Banking faces seismic changes, by Alasdair Macleod

The major banks’ business is shifting to more lending to government and less to the private sector. From Alastair Macleod at

The role of commercial banks in the global economy is changing, with lending to governments and their agencies now more important than lending to goods and services industries. It is a trend which is due to continue.

The new Basel 3 regulations seem set to encourage this trend, despite retail depositors being accorded a stable funding status. Central bank digital currencies are anticipated to augment and perhaps replace non-financial business credit over the next five to ten years.

But the increasing financialisation of commercial banking brings the risk of tying its future firmly to a financial bubble. And with price inflation on the increase, it is only a matter of very little time before that bubble bursts.

This article looks at some of the implications for commercial banking of Basel 3, CBDCs and the changing economic role of commercial banks.


The introduction of both Basel 3 banking regulations and central bank plans for digital currencies will affect commercial banks’ priorities and their role in the overall financial system. Basel 3, particularly with regard to the application of the net stable funding ratio (NSFR), will change banking priorities by imposing standardised risk factors across the industry, and central bank digital currencies (CBDCs) threaten to cut the banks out of their intermediary role between central banks and non-financial users of money and credit.

Few members of the public think positively about the banks and their cartel, so popular opinion is unlikely to shed many tears if CBDCs displace them. Ever since the goldsmiths in London began in the seventeenth century to take in deposits upon which they paid six percent, with the agreement that they were not trustees of the money but proprietors of it, banking has contravened the spirit of Roman law by taking in deposits and using them as they please, without depositors fully realising the arrangement. This breach of “natural” law was originally a ruling by the Roman juror, Ulpian (170—228 AD), later codified by the Emperor Justinian (527—565 AD).

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