The rules of global banking are being rewritten, say John Micklethwait and Adrian Wooldridge in Bloomberg, and it’s resulting in a return to an old idea: that “finance is an arm of the state”. Just look at the two big scandals of recent weeks. The collapse of Silicon Valley Bank wasn’t a “systemic” threat to America’s financial system – but the government bailed it out anyway, to protect the country’s strategically valuable tech sector. Similarly, Switzerland’s decision to force UBS to take over Credit Suisse – the country’s biggest bank buying its main competitor – didn’t make free-market sense. But if the aim is to “keep Swiss finance Swiss”, and to protect a vital national industry, the move “works just fine”.
This “chimes all too well with the statist policies of modern geopolitics”. We’re no longer in a liberal world order, but one of “competitive regional blocks” and protectionism. Joe Biden is “bribing semiconductor companies to set up shop” in the US and cajoling consumers to “buy American”; China is doubling down on “self-sufficiency in key technologies”. For finance, this means bank mergers to create big national champions – if computer chips are a vital national resource, “then the bank that lends to those chipmakers is too”. The world’s money men will be only too happy to go with this. “As Adam Smith would be the first to point out, bankers were opportunists long before they were cosmopolitans.”