A week or so ago, the font of much regulatory creativity, the U.K.’s Andrew Haldane, recommended to Parliament that the British government establish a government-owned utility to control data on the retail banking system. Could it ever happen here? U.S. banks may feel secure in the knowledge that the U.S. Government would never engage in private commerce, but that’s what banks thought about the payment system before the Federal Reserve took over most of the business. Consumer banking is more and more seen as a utility that must serve the public good even as management seeks to mollify shareholders. Mr. Haldane recognizes the inherent conflict in this notion and, thus, proposes to hand the keys over to the government. Could the CFPB do the same?
First to Mr. Haldane’s idea. To be sure, it’s based on one characteristic of British banking that’s quite different from ours. U.K. banking is very, very concentrated. This was true even before the crisis, but it’s even far more tightly controlled than ever because of the demise of several major players that were then merged with other large U.K. banks to make them even bigger. Although Her Majesty’s Government still holds large stakes in several of these acquirers and other troubled survivors, this has done nothing to calm complaints about the few choices British consumers believe they have when they want to open a new checking account or leave their current bank for a more friendly or cheaper one. Various proposals are thus under consideration to improve U.K. bank competitiveness, with Mr. Haldane’s concept one of the most innovative among them.

To date, he has offered few details. However, the idea is that the government would manage a master data system in which all retail-banking products would be catalogued and customer information maintained. This would, he posits, eliminate the data-gathering obstacles that make it hard for customers to compare services and move accounts. In essence, a consumer would dial up the government’s utility, tell it to move an account from Bank A to Bank B and, lo, it would be done.
The U.K. banking system is, as noted, different from the U.S. one, but it’s not at all clear that it’s any easier here to pick financial products or move accounts around. The latter can prove particularly tricky, as many customers found out last year as they tried to move money from large to small banks at the urging of community activists. Lots of accounts stayed stuck because consumers didn’t have the time or energy to move them, desire to do so notwithstanding. Indeed, the “stickiness” of bank services is one reason retail banks fight so hard to get first-time customers, knowing that business is as good as locked in once that signature card is in hand.

Ordinarily, U. S. policy-makers would stand aside, telling consumers either to try harder to change banks or give it up and take what’s coming. But, these are not ordinary times. The level of distrust – the nicest word I know for how consumers feel about their banks – is at an unprecedented high. This has already led to a zero-tolerance zone in which any consumer misdeed results in major reputational risk and a walloping CFPB fine to boot. The CFPB has its hands more than full, but a system that helps consumers switch to banks they like better strikes me as one with which the CFPB could well become enamored.

Indeed, the CFPB is already treading on the fine line between public good and private profit. On Wednesday, it announced a new project in tandem with three firms selected for undisclosed reasons. The aim of the program, dubbed “Project Catalyst,” is laudatory: thinking through possible new products and the problems or opportunities they raise. But, for a government agency to do so in tandem with private companies may well create a policy preference for particular products or technologies. This remains to be seen, just as the degree to which the CFPB would countenance a new retail-banking utility under its aegis is unknown. But, unknown is not impossible.