Banks that are too big to fail or TBTF are by definition also too big to manage or TBTM. In Part III of the series we look at the role played by customers in this phenomenon. The link for Parts I is here and for Part II here.
In Part II of TBTF Means TBTM we looked at how the belief that the markets are a zero sum game has created a banking culture obsessed with the size of a bank’s market presence and to what extent it can exert dominance. Allied to this philosophy and in many ways intrinsic to it, has been an approach where banks have strived to become all things to all customers.
All things to all customers by definition imposes a requirement on banks to offer all products or at the very least as many products as possible. For a number of different reasons this does not make any sense. Foremost amongst these reasons is the fact that it is highly unlikely that a single institution can be proficient in all products.
The following anecdote illustrates the point. Continue reading