John Kay

Two years after the collapse of Lehman, the case for structural reform of the financial system rather than closer supervision of behaviour and the prescription of ever more elaborate rules is stronger than ever.

Anonymity is often the most effective means of telling truth to power: and sometimes the only one.

While there may be some economies of scope in the provision of financial services, they don’t in any event compare in order of magnitude with the collateral economic damage imposed by recent failures in the financial sector.

The Independent Commission on Banking headed by Sir John Vickers which the coalition Government has established will be told that such a separation between utility and casino can’t be done – although it was done in Britain for most of the 20th century.

More competition and a reduction of the conflicts of interest between different financial services activities is the antidote to gouging. The separation of retail and investment banking would begin a move away from the transaction-focused, sales-driven culture of recent years and reassert the development of long-term relationships with customers.

The modern cult of the heroic chief executive is at the root of the problem. Greater shareholder activism may help, but the most valuable restraint would be more effective checks and balances within the company itself.

There is no simple answer to the question: “How should capital gains be taxed?” So there are as many different regimes as there are national tax systems and they are often, as in Britain, in a state of seemingly endless flux.

The assertion that depositors in Kaupthing and Landsbanki have a claim on ordinary people who were too prudent to put money there, or did not have any money to deposit in the first place, has little justice or legal basis.

You are the recently appointed First Minister of an independent Scotland, sitting in the elegant drawing room of Bute House, enjoying a relaxing moment after a stressful day. Then you receive an urgent call from the Governor of the Central Bank of Scotland. A few minutes later, the Governor is shown in. He explains that within a few days the Royal Bank of Scotland will be unable to roll over its facilities and will run out of cash. What do you do?

“Too big to fail” insurance is likely to leave the non-financial economy with the worst of all possible worlds – less public control of risk and greater potential calls on taxpayers.