Editorial - August/September 2017
Welcome to the August/September edition of Global Insight, a finance special assessing the current state of the art and a future sure to be shaped by technology. Focus on the sector is needed, now more than ever.
The extent of wrongdoing is still emerging ten years after the crisis. Institutions have already paid more than $150bn in fines relating to the crisis in the United States alone. The Royal Bank of Scotland’s $19bn settlement with the US Department of Justice in July was just one of three by European banks this year. New cases relating to the crisis are still emerging.
The Governor of the Bank of England, Mark Carney, suggested at the beginning of August that, if all goes to plan, a United Kingdom financial system, currently ten times the size of UK GDP (£1.9tn per year), will be 15 to 20 times GDP in 25 years. The major proviso being everything going to plan – this means the UK financial system thriving post-Brexit by keeping its market share of cross-border capital flows.
Many financial institutions have threatened to move business away from Britain, prompting talk of de-regulation to be competitive. America’s bank regulator is already consulting on further watering down the Volcker rule, intended to stop casino banking – one of many factors that triggered the crisis. Reassuringly, Carney says that ‘post-Brexit the level of regulation will be at least as high as it currently is and that’s a level that in many cases substantially exceeds international norms’.
This should contribute to avoiding a repetition of the devastating consequences that have reshaped economies and markets, with dramatic effects on democracy and whole populations. Nevertheless, the prevalence of legal settlements and deferred prosecution agreements remains a fundamental barrier to progress, as two of our features – ‘The age of impunity’ and ‘America’s real border problem’ – point out.
US Judge Jed Rakoff, who featured on the cover of the February/March 2013 edition of Global Insight, captured the sentiment well: ‘The court, and the public, need some knowledge of what the underlying facts are: for otherwise, the court becomes a mere handmaiden to a settlement privately negotiated on the basis of unknown facts, while the public is deprived of ever knowing the truth in a matter of obvious public importance.’ Navigating new terrain likely to include innovations such as bitcoin and blockchain is one of the major challenges for the future. Ensuring the finance sector acts in the public interest has been for some time.