John Kay

Plurality and diversity are generally sources of stability – in banking as in nature.

Investment banks have declined, while investment bankers have grown in power, influence – and remuneration. This is perhaps the most startling of the many consequences of Big Bang.

On the 18th October John gave evidence to the Treasury Committee on the proposals put forward in the Independent Banking Commission’s Final Report. Also in attendance were John Hitchins, PricewaterhouseCoopers, John Grout, Association of Corporate Treasurers, Matthew Fell, CBI and Peter Hahn, Cass Business School. Watch full coverage here.

It is more effective to give incentives to serve consumers well than to supervise the way in which they are served.

I have always found it hard to interest people in measurement issues, but the way we record things in business and finance has a large effect on what people do.

On the 22nd June the Secretary of State for Business, Vince Cable, announced a review that will  examine investment in UK equity markets and its impact on the long-term performance and governance of UK quoted companies. John will lead the review, supported by an expert panel. 
He said,  “Equity markets are a principal mechanism of control and [...]

The core problem is that banks have no intention of abiding by the spirit, rather than the letter, of any regulatory rules.

Failure is intrinsic to the market economy: but the legitimacy of capitalism depends in part on how it deals with the consequences of such failure.

The credit crunch of 2007–8 was the direct and indirect result of losses incurred by major financial services companies in speculative trading in wholesale financial markets. The largest source of systemic risk was within individual financial institutions themselves. The capital requirements regime imposed by the Basel agreements both contributed to the problem and magnified the damage inflicted on the real economy after the problem emerged. This chapter argues that regulatory reform should emphasize systemic resilience and robustness, not more detailed behavioural prescriptions. It favours functional separation of financial services architecture, with particular emphasis on narrow banking—tight restriction of the scope and activities of deposit-taking institutions.

The best way to make the financial system more robust to the inevitable shock and failures is to restore elements of the functional separation which existed before the 1980s – most of all, to split the utility functions of traditional retail and commercial banking from the casinos of investment banking. As the crisis developed in [...]