Bibles, 4 fundamental freedoms, mattresses, funding, shadows, scandals and a declaration of love: the Gresham lecture had it all

By Phil Cantor,

Chief Marketing Officer,

iGTB | Intellect Design Arena Limited


Verena Ross at the Sir Thomas Gresham lecture


Ah, regulations, doncha just love ’em?

And regulators, too. Well, yes, actually, in one sense, but we’ll come to that at the end.

At the Sir Thomas Gresham lecture run by Gresham College and hosted by the gentle, piercing, forensic polymath Alderman Professor Michael Mainelli, Emeritus Professor of Commerce, Verena Ross, the German-born, UK-careered, now Europe-centered Executive Director of the regulator the European Securities and Markets Authority (ESMA), gave a clear and powerful dissection of the state of financial markets and Europe. Here’s my take on this: any credit goes to the speakers, any errors/howlers, all down to me.

In short, three things: one, how to make sure the financial markets flourish, are respected (tall order that one, have you heard of Wall St – Occupy, that is) and be more open; two, how can financial markets contribute to growth and three, what role will Europe play in world financial markets? One, London is and will remain Europe’s and maybe the world’s top financial centre (the capital with best access to capital), but the “dangerous cocktail” mixed by the lack of a single rule book contributed to a few small financial crisis issues: now we are much stronger by avoiding the divergence between countries and resultant friction seen elsewhere; two, we need to find money if we are to grow – EUR 2 trillion to be exact (well, to be approximate) – and bank lending ain’t gonna cut it – so retail investors have the money and must step up to the mark, but how do we protect them, how do we educate them and how do we increase their risk appetite: it’s not about shrinking banking but increasing diversity; three, an already big role for Europe can get bigger – as a more attractive market itself, benefitting from the single rule book and access to nearly one billion consumers, and as a contributor as other markets develop: achieving things individual states could not achieve such as TTIP (whether TTIP itself is a good or a bad thing).


ESMA has just 160 people doing the regulating, compared with over 3,000 in the FCA (hope I got those numbers right). Impressive. Reminiscent of the statistics about how few were needed in the Civil Service to run the British Empire compared to needed now to run only a small island. Regulations, regulations: Basel 3, MiFid 2. (James Alexander Gordon, where are you when we need you?). MiFiD, the Bible of the securities market. EMIR in EMEA. You’ll betray yourself if you mistake one for t’other there, luv. Regulating benchmarks: historical, fairly straightforward. Judgmental, not so simple. LIBOR was a scandal because what had been a historical, factual, reportage benchmark became judgmental, an opinion, and so susceptible to manipulation. But all of this is crucial to nothing less than shoring up one of the EU’s four key pillars of freedom of movement: of people, of goods, of services and, in this case, of capital.

More regulation, that’s not the aim, nor is the EU the aim, but the development of society and of the economy, aka wealth. All of us – you, me, your next door neighbour, invest these days in vehicles not much different from putting the money under the mattress. There’s the cash. How to put it to work? So financial innovation, and it’s rife, and they want to encourage it…er, but then it gets to a point it gets a bit risky – risky for the investor or risky for stability – then the regulators start to consider acting. Here’s the issue – and this is me, Phil, talking now, not paraphrasing others – here’s the thing. If we have to regulate – or even just consider regulating – every new financial product, every financial innovation and if, if, we encourage and promote a flood of new innovations, whether from traditional players, from “shadow banks” (that triumphant nomenclature devised by banks to suggest any competitor they don’t like is somehow evil), from entrants like supermarkets or innovators like Amazon, Google and Paypal, from crowd initiatives from the real Amazon or Africa (mobile phones anyone?) or from would-be disruptors like Blockchain, Ripple, Bitcoin, Payswarm and their derivatives, so if, if we encourage this flood of innovation, can’t we atomise financial products? Can’t we put some science to this and identify and isolate the key components, the atoms, of financial products and regulate at that much simpler and more effective and more cost-effective level of granularity? Then any new combination of atoms will come ready-regulated, the regulator’s job becomes simpler (= possible), the risks of over-regulation and playing catch-up are lessened and, quite frankly, the humungous number of closely-worded pages that have to be scrutinized to play in this market might be lessened (or at least the rate of growth lessened).

As Michael himself said at iGTB’s own Advisory Event last month in Boston, is the regulator the banks’ best friend by making the sector well nigh impossible to enter? On which point he made another good, rather robust sally forth. Is regulation the only tool (reminds me of a favourite nostrum: when all you have is a hammer, everything looks like a nail). Let’s compare. The food safety industry uses regulation but also voluntary standards, 800 ISO standards. Shipping? 300 ISO standards. Financial services? just around 50. Why so few? Er…yes, good point. Or Chris Skinner’s rapier thrust: why not just make sure banks are smaller, small enough, then we won’t need to regulate them so much. Small enough to fail, as in Matt’s famous cartoon.

Back to one point. If the saviour of growth and capitalisation in the EU is to be the retail investor, and this means relying on the retail investor to be prepared to take risks and “be educated” so they can judge what to invest in, er, how does that work then? How, as a retail investor, am I expected to gamble more accurately (or even avoiding-disastrously) on what to invest in, what risks to take, when there are professionals out there who spend their whole lives doing this and still, still get it collectively, spectacularly wrong, from tulips, South Sea, black swans, Wall St 1920s right up to the global financial crisis and whatever new mass hysteria is currently brewing? Educate? Who’s going to do that then? “I know, I can explain how to invest well – tell you, what, I’ll go educate people. I could go make pots of money, but no, I’ll go tell others how.” Really? I don’t think so. In any cases 99% of the retail investors are reluctant investors. They don’t WANT to be educated, to judge a good investment. They just want some way to keep their money safe and not look a fool 5, 10, 20 years later when they look round and find their pension has withered away because of “management fees” or their mortgage is still not paid off because of getting some dim out-of-market rate they never checked. Actually all they really want is to have an old age for however long chance (or God, if you’re like that) grants them and have somewhere to live. If they could avoid financial services entirely, they probably would.

Anyway, I’ll declare my personal passion. At dinner I declared my love, publically. In front of 30+ serious, besuited and betie-ed men (well there were precious few women) after a lovely dinner and ding-dong chat, I stated loudly and firmly I was in love. The table was shocked, they asked with whom or what? With Verena of course. Er…nervous laughter. I explained. “The more she regulates, the more systems I sell.” There you go. I’ve said it, I’ve made it public, can’t say fairer than that. I’m in love. After all, iGTB sells systems to banks so they can help corporations create the wealth of the world. Personally I’d like us to have fewer, more precise and less reactive regulations, but professionally it’s in my interest. This is all tongue in cheek, of course – actually my mission is to make it EASIER for banks, not revel in and profit from their discomfort. But it got a good laugh anyway and if you can’t have fun discussing bank regulations, you’re in the wrong job.

Looking forward to next year’s lecture.

(For the hugely wide-ranging programme of free Gresham lectures that always stimulate, supported by Z/Yen and – continuously since the 16th century the City of London and the Worshipful Company of Mercers, see




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