1. Think about the last organization that you were employed in prior to Sloan. What was "your" industry (i.e., the one in which that employer operated)? Think about what that definition includes (and excludes).
the banking system – and the wider financial system – plays a crucial role in a market economy. It connects savers and borrowers, investors and users of funds, it allocates capital, it provides payment services, it insures against risk.
Core banking services: personal and business current accounts, overdrafts and savings products traditionally associated with banks Secondary banking services: unsecured and secured loans to personal and SME customers. Peripheral banking services: such as insurance, pensions, wealth management, hedging, letters of credit and legal services
1. Was there a lot of entry in your industry? Why or why not?
Compared to historic trends, I think there has been a lot of entry in the retail banking segments. - Start-up businesses
Metro Bank (Vermon Hill)- new 'brand', differentiation by using newer technology, branches open 7 days a week, late hours, good locations - all reqd for in and around London; better product features; my experience. Walton & Co
- UK companies expanding into Financial services
M&S, Tesco - existing supermarkets having large network and retail space Virgin Money - buying up 'bad' assets of Northern Rock at a cheap price from the govt. - Overseas
Santander buying in A&L, Abbey
what are they bringing in - new approach to service; innovative branch-service proposition
political will - EU, BoE/FSA; regulation
riding on sentiments against the banking post financial crisis; opportunities post financial crisis; shortfall in the supply of credit; low interest rates;
reduced competition (before crisis there were 9 banks in the FTSE 100, now there are 5 - nationalized fully/partly or acquired. Post-crisis hangover: incumbents are occupied with merger integration and disposals + de-risking balance sheets. Lack of legacy - incumbents have branches at unprofitable locations, union agreements on working hours; IT all over the place due to M&A. Though the new entrants cost-income ratios will be high at the outset, as they gain scale they will enjoy a significant cost advantage over their bigger rivals. This will help them compete strongly on price.
Ways to enter -
* Some firms have entered retail banking by only offering a limited range of products to personal and SME customers (for example, monoline providers of credit cards such as Capital One). From this position it is possible to move towards offering a much wider portfolio of products (as is expected in the case of Virgin Money and Tesco Bank), or to expand from just offering products to individuals to catering for SME as well.
* entry through direct acquisition of existing banking assets, for example Grupo Santander acquiring Abbey
* entry through a regulatory passport,for example the entry of ING Direct, and
* entry through a joint venture, for example the Post Office working with Bank of Ireland.
Barriers to Entry
attracting new deposits
can no longer raise money cheaply from wholesale markets; separating retail and IB; tougher liquidity regulations.
strengthened liquidity and capital requirements
more intrusive supervisory role by regulator
scrutiny on bonuses - higher upfront costs for sr. execs - larger salaries instead of rewarding them later.
Regulatory approval lead time > 1 yr
Recruiting Board level directors and non-exec directors
In a sector such as retail banking, where there are well established incumbents which already have a large established customer base, high brand recognition and an extensive branch network, new entrants may face significant difficulties in attracting customers. If providers face...