Do the almost simultaneous announcements this month of a new regime at Deutsche Bank, and an extensive restructuring at HSBC, symbolise a fundamental change in the structure of financial firms?

The last two decades of the 20th century saw the rise of integrated financial conglomerates. In Britain, the trigger was Big Bang in 1986. In the United States, the separation of investment and commercial banking imposed in the 1930s by the Glass Steagall Act was steadily eroded. The universal banks of continental Europe, seeing these trends, reinvented themselves along Anglo-Saxon lines.

In Britain, the very large financial resources of retail banks meant that they were initially dominant players, absorbing the partnerships which had dominated stockbroking, market making and investment banking. Few of these acquisitions worked out well. Stockbrokers, jobbers and corporate deal makers did not much enjoy the culture of the retail bank. Many of those who had been partners in these firms, who had been made very wealthy men through the sale of their businesses, preferred to spend more time with their families. The hard working revenue earners below, who had been deprived of the opportunity to enjoy the icing on the cake, were unhappily nicknamed the marzipan layer. 

Despite these initial failures, dealmaking continued apace. In 1998–9 Sandy Weill created Citigroup, largest of all financial conglomerates. Weill secured the final repeal of Glass-Steagall, and ejected his co-CEO John Reed, a career retail banker in traditional mould.

The balance of power within financial conglomerates had changed. Deal makers, greedier and smarter, took control. Within investment banks themselves the traders rather than the corporate suits were increasingly in charge. Trading was believed to be the major source of profits, and power followed profits. The worries of the marzipan layer were dispelled by the large bonuses which they received as part of these big corporate organisations.

But Weill’s triumph represented the crest of the wave. Reputational issues began to dog  his creation.

The culture of retail banking, intrinsically bureaucratic, perhaps boring, driven by the routinisation needed to allow the accurate completion of millions of transactions every day, was incompatible with the entrepreneurial, buccaneering environment of the investment bank. The association provided opportunities for cross selling of products and informational advantages were derived from engaging in multiple roles. But the primary logic that brought these activities together was financial; the cross subsidy made possible by a passive deposit base guaranteed by the  taxpayer.

While these apparent synergies might yield private advantage for banks, the benefits the banks derived were offset, and generally more than offset, by the costs to customers and  taxpayers. This downside would become all too apparent as misselling and conflicts of interest were exposed and taxpayer support demanded.  Within a decade Citigroup had to be bailed out by the US government.

But in the short run there was little sign of any change in the direction of unwieldy conglomerates. When the music stopped for Chuck Prince at Citigroup  investment banker Vikram Pandit took his place. The elevation of Bob Diamond to the CEO slot at Barclays  and of Ashruf Jain to the same position at Deutsche Bank was yet to come.

And yet, seven years later, it seems that change may be beginning. The respected central banker Axel Weber went to UBS to slim down its investment banking activities. When Diamond was fired from Barclays, and Pandit from Citigroup, they were replaced by institutional lifers with experience of traditional banking. Now Jain has lost his post at Deutsche bank. HSBC has told its shareholders that ahead of government imposed ring fencing of its UK retail banking operations, it will rebrand these activities, with the likely outcome that they will be hived off altogether.

Perhaps, not before time, boring banking is starting to make a comeback.