by Dr. Sebastian Schich

A change in banks’ status may be right around the corner. Traditionally, banks have been considered “special” among financial intermediaries. This status in turn has been seen as justifying the backing of bank activities by a publicly-supported financial safety net. The recent wave of innovations in financial services, however, raises the question of whether that assessment is still valid. Many financial services traditionally offered only by banks are now increasingly being offered by other providers, often in more convenient forms for customers and sometimes also more cheaply. The economic functions performed by banks are being unbundled and offered separately or in rebundled form. To paraphrase a widely-used statement attributed to Bill Gates, while banking is needed, banks might not be. Continue reading →