John Kay

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

The interim report of the Kay review into the effect of UK equity markets on the competitiveness of UK business, was released yesterday. It summarises public responses to the call for evidence, and draws out the issues that will be considered in the second phase of the review. Read it here.

Since there are many issues in public debate, attention to any one is necessarily transient. The attention of vested interests to their own concerns, however, is permanent.

The jobs and growth the bankers claim will be in jeopardy are their own: the pressing needs of the real economy point not to delaying change, but to implementing it as speedily as possible.

As the commercial market is being transformed, anyone who thinks that the policy challenge is to restrict internet piracy has missed the point.

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.

When an industry model is broken, the best business strategy may be to manage its decline.

Britain is a small island, dependent on frequent and reliable air travel. From the distribution of its population, its biggest airport would ideally be north-west of London.

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.