Notes from a workshop: 7 miscellaneous ideas for the financing sector market

1. Finance has outgrown national governance; banking reform beyond deposit-taking must be multi-national to be effective. For European countries the EU's "normative power" provides an available and important space to do this.

2. Remember competition policy. We have to manage economic entities so that:
- their failure doesn't threaten the whole system (that means smaller banks, whether split between investment and retail or not)
- their power doesn't create imbalances in our political system (i.e. threaten government's capacity to make decisions in the interests of the whole). Overly dominant institutions use lobbying, funding and PR to drive policy in their interests (e.g. oil companies in the US)

3. The last three years has seen the extent to which banks operate with the implicit backing of governments. We need to make more explicit the conditions of licences to operate. Review, publicise and retool.

4. Introduce a better risk reporting matrix for pension funds. In the light of the huge impact of systemic volatility on pension finds over the past three years, pension funds need to better understand that fiduciary duty means addressing systemic as well as stock risks. Governments need to make explicit their requirement that funds do this (as distinct from telling them how to do this). Requiring reporting on a matrix of risk areas would force them to analyse and exposes long-term issues.

5. The achieve a rapid shift an economy governments need to use Government preferencing tools to better align political policy with financial priorities
- tax credits
- guarantees
- on-lend to local banks (i.e. use their distribution) for targeted programmes (e.g. green businesses)
- regulatory support (e.g. outlaw high-carbon investments)

That applies most urgently to green economy transitions.

6. Improve consumer protection. In the UK for example consumer protections have lagged behind other countries. This has the benefit of limiting opportunities to un-sustainably gouge consumers (it protects financial institutions from their worst tendencies).

The most urgent in the UK is to cap usurious interest rates. Many countries have a cap; Australia has around 50% for example. "Wonga.com", with interest rates in the thousands, should not be allowed in any market.

Equally, mortgage market regulation should mandate maximum lending ratios, capping them at 80% or 90%. This mitigates against practices dependent on upward market valuations.

7. The most important thing we could to encourage more productive capital allocation in anglo countries would be to tax income spent on mortgage payments just as we tax income spent on rent. It would reduce speculative pressure, even up the financial equivalence of renting and home-buying and push capital to other investment options where it's more urgently needed, such as the transition to a green economy.