Instead of focusing on trying to preserve their existing business in the wake of Brexit, banks and asset managers should focus on how they can reinvent it.
Here is a selection of recent academic papers and speeches on pay and diversity that we have read, sifted and translated so that you don’t have to. This selection includes research on why the problem with executive pay could be worse than you think; a history of executive pay since the 1930s; how stock awards reduce systemic risk in banking; the limitations of ‘say on pay’; how social networks between analysts and fund managers affect their investment decisions (and why female board members in Singapore play golf); and why the financial services industry needs to address diversity.
The challenges for financial markets – summary of a speech by Sir Jon Cunliffe, deputy governor of the Bank of England
Financial markets have grown rapidly over the past few decades boosted by globalisation and the revolution in IT. This growth has been accompanied by increased concentration, with economies of scale, lower costs and greater efficiency, creating larger clusters and financial centres. But somewhere along the way the connection between financial markets and society has been lost: rebuilding trust in banking and finance and dealing with the UK’s exit from the European Union will be the main challenges for the industry for many years to come.
The decision by the British people to leave the European Union will have a profound effect on capital markets in Europe. This short paper summarises the main challenges and questions ahead for the capital markets industry in the wake of Brexit, based on peer intelligence from events that we have hosted over the past few months and discussions with European Commission officials, senior market participants and policymakers. The main trade-offs are between access to the single market, free movement of people, and the regulatory framework.
Gender balance in UK financial services has leapt up the agenda since the government asked Jayne-Anne Gadhia, chief executive of Virgin Money, to lead a review of women in senior management, and launched HM Treasury’s Women in Finance Charter. New Financial’s latest report looks at the context of the Gadhia Review and the Charter and discusses how the industry can engage with these initiatives as an important stepping stone towards permanent, sustainable change.
The outcome of the EU referendum campaign showed that the banking and finance industry has a long way to go in rebuilding trust with the wider public and with policymakers. This speech by our founder and managing director William Wright on ‘Making the positive case for capital markets’ at the annual dinner of the Institutional Money Market […]
Capital markets across Europe would be significantly disrupted if the UK votes to leave the EU in the referendum on June 23rd. This would create uncertainty, complexity and increased cost for market participants and their customers in the UK and the rest of the EU – according to our in-depth qualitative survey of the views of market participants from different sectors of the capital markets.
One of the problems with the question of pay in banking is that that so much of the debate is based on poor information: public disclosure by the industry is patchy, inconsistent and often confusing. This reports puts some hard numbers on what has been happening to pay over the past decade – and shows that while progress has been made, the industry still has further to go in addressing pay.
For all the progress that has been made towards a single capital market in Europe over the past few decades, significant barriers remain. These inefficiencies cost the European economy many billions of euros every year in lost investment and unnecessary costs. Here are 10 fantasy reforms that could help unlock the potential of capital markets in Europe.
When it comes to gender diversity, we all know that the capital markets industry is starting from a low base. But the latest report by New Financial on female representation on boards and executive committees at 220 organisations across 11 sectors in European capital markets shows that the numbers are beginning to move in the right direction.
By reducing the wide range in depth and development in capital markets across Europe, capital markets union could help unlock more than €200bn a year in additional funding for companies and more than €6 trillion in long-term capital for investment.
Debate: this house believes that tax relief on debt is a dangerous flaw at the heart of the world economy
Tax relief on debt is an anachronism that distorts management and investment behaviour, increase financial instability, and helps fuel inequality. This is an edited version of a speech given by William Wright, managing director and founder of New Financial, as part of a debate held at the Capital Structure Forum organised by Private Debt Investor. The motion is taken from the cover of The Economist in May 2015.
Diversity disclosure is an opportunity for the European capital markets industry to get ahead of regulation, signal that it is serious about cultural change and inform the debate with facts rather than anecdotal evidence. The latest report from New Financial analyses what the biggest companies and organisations across the financial markets tell us about their approach to diversity on more than 50 criteria.
Average pay at investment banks has been falling since the financial crisis, but it has been rising steadily at asset management firms for the past decade. While staff at investment banks are taking a shrinking portion of a shrinking pot, asset managers are taking a constant portion of a growing one – with potentially significant consequences.
The latest report from New Financial puts some hard numbers for the first time on where capital markets in the rest of the EU stand without the UK. While capital markets in the EU27 are significantly smaller and less developed than in the EU as a whole, the report shows that there is a huge opportunity for the economy and for the capital markets industry in developing deeper capital markets in the EU beyond Brexit.
The available data around the capital markets in Europe is very patchy and inconsistent. In producing our report ‘Decoding capital markets union’ we had to make lots of assumptions, some more informed than others. Here’s a summary of where we got the data for our report and what estimates we made. If you have any queries about our data […]
The European capital markets industry risks losing its competitive edge if it doesn’t embrace the importance of gender diversity. The latest report from New Financial takes a snapshot of female representation on boards and executive committees at 220 organisations across 11 sectors in the financial markets – with some predictably depressing results.
Capital markets union could help unlock hundreds of billions of euros in additional investment to boost growth and job creation in Europe. But there is a danger that it will fall short of the unrealistically high expectations that many people have set for it.
Addressing diversity in the capital markets could be an important way for the industry to show that it is willing to embrace change and take steps to improve its culture – before it is forced to do so by regulators.
Finance academics and economists need to take a more constructively critical approach to the finance industry to help keep it on its toes, break out of the vicious circle of mistrust and regulation, and highlight the positive role it can play in driving prosperity.
Investment banks and asset managers need to start making a more constructive and positive case for what they do and for the valuable role that capital markets can play – before it’s too late.
Europe desperately needs to build bigger and better capital markets to help kickstart its recovery. Our first report puts some hard numbers on the gap in depth between capital markets in Europe and the US – and on the impact that has had on the European economy.
The details of the latest multi-billion dollar settlement over concerted manipulation of the FX markets make for depressing reading. But almost perversely, there is some good news buried beneath the piles of ordure…
If you work in the financial markets then you should probably have already read the recent speech by Minouche Shafik – deputy governor of the Bank of England with responsibility for markets and banking – on why markets matter, why the latest scandals are not just the fault of ‘a few bad apples’, and how the industry can apply its collective imagination to help rebuild fair and effective markets. But just in case you haven’t, here is an edited summary.
Here is a selection of recent academic papers and research that we have read, sifted and translated so that you don’t have to. This week, the papers include the theory behind regulatory capture, the impossibility of designing a benchmark that can’t be manipulated by determined and unscrupulous traders, an alternative perspective on long-termism, and why happy staff make for happy shareholders.
‘Capital markets union’ is an idea in desperate need of some concrete policies – but it could unlock billions of dollars in additional funding for businesses across Europe and help wean the economy off its damaging reliance on bank-lending.
If the banking industry wants to rebuild trust and persuade policymakers that it has fundamentally changed, it needs to show that it has changed the way it thinks as well as how it behaves.
Here is a selection of recent academic papers and research that we have read, sifted and translated so that you don’t have to. This week, the papers include the impact of capital markets on the companies that use them, the downside of shadow banking, what happens when CEOs drop dead, and why is the gap between bankers’ pay and lesser mortals so wide – and getting wider. Please send any papers that you come across or would like to recommend to firstname.lastname@example.org
In the wake of the financial crisis, more and more senior women in finance seem to have decided that the trade-offs that used to make sense are no longer worth it. This could reverse a lot of the progress in gender diversity that the industry has made over the past few years.
The question of pay and bonuses at investment banks is an important barometer of how the industry thinks about itself in relation to its shareholders, to its clients, and to society. Until banks start making a more positive case for what they do, they will struggle to defuse – let alone win – the argument.
For all of the talk of tough decisions and headlines about slashing costs and culling jobs over the past few years, investment banks have been running hard to stand still. The industry needs to get a grip on its costs and take more radical and strategic decisions than most banks have yet considered.
Given the technological progress, deregulation and innovation over the past 30 years, you might have expected to see a quantum change in the cost and efficiency of finance. Instead, the cost of financial intermediation has increased – and market participants have captured most of the gains for themselves.
The impressive recovery in IPO volumes over the past six months has been accompanied by less impressive aftermarket performance and poor returns for investors. This points to structural weaknesses in the IPO market that could kill off a sustained recovery in new issues before it even gets going.
The asset management industry’s collective failure to speak up and engage in the debate on the reform of banking and finance has cost it a seat at the top table and helped attract the attention of regulators to the industry’s own shortcomings. It’s time to change tack.
The long, slow decline of the fixed income business has highlighted the inability of most investment banks to adapt their business models to a changing landscape – and raises serious questions for the future of the entire industry.
Capital markets union is a great idea in need of some concrete policies. It could have a transformative effect on the European capital markets and on economic growth, but there is a danger that it could be diverted, delayed or even derailed. Here’s how: