Tag: credit crunch

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.

Capitalism 1 was a world of laisser faire. This concept dominated economics and economic policy from The Wealth of Nations to the Great Depression....

The risks that the financial sector has devised techniques to manage are not the everyday risks of an uncertain world: they are risks almost entirely created within the financial sector itself.

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.

It was not British housebuyers who took on debts they could not repay in the recent boom: it was British banks.