks that have the votes right right per Offa you know how you How do you start unpicking this puzzle I never knew that's very useful piece of information it's not part of pretty dangerous piece of information and it's not part of the UK because the queen is not allowed to enter without permission she's not the Sovereign therefore it's not part of the UK you know of course that's since you know 1688 I have to make a not since the corent invasion