John Kay

Ambiguity is often attractive to politicians and costly to taxpayers.

The belief that the right response to the failures of Basel I and II is a more elaborate version of the same global regime is a triumph of hope over experience.

Effective banking reform should aim at structures, not at intensified supervision. Resilient systems are simple ones.

Why do we so often find that events reinforce what we already believe? John explains how confirmation bias characterises reactions to the financial crisis.

John reviews the interim report of the Independent Banking Commission. The direction of travel is right but the devil is in the detail

The suggestion that we might partially turn back the clock has been described as a call for “Hovis banking”, referring to an advertisement that plays on nostalgia. The commercial succeeds because we believe the bread our grandparents ate, before innovations in technology and marketing, was nicer and more wholesome. Perhaps that is true in banking as in baking.

We will succeed in managing financial risk better only when we come to recognise the limitations of formal modelling. Control of risk is almost entirely a matter of management competence, well-crafted incentives, robust structures and systems, and simplicity and transparency of design.

The value of Modigliani-Miller – like any good model in physics or economics – lies as much in the questions it raises as in the truths it reveals.

No one loves the bearer of bad news. But short sellers, Wikileaks, accountants who mark to market, and even rating agencies, should be applauded for telling people the news they do not want to hear.