Capital markets in the UK are the largest in the EU and are roughly twice as deep relative to the size of the economy as in the rest of the EU. But there is plenty of scope for growth and no room for complacency: UK capital markets are only half as developed as in the US, and over the past decade this gap has widened.
The asset management industry is a huge, important and growing industry, that plays a vital economic and societal role in managing risk and return for its customers and in allocating capital. But it can often be distracted from its underlying purpose of serving is customers by the structure of the industry, misaligned incentives, and its reliance on modern portfolio theory. In an important recent paper, Jon Lukomnik and Jim Hawley explore the underlying purpose of asset management, and how to reconnect the industry with that purpose.
The UK government launched the HM Treasury Women in Finance Charter in March 2016 to encourage the financial industry to improve gender balance in senior management. This report is the first annual review of signatories to monitor their progress against their Charter commitments over the past year. And while they are off to an encouraging start – 85% have either met their targets or are on track to meet them – progress has so far been slow.
Most sectors of the capital markets in the EU have shrunk relative to the size of the economy over the past decade – and the gap in the depth of capital markets with the US has widened. This report highlights the urgent need for action to boost capital markets in the EU – particularly after Brexit – but shows that there is a huge growth opportunity for capital markets in Europe.
The recent attack on the City by the Labour leader Jeremy Corbyn – and the public comments by a bank chief executive on bankers’ bonuses and populism – show that 10 years on from the financial there are few signs of mistrust and anger with the industry going away. If the industry wants to bridge the gap with the rest of society it should start by talking about itself in a different way.
The main benefit of a transition period is that it would reduce the risk of a ‘cliff-edge’ Brexit and buy more time for the UK and EU to negotiate a better long-term deal, but we think it is unlikely that any agreement can be reached early enough to prevent firms relocating significant numbers of staff. The good news is that an agreement on a transition period would be possible later next year – but only if the UK government changes direction in its negotiation strategy, and soon.
Diversity is firmly on the corporate agenda. New Financial’s latest report looks for the first time at what asset owners (such as pension funds, insurers and sovereign wealth funds) are doing on the diversity front. We analysed 100 asset owners globally with combined assets of $8 trillion to find out why and how they are approaching diversity – and how this affects asset managers.
The shadow of the financial crisis has dominated the banking and finance industry for nearly a decade. This report measures the concrete impact of the crisis on 16 sectors of the capital markets industry – from investment banks and asset managers, to exchanges, trading volumes and regulation – and highlights which sectors have suffered, which have weathered the storm, and which have flourished.
Brexit could have a significant impact on recruitment and jobs in the City of London – not least by highlighting structural challenges that will have a far bigger impact on the industry in the longer-term Another week, another set of numbers that send completely contradictory messages about the impact of Brexit on the City of […]
Capital markets union, the EU’s flagship initiative to boost capital markets in Europe and reduce the economy’s reliance on bank lending is three years old. This report analyses the progress so far, the impact of Brexit, and the shift in direction in CMU 2.0, (the revised version of the project that was published last month) – and suggests some more radical longer-term measures to build bigger and better capital markets in Europe.
HM Treasury’s Women in Finance Charter launched in March 2016 and now has more than 140 signatories. Our latest report is based on a survey of more than 80 firms that have signed up and assesses the concrete impact of the Charter is having on how they approach diversity, the benefits they are experiencing - and the challenges they face in meeting their Charter commitments.
The debate around gender diversity at the most senior levels in the corporate world has shot up the agenda in recent years – but for all the talk, how much progress has been made in the financial services sector? New Financial’s latest research on female representation on boards and executive committees across European capital markets shows a significant improvement in female representation on boards and excos – and the numbers are heading in the right direction across the industry.
Much of the debate around the impact of Brexit on the City of London and the financial services industry across Europe has been UK-centric. So we’ve read, sifted and summarised hundreds of speeches, articles and reports to identify what the rest of the EU really think about it. This report summarises the main priorities, concerns and negotiating positions of policymakers and regulators in each of the 27 member states who will be on the other side of the negotiating table from the UK over the next few years – and sums up what’s at stake.
The drill is well-rehearsed: misrepresent, ignore, and avoid. Whether it is Glass-Steagall, bankers bonuses, proprietary trading or capital requirements, the effect is the same. That there is even still a debate over higher levels of capital and lower leverage is testament to the success of the diversionary tactics of the banking lobby over the past five years.
To people who work in and around the financial industry it is self-evident that capital markets play a vital role in channelling investment into the economy to help drive growth and prosperity. But to most people outside of the industry, what capital markets do and the value of what they provide is less obvious, particularly given the shadow of the financial crisis. This report aims to address that disconnect.
The problem with chasing your tail is that you can lose sight of where you are heading without getting any closer to where you want to be. Over the past six months much of the City of London and financial services industry in the UK has been locked in an often circular argument about the potential impact of Brexit on their business and how to adapt to it. Here is a short 10-point reality check on the impact of Brexit.
There are few issues more challenging for the City of London and the financial services industry than the impact of Brexit. Yet there are few things less enticing than the prospect of reading the many dozens of often dense reports that have been written on the subject. We’ve read, translated and summarised nearly 50 reports on the implications of Brexit, so that you don’t have to. We’ve tried to boil down the essentials of each report, strip out the jargon and legalese, and cut back on the repetition and context.
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.
The HM Treasury Women in Finance Charter, launched in March this year, is a call to action for better gender diversity in financial services. New Financial’s latest report, produced in collaboration with HM Treasury, analyses the submissions from the first wave of Charter signatories to establish the starting point for levels of women in senior management today, the targets signatories are aiming for – and how they plan to achieve them.
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.
Capital markets have made remarkable progress from a standing start in Central and Eastern Europe over the past 25 years. This report, published in collaboration with AFME, shows that there is a huge opportunity for further growth: deeper capital markets in the region could unlock more than €200bn in long-term capital, deliver more than €40bn a year in extra funding for companies, and help restore rapid economic growth
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 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 […]
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.
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.
New Financial’s data on UK financial services commissioned for the Gadhia review shows the industry has a long way to go to improve gender diversity.
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.
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.
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.
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.
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.
New Financial is a new think tank and forum that believes Europe needs bigger and better capital markets to drive its recovery and growth – and that this presents a huge opportunity for the industry and its customers to embrace change and to rethink how capital markets work. Here is a summary of our work and of some of the recent coverage we have received:
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.
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 […]
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.
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.
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.
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.
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.
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.
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:
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.
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.
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.
‘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.
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.
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 email@example.com
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 available data around the capital markets in Europe is very patchy and inconsistent. In producing our report ‘Driving growth: making the case for bigger and better capital markets’ 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. […]
The relentless process of regulatory reform is getting bogged down in its own complexity. But before banks can draw a line in the sand and move on they need to prove they can be trusted on a longer leash – and stop treating every reform like it was General Custer’s last stand.
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.
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.
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 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.
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.
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.