SMF | New Finance Debate - Socially useless? Financial Innovation and the Real Economy

New Finance Debate - Socially useless? Financial Innovation and the Real Economy

Date: 17.30-19.00, Thursday 26th November 2009

Location: Social Market Foundation, 11 Tufton Street, London, SW1P 3QB

Speakers: John Kay, Financial Times
Anthony Belchambers, Chief Executive, Futures and Options Association
Gavyn Davies, Chairman of Fulcrum Asset Management, former Chief Economist, Goldman Sachs

Chair: Ian Mulheirn, Director, SMF

You can download a podcast of this event here

It would have been inconceivable even six months ago, but the following statement is now true: the CEO of Goldman Sachs and the Chairman of the FSA are united in believing that much banking activity of the last decade was socially useless.

Lending and deposit taking by banks - credit intermediation - is clearly essential for the functioning of the economy. But in the analysis of the credit bubble that exploded in 2007, a growing number of stakeholders across the banking sector now believe that a significant proportion of the activities of major banking institutions make negligible or limited contribution to the "real economy".

This change in the debate is significant, creating as it does more space for policymakers to act. However, while recognition of "socially useless" banking is growing, uncertainty still clouds what exactly is socially useful banking, how this can be categorised, identified and measured, and what all of this means for practical regulation.

This debate will therefore explore the questions:

What is socially useful banking and what is socially useless?
Is socially useless banking the same as economically useless?
What exactly are the negative externalities associated with socially useless banking activities? How can they be measured and how can the costs and benefits of such activities for society be evaluated by regulators?
Does banking activity have to be "socially useful" to be valid and permissible?
Should regulators worried about the existence and effects of socially useless banking consider radical measures to reduce its prevalence, such as a Tobin tax?

This event is free and open to all; however registration is required. If you would like to attend this event, please email events@smf.co.uk or call 020 7222 7060. Please note that places at this event are strictly limited.