Wednesday, June 21, 2017

Do we need 'big banks'?

Nakumatt is a big retailer with branches across three countries. If it fails, will it bring down with it the chain of suppliers that it has failed to pay for the past five years? Nakumatt's suppliers are petitioning Government officers to intervene so that their bills are settled. In short, they are looking for a Kenya Airways deal.They are unlikely to get one. So, knowing what we know about too-big-to-fail corporations, and the enormous risks they place countries' economies in, why is the National Treasury pursuing the dream of a "few big banks" in Kenya? The recent global recession showed the risks of too-big-to-fail banks to the global (and US) economy. Nakumatt has shown how too-big-to-fail supermarket chains can strangle economic activity. Are big banks something we should pursue in the wake of the poor supervision of smaller banks by the Central Bank or the Capital Markets Authority?

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