
How U.S. Banks Took Over the World - chmaynard
https://www.wsj.com/articles/how-u-s-banks-took-over-the-world-11567589403?mod=rsswn
======
treydey
What most people in this thread are talking about is retail banking. Retail
banking in the US lags far behind the EU in terms in technology and security.
However, retail banking is only accounts for about 25% of total profits when
compared to commercial and investment banking. This is where US banks have
consistently beaten the competition. Especially since Brexit which has
destabilized London as the financial hub of Europe

~~~
qaq
This pretty bold statement what is this based on ? As someone who just moved
from US to Ireland I def. not getting that impression. I also highly doubt
there are banks in EU that can match say Chase on security side.

~~~
neffy
You´ll be finding out I suspect.

No idea how it is in Ireland, but in most of the EU, digital transfer between
banks and countries is completely seamless. I can transfer money to family
members accounts in different banks in the same country in a couple of
minutes, and to another country in a day or two. I haven´t used a physical
cheque since I moved back from the US.

~~~
qaq
The transfers thing yes (although it's cultural to an extent). The Clearing
House's Real Time Payments network has launched in Jan. but people are not
that used to products using it. On security side Chase's security spend dwarfs
even largest security firms. If I remember correctly they spend on the order
of 4 billion per year on security which among other things allows them to be
running world class security team.

~~~
Denvercoder9
Expensive security and good security are two entirely different, often
uncorrelated, things.

~~~
qaq
In a market where competent candidates start at 300K+ you can't hire a good
team unless you a) have resource b)are actually willing to pay for talent.
Chase actually has a very competent team. I have doubts there are many (any?)
EU banks who's team is on par with Chase.

~~~
neffy
Yes, well, so the way it is in banking if you don´t have a competent security
team, you won´t be in business for very long. And banks in general, everywhere
and anywhere, have been in the business of security for a very long time
indeed.

I´m sure American banks have very competent teams. So do the Europeans. Behind
the scenes they all also tend to collaborate quite a lot in this area at
least.

~~~
qaq
" if you don´t have a competent security team, you won´t be in business for
very long" oh that what logic would have you believe and yet it very far from
reality.

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priansh
To be fair I think this article doesn't fairly assess whether this is good or
bad.

From my POV as a US citizen that has been living as an expat in different
countries for the last few years, US banks globalizing is a net positive. I
get convenience and speed with US banks that I get nowhere else -- i.e. the
most online traditional bank in the UK is probably NatWest, which sucks
because you have to get a physical card reader (like an actual machine that
scans your debit card) in order to use the online banking most of the time.
There's Monzo which is fully online but it sucks internationally, and adding
funds is a pain. In China I had to jump through so many hoops to get an
account and there are hundreds of restrictions in place; likely because I'm
not a Chinese citizen. This is not a pain point for any immigrants I know in
the US as it's fairly easy to move money around.

I'm sure US banks in control is bad at a macroeconomic level, but for the
average consumer and at a microeconomic level I think it could bring about a
lot of positive changes. Then again my perspective is probably skewed as an
American

~~~
owenwil
We have very different experiences of the global banking system, it seems. To
me, US banks are archaic, slow, and backward—and the UK has to be in for close
second so it isn't a fair comparison at all.

I have lived/banked in New Zealand, Canada and The Netherlands, all of which
are delightfully eons ahead of the US banks almost across the board. For
example:

\- P2P or bill payments in Canada can be made to any email address and
received within 60 minutes for free.

\- Splitting a bill or requesting payment in Netherlands is trivial, because
the banks all allow you to generate a URL and send it to anyone for instant
payment.

\- Transfers in NZ are realtime, instant, and validated before you send to
ensure its the right person. You can also create accounts online with your
government login. Touch to pay exists everywhere since at least 2010.

Meanwhile in the US, checks exist and people go crazy when Apple Pay is
accepted at a single chain store. I've never touched a check, and I hope I
never need to—and the examples of hoops to jump through are likely because
you're new! KYC regulations tend to relax over time, and it can be painful at
first almost everywhere. The fintech revolution in Europe between N26, Revolut
and the dizzying array of others is evidence we don't need, or want, US banks
to do anything. It won't help.

~~~
wozniacki
Why do European vendors have such a hard time accepting credit / debit cards
and still insist on cash?

I know of instances where a credit card from Amsterdam, the Netherlands is not
even accepted at a shop in the Swabia region of Germany.

I also know of instances where they outright refuse to accept Visa and only
deal with Mastercard and such - that too issued in Germany!!. What's the point
of a credit card if you cannot travel with it?

Why are cash transactions so much more prevalent in Europe? I've seen the same
in Japan but that's entirely a different case.

[1] For Many Germans, Cash Is Still King

[https://www.npr.org/2019/06/09/728323278/for-many-germans-
ca...](https://www.npr.org/2019/06/09/728323278/for-many-germans-cash-is-
still-king)

~~~
MrRadar
I think that's more a Germany thing than a European thing. In Sweden cash has
almost been completely eliminated from their economy to the point that some
retail banks no longer deal in cash.

~~~
C1sc0cat
More fool them - wait until they have a major banking computer crash / cyber
attack.

~~~
asciident
And then what? They have to close for a few hours? A few excited local
reporters coming by?

~~~
C1sc0cat
Seeing a Bank run with lines of citizens queuing at banks does tend to
concentrate politicians minds.

~~~
MrRadar
Why would there be an in-person bank run in a cashless society?

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css
Because they can threaten the people in charge of holding them accountable:

> To be clear, the decision of whether to indict a corporation, defer
> prosecution, or decline altogether is not one that I, or anyone in the
> Criminal Division, take lightly. We are frequently on the receiving end of
> presentations from defense counsel, CEOs, and economists who argue that the
> collateral consequences of an indictment would be devastating for their
> client.

> In my conference room, over the years, I have heard sober predictions that a
> company or bank might fail if we indict, that innocent employees could lose
> their jobs, that entire industries may be affected, and even that global
> markets will feel the effects. Sometimes – though, let me stress, not always
> – these presentations are compelling.

[https://www.justice.gov/opa/speech/assistant-attorney-
genera...](https://www.justice.gov/opa/speech/assistant-attorney-general-
lanny-breuer-speaks-new-york-city-bar-association)

~~~
hanniabu
> a company or bank might fail if we indict, that innocent employees could
> lose their jobs, that entire industries may be affected, and even that
> global markets will feel the effects

Isn't this what capitalism is all about? If they can't do the job then
somebody else will come up on it's place.

~~~
JackFr
The original speech which is quoted is an outline for the use of 'deferred
prosecution agreements' office which are effectively corporate plea bargains
by the DOJ.

The public policy problem is that if a corporation is indicted, legally they
are presumed innocent but the market may not see it that way. Though the
company might be eventually fully exonerated in court, they might have driven
to bankruptcy by the market. By agreeing to a DPA, the company can treat it as
a pseudo-regulatory matter.

This, of course, has critics on both sides. On the one hand some critics feel
this has allowed corporations to engage in ongoing criminal behavior without
ever really paying the full price. On the other hand, people have criticized
the Attorney General's office for using the threat of indictments on flimsy
grounds as a means to create a backdoor regulatory regime with no legislative
basis.

~~~
arrosenberg
My biggest issue with it from a public policy standpoint is that we don't have
any problem putting the same burden on individual people. A person accused of
a crime they didn't commit runs the same exact risk of bankruptcy and
financial ruin if they can't make bail (and sometimes, even if they can),
despite the same presumption of innocence.

How are we supposed to reconcile giving a corporation, with vastly more
resources, special consideration that an individual person does not get?

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fnord123
The primary component in the success of US banks over European banks is that
European banks struggle to do business in the US. This is because the jingoist
zeal in the US puts up massive hurdles in the way of any foreign bank.

In other words, Americans only buy from Americans. This is why "Twenty-five
years ago, European banks charged into the U.S. They bought storied firms like
Donaldson, Lufkin & Jenrette and Wasserstein Perella and dangled big paydays
for rainmakers" \- to convince Americans they were buying from other
Americans.

This allows American banks to build up a war chest domestically and keep the
fight in Europe and the developing world - while there is no fight in the
worlds largest economy. China is doing the same.

~~~
xxpor
I'm really not sure what you're talking about. I cant go open a bank account
at HSBC or TD today if I like. And ING was a thing before they I guess got
bought out by Capitol One.

~~~
fnord123
This is about investment banking. Not retail banking.

~~~
xxpor
Fair enough, I'm a lot less familiar with that side. But don't Deutsche Bank,
UBS, and Credit Suisse have a large US presence?

~~~
fnord123
They are discussed in the article.

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gniv
I read the article but there is no insight into why. Are the US banks better
run? Is the regulatory environment post-crisis better in the US? Something
else?

~~~
cm2187
I can probably provide a few elements of response.

First regulations and rates. Europe is actually several major jurisdictions:

\- Switzerland: they went through a near death experience during the financial
crisis, with two huge banks relative to the size of the economy (UBS and
Credit Suisse) that would have sunk the country if they failed. Their reaction
was understandly to slash and shrink these giants to a less threatening size.
UBS and Credit Suisse, once major global players and dominating asset
management, are the shadow of what the once were.

\- UK: of the major UK banks, two went really bad during the crisis (RBS &
HBOS) while the others big banks were mostly healthy. Those two banks were
requested to massively deleverage (RBS pretty much exited investment banking).
The other UK banks (HSBC, Barclays) were comparably healthier. There was a
wish for tough regulations within the EU, however the state of European banks
is generally pretty bad (particularly in Germany and Italy) which severely
limited how tough european regulations could go before threatening the
stability of the country. The UK didn't have that problem and therefore gold-
pleated all EU regulations, requiring higher capital ratios, higher coco
triggers, strict ring-fencing, massive fines, massive PPI penalties, more
severe rules and timing from UK banks. It forced them to retreat from many
businesses and to shrink.

\- rest of Europe. EU regulators generally are hostile to investment banking
and the new regulations make many traditional IB activities uneconomical (in
particular trading and financing trading transactions, as well as imposing
various degree of ring-fencing of non IB activities). In addition, the EUR
zone maintained low rates for a very long time (now going deeply negative),
which adds further pressure on the profitability of EUR zone banks.

In the US, regulations have been less aggressive, and the rate environment
(high rates) less toxic to banks (the reason why low and negative rates are
toxic to banks is that 1) the bank is a net receiver of interest rate, because
it has interest paying assets and liabilities, but more assets than
liabilities, and 2) because if rates turn negative, it may not be able to pass
on negative rates to their depositors (negative rates on current accounts) and
find themselves pocketing the difference between their assets and
liabilities).

However some European banks have been doing OK, like BNP Paribas or Santander.
Their local regulators rather shielded them from tougher regulations. They are
challenged nevertheless by the rates environment.

I think the second reason is culture. US banks took losses upfront, slashed
bad activities quickly and put the problems of 2008 behind them within a few
years, in a typical aggressive, pragmatic american way. The culture in Europe
is often to try to live with problems and hope that waiting will make them go
away. Even aggressive european players like Barclays, Deutsche Bank or SocGen
were very slow to react to the new environment, and were still downsizing and
cutting activities long after US banks went back into bullish/expanding mode.
In Italy the banks were never really restructured.

~~~
dfawcus
> UK: ... It forced them to retreat from many businesses and to shrink.

The UK Banks didn't so much retreat as split their business in to a ring
fenced operation (for retail), and a non ring fenced operation. The non ring
fenced operations sometimes having their customer facing portion offshore in
IOM, Gibralter or Channel Isles subsidiaries.

I believe one or two may have completely retreated.

Stuff like over the counter share trading which used to be available in UK
Retail banks, no longer is. One has to deal directly with a stock broker
operation (which could just be another company in the same bank group).

~~~
cm2187
I am rather refering to commodities, illiquid rates and currency trading,
certain exotic products. Also certain regions where the UK banks weren't big
enough, in Asia, Africa or South America.

The ring-fencing is kind of an orthogonal question.

------
Yuval_Halevi
Not only the U.S bank... China aswell

they loan billions for poor countries they know they son't be able to bring
the loands back

once they don't pay the loan they take control of strategic building/places in
those countries.

~~~
grecy
Actually you just described what the world bank did to virtually every African
nation in the 60s when they were gaining independence. For most nations the
interest on the loans they owe exceeds their GPD, so they will be forever
enslaved monetarily. The world bank dictates that for example Ethiopia can not
sell processed coffee, else the World Bank will bankrupt them and destroy
their economy.

What China are doing now is a lot more honest and up front (though I'm not
saying it's good). They go to a country and say "We'll build you these
roads/bridges/hydro stations" in exchange for mineral/fishing/whatever rights.
So the country gets actual improvements for its citizens, and China gets cheap
minerals.

~~~
JoeAltmaier
"What they did" and "What happened" are very different. The loan was supposed
to foster economic growth, which would have enabled paying back the loan.
Which didn't happen for sad reasons.

The coffee part is odd - what's that about? What does the World Bank have to
do with coffee?

~~~
grecy
> _The coffee part is odd - what 's that about? What does the World Bank have
> to do with coffee?_

The world bank holds many countries to ransom by dictating what they can (or
can't do).

Guinea wants to get the internationally accepted price for their Bauxite?
World Bank says no, else we'll call in your loan.

Senegal wants to get a fair price for it's resources? Nope, let's put a travel
warning on them and decimate their tourism for a year or two.

The list goes on and on and on. I just spent 3 years in Africa at ground level
in 35 different countries. The longer you spend there the more you realize.

Read this:
[https://www.amazon.com/dp/B00FDVMOFU/?tag=roadchoseme-20](https://www.amazon.com/dp/B00FDVMOFU/?tag=roadchoseme-20)

------
otoburb
Perhaps in the next few generations we will see similar headlines from other
growing superpowers such as India and China.

European and US bankers may chuckle good naturedly when this idea is
mentioned, but they forget that the European banking sector was the genesis of
most of our current modern-day banking system starting from the 17th century,
and yet today they are eclipsed by the US banking sector, aided in no small
part by the size and influence of the US economy.

The tables can turn relatively quickly.

~~~
buboard
US didnt exist when (european) banks began existing so i dont understand the
analogy

~~~
otoburb
The point I was trying to make was that upstarts can overtake experienced
incumbants relatively quickly. Perhaps it's a self-evident point to an HN
audience, but the (small) set of bankers that I've spoken to don't seem to
believe that anybody else can credibly challenge their dominance.

~~~
smolder
What if US banking dominance was considered a national priority by the state,
and they used some mix of military might, diplomacy, and spycraft to maintain
it? It's an interesting possibility, anyway.

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alessioalex
How did they take over the world. We barely see one US bank here in Romania
for example, and its coming just happened recently.

With the economical crisis starting from US and NSA scandal(s), I'd never
trust a US bank over a EU one.

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TheAlchemist
That's a very misleading article. 'Took over the world' isn't exactly going
from 42% to 52% of market share...

Also quite funny is "Coming out of the crisis, U.S. banks quickly raised
capital and shed risk" and the chart below showing that it's actually the
European that cut the assets they are holding to 50%, while the US banks
actually increased theirs... Granted, asset != risk, but it's a pretty good
proxy here.

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decasteve
I thought this was going to be about J.P. Morgan and the World War I era. The
article is not wrong but there are a number of interesting moments over the
past hundred years that have shaped the world because of the financial system
changes and its influences on politics.

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rb808
Just another industry where European companies are slowly dying while the
Americans succeed.

~~~
lavezzi
A lot of UK banks chose to retreat from investment banking to focus on retail
banking. That's not dying, it's risk avoidance.

~~~
rb808
OK dying might have been the wrong word, but I'd count retreating as similar
to what I meant.

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chiefalchemist
Circa 2008 we were told there was too much power in too few hands. Then we
went for eight major banks down to seven. Now those seven hands are expanding
their reach?

If they're too big to stop, then certainly they're still to big to fail. The
queation is, will the world be willing to do the bail out next time.

~~~
jessaustin
_...will the world be willing to do the bail out next time?_

Are the relevant decision-makers still industry insiders and others who owe
their wealth and position to the industry?

