tag:theconversation.com,2011:/global/topics/financial-services-813/articlesFinancial services – The Conversation2024-01-22T13:29:16Ztag:theconversation.com,2011:article/2213932024-01-22T13:29:16Z2024-01-22T13:29:16Z‘No cash accepted’ signs are bad news for millions of unbanked Americans<p>How many people don’t have a bank account? And just how difficult has it become to live without one?</p>
<p>These questions are becoming increasingly important as <a href="https://www.chicagotribune.com/business/ct-biz-cashless-backlash-20180710-story.html">more businesses refuse to take cash</a> <a href="https://www.wmtw.com/article/cashless-businesses-south-portland-come-under-fire/40450267">in cities across the U.S.</a> People without bank accounts are shut out from stores and restaurants that refuse to accept cash.</p>
<p>As it happens, a lot of people are still “unbanked”: <a href="https://www.fdic.gov/analysis/household-survey/2021report.pdf">roughly 6 million</a> in the U.S., the latest data shows, which is about the population of Wisconsin. And outside of the U.S., <a href="https://www.worldbank.org/en/publication/globalfindex/Data">more than a billion people</a> don’t have a bank account.</p>
<p><a href="https://www.bu.edu/questrom/profile/jay-zagorsky/">I am a business school professor</a> <a href="https://blogs.bu.edu/zagorsky/">who researches society’s transition</a> from cash to electronic payments. I <a href="https://www.govtech.com/workforce/data-seattle-area-becoming-increasingly-cashless">recently visited Seattle and was amazed</a> by the mixed signals I saw in many storefronts. Numerous shops had one sign proudly proclaiming how welcoming and inclusive they were — next to another sign saying “No cash accepted.” This tells people without bank accounts that they aren’t welcome.</p>
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<figcaption><span class="caption">Not far from Seattle, Mount Rainier National Park stopped accepting cash in May 2023.</span></figcaption>
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<h2>Why not have a bank account?</h2>
<p>Why would someone want to avoid using banks? Every two years, the Federal Deposit Insurance Corporation surveys households about their connections to the banking system and asks people without bank accounts <a href="https://www.fdic.gov/analysis/household-survey/2021execsum.pdf">why they don’t have one</a>. People can respond with multiple answers. In 2021, the top reason — with over 40% of respondents choosing it — was that they didn’t have enough money to meet the minimum balance.</p>
<p>This is consistent with data showing that poorer households are less likely to have bank accounts. About one-quarter of those earning less than $15,000 a year are unbanked, the FDIC found. Among those earning more than $75,000 a year, almost every person surveyed had some type of bank account.</p>
<p>The second- and third-most common answers show that some people are skeptical of banks. Roughly one-third of survey respondents agreed that “Avoiding a bank gives more privacy,” while another one-third said they simply “don’t trust banks.”</p>
<p>Rounding out the top five reasons were costs of dealing with a bank. More than one-quarter of respondents felt bank account fees were too high, and about the same proportion felt fees were too unpredictable.</p>
<p>While many middle-class and wealthy people don’t pay directly for their bank accounts, fees can be costly for those who can’t maintain a minimum balance. A recent Bankrate survey <a href="https://www.bankrate.com/banking/checking/checking-account-survey/">shows basic monthly service fees</a> range between $5 and $15. Beyond these steady fees, <a href="https://www.fdic.gov/resources/consumers/consumer-news/2021-12.html">banks earn $4 to $5</a> each time people withdraw cash from an ATM or need services <a href="https://www.bankrate.com/banking/checking/what-is-a-cashiers-check/#fees-for-a-cashier-s-check">like getting cashier’s checks</a>. Unexpected bills can result in <a href="https://www.bankrate.com/banking/checking/checking-account-survey/#overdraft-fees">overdraft fees of about $25</a> each time an account is overdrawn.</p>
<h2>Being unbanked in America</h2>
<p>The FDIC calls people without a bank account “<a href="https://www.pbs.org/newshour/show/millions-of-unbanked-americans-lack-adequate-access-to-financial-services">the unbanked</a>.” People with a bank account but who primarily rely on alternative services such as check cashing outlets are called “<a href="https://guides.loc.gov/fintech/21st-century/unbanked-underbanked">the underbanked</a>.”</p>
<p>The latest FDIC data shows almost 6 million unbanked and 19 million underbanked U.S. households. Given that <a href="https://www.census.gov/content/dam/Census/library/visualizations/time-series/demo/families-and-households/hh-6.pdf">2.5 people live in the average household</a>, this means there are over 15 million people living in a home with no connection to banks, and 48 million more in homes with only a tenuous connection to banks.</p>
<p>Combining the two figures means roughly one out of every five people in the U.S. has little or no connection to banks or other financial institutions. That can leave them shut out from stores, restaurants, transportation and medical providers that don’t take cash.</p>
<p>The true number of unbanked people is likely higher than the FDIC estimates. The questions on being banked or unbanked are supplemental questions <a href="https://www.census.gov/programs-surveys/cps/about.html">added to a survey</a> given to people at their homes. This means it misses homeless people, transients without a permanent address and <a href="https://www.dhs.gov/immigration-statistics/population-estimates/unauthorized-resident">undocumented immigrants</a>. </p>
<p>These people are likely unbanked because you need a verified address and a government-issued tax-identification number <a href="https://www.federalreserve.gov/boarddocs/supmanual/bsa/bsa_p5.pdf">to get a bank account</a>. Given roughly <a href="https://www.npr.org/2023/12/22/1221006083/immigration-border-election-presidential">2.5 million migrants crossed the U.S.-Mexico border</a> in 2023 alone, there are millions more people in the cash-only economy than the FDIC estimates. </p>
<h2>How many people globally are unbanked?</h2>
<p>While the U.S. has relatively high rates of people with bank accounts, the picture is different in other parts of the world. The <a href="https://www.worldbank.org/en/topic/financialinclusion/overview">World Bank has created a database</a> that shows the percentage of each country’s population that has access to financial services. The World Bank’s definition of being banked is broader than the FDIC’s, since it includes anyone who uses a cellphone to send and receive money as having a bank account.</p>
<p>Overall, the World Bank estimates about <a href="https://www.worldbank.org/en/publication/globalfindex">one-quarter of the world’s adults</a> don’t have access to a bank or mobile-phone account. But that varies dramatically by region. In countries that use the Euro, almost everyone has a bank account, while in the Middle East and North Africa, only about half the population does.</p>
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<h2>A more inclusive economy</h2>
<p>Many of us swipe our credit cards, tap our phones or insert a debit card to pay without thinking. However, there are at least 6 million people in the U.S. and almost <a href="https://ufa.worldbank.org/en/ufa">1.5 billion worldwide who are unbanked</a>.</p>
<p>When businesses stop accepting cash, the unbanked are forced to use payment methods like prepaid debit cards. However, these <a href="https://www.consumerfinance.gov/ask-cfpb/what-types-of-fees-do-prepaid-cards-typically-charge-en-2053/">prepaid cards are costly</a>. For example, Walmart, one of the largest U.S. retailers, <a href="https://www.walmartmoneycard.com/">offers a reloadable basic debit card</a>. The card <a href="https://www.investopedia.com/articles/personal-finance/112315/6-ways-load-your-walmart-money-card.asp">costs $1 to buy</a> and charges <a href="https://www.walmartmoneycard.com/helpcenter/getting-started/why-walmart-moneycard/how-can-i-waive-my-monthly-fee-for-walmart-moneycard">$6 per month in fees</a>, in addition to <a href="https://www.walmartmoneycard.com/helpcenter/adding-money/how-much-does-it-cost-to-use-walmart-rapid-reload">$3 each time someone wants to load the card with cash</a> at Walmart’s registers. Paying a minimum of $10 just to set up a debit card for a few purchases is a steep price.</p>
<p>The next time you see a sign in a shop or restaurant window stating “No cash accepted,” you’re really looking at a business excluding many unbanked and underbanked people. Insisting that all businesses accept cash is a simple way to ensure everyone is financially included in the modern economy.</p><img src="https://counter.theconversation.com/content/221393/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jay L. Zagorsky does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A cashless economy is a less inclusive economy.Jay L. Zagorsky, Clinical Associate Professor of Markets, Public Policy and Law, Boston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2151872023-10-09T10:13:45Z2023-10-09T10:13:45ZFair Play: Netflix drama reveals the dark side of being a woman in the financial services industry<p><em>Warning: this article contains minor spoilers for Fair Play.</em></p>
<p><a href="https://www.netflix.com/gb/title/81674326">Fair Play</a> follows a young couple working as analysts at a high-flying, ruthless asset management firm in New York. They work hard and play hard while appearing to support each other’s careers. </p>
<p>But their relationship is in breach of company policy, so they keep it quiet, despite living together and getting engaged. As a portfolio manager is fired, Emily (Phoebe Dynevor) hears a rumour that Luke (Alden Ehrenreich) may be offered the role. </p>
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<p>They celebrate the rumour the same evening with booze and sex. However, it is Emily who is summoned to a bar in the middle of the night and told she’s being promoted on the back of her excellent résumé and performance. Luke is given the role of her analyst and now works for her. From here their dynamic unravels. </p>
<p>Fair Play portrays the darkest side of the financial services industry: the greed, the fear, the inappropriate behaviour and the frivolous spending. </p>
<p>Despite her excellent performance, Emily struggles to feel she deserves the promotion – and so does Luke. It was much easier for them to celebrate the rumour of his promotion than the fact of hers. </p>
<p>While at times supportive, Luke finds it impossible to believe that her promotion was based on merit and pushes outdated gender stereotypes onto her. At his worst, he accuses Emily of sleeping her way to the promotion.</p>
<p>There is an air of Emily feeling lucky, instead of deserving, to be promoted. <a href="https://www.routledge.com/Gender-and-Finance-Addressing-Inequality-in-the-Financial-Services-Industry/Baeckstrom/p/book/9781032055572">Like many real women</a> in the financial services industry, she struggles to know how she should act. Without other female role models – but plenty of alpha male ones – her confidence in who she is and how she should act is extremely fragile. </p>
<p>A derogatory comment about her dress code sends her into despair, trying to select office outfits that send the right message. This struggle is unsurprising given <a href="https://daily.jstor.org/the-history-of-the-power-suit-for-women/">the short history of women’s business attire</a> compared to men’s. </p>
<p>Observing her confidently delivering her well-researched opinions in meetings and making brave trading decisions is promising. Watching her celebrate with the senior, all-male team in a strip club and getting involved in derogatory, sexualised stories about women is revolting.</p>
<h2>The real finance industry</h2>
<p>The alpha male dominance of financial services and the historical exclusion of women mean it’s a relatively new domain for women. In the US, where Fair Play is set, women didn’t gain the legal right to be members of the New York Stock Exchange until 1967. And it wasn’t until 2021 that <a href="https://www.citigroup.com/global/about-us/leadership/jane-fraser">a woman took charge</a> of one of the top 30 global banks.</p>
<p>Regardless of how talented she is, it is understandable for a woman to feel more unstable about her position as she rises in the ranks. In banking, successful women are <a href="https://www.theguardian.com/business/2023/jul/27/was-alison-rose-held-to-higher-standard-because-woman">scrutinised more harshly</a> than their male counterparts. </p>
<p><a href="https://www.routledge.com/Gender-and-Finance-Addressing-Inequality-in-the-Financial-Services-Industry/Baeckstrom/p/book/9781032055572">As I show in my research</a>, when it comes to financial services we are predisposed to think talent plus hard work equals a lucky woman, and that talent plus a good contact network equals a successful, powerful man. </p>
<p>Despite outperforming colleagues, women like Emily can at times feel that they do not deserve their promotions. However, when it comes to men, people tend to see potential because they expect potential. Many women and men want to change this.</p>
<p>Fair Play leaves the viewer feeling hopeless about the possibility of inclusive and fair financial services careers and personal relationships. It signifies how extremely difficult it is for people of all genders to break through entrenched negative gender roles. </p>
<p>Financial services is an extremely powerful industry, without which our society cannot function. It is also the best-paid industry, yet has the second <a href="https://www.cnbc.com/2023/04/05/uk-gender-pay-gap-banks-pay-women-less-than-two-thirds-of-mens-earnings.html#:%7E:text=The%20finance%20sector%20reported%20the,according%20to%20a%20CNBC%20analysis.">largest gender pay gap</a> (after education). It therefore has a responsibility to set the standard for inclusive and fair practices. </p>
<p>Challenging outdated gender stereotypes through reverse messaging and fair treatment is a better strategy than creating a new generation of alphas of all genders. To work well, we need supportive structures both at home and in the workplace and a culture that evaluates and rewards people based on their potential and contributions – regardless of gender.</p>
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<p class="fine-print"><em><span>Ylva Baeckstrom does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In the US, where Fair Play is set, women didn’t gain the legal right to be members of the New York Stock Exchange until 1967.Ylva Baeckstrom, Senior Lecturer in Finance, King's College LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2111342023-08-14T15:49:38Z2023-08-14T15:49:38ZHow subtle forms of sexism in financial services led to recent City scandals – what research shows<figure><img src="https://images.theconversation.com/files/542308/original/file-20230811-29-95huly.jpg?ixlib=rb-1.1.0&rect=78%2C39%2C6475%2C4343&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">William Perugini/Shutterstock</span></span></figcaption></figure><p>When I first worked in the City of London, a few years out of university, a company-appointed “style consultant” suggested I would be taken more seriously as a female professional if I wore more make-up and exchanged my trousers for skirt suits. </p>
<p>At the time, I was under the naïve impression that workplace sexism was more or less a thing of the past. But I soon found out I was wrong and this conversation served as an early red flag. </p>
<p>That was 20 years ago. And while the financial and professional service industries have changed for the better, they may not have changed enough.</p>
<p>A <a href="https://www.theguardian.com/business/2023/jul/14/parliament-launches-new-inquiry-into-city-sexism-after-scandals">parliamentary committee</a> has been tasked with renewing an inquiry into sexism in the City of London following claims of sexual misconduct against <a href="https://www.ft.com/content/e5d14398-e866-44b3-8ecb-4e6371167c6d">hedge fund leader, Crispin Odey</a>, which he has denied. The Confederation of British Industry (CBI) has also recently launched an investigation into similar claims and has announced <a href="https://www.cbi.org.uk/media/lkto4nzv/a-renewed-cbi-prospectus.pdf">an overhaul</a> focused on company culture. </p>
<p>Scandals like these matter, of course, most obviously to the women directly affected by them. But such relatively high profile incidents may only represent the tip of the iceberg. There are many more subtle, underlying forms of sexism that pervade the Square Mile and beyond. These forms often lay the foundation for the larger scandals that erupt less frequently.</p>
<h2>A man’s world</h2>
<p>Men still dominate the most senior and highly paid positions in financial services. The 2021 <a href="https://www.gov.uk/government/publications/new-financial-women-in-finance-annual-review-march-2021">Women in Finance Charter Annual Review</a> reported 32% female representation in senior management on average among charter participants, which includes many top banking and finance firms. This is an increase of less than 1 percentage point each year since 2017.</p>
<p>Superior status and pay offer men more power and evidence shows that related abuses and sexual harassment are <a href="https://hbr.org/2017/11/training-programs-and-reporting-systems-wont-end-sexual-harassment-promoting-more-women-will">considerably more likely</a> as a result. Factors contributing to this situation are complex and rooted in history. The City has always been male-dominated. Men (typically white, often from middle-class backgrounds) and the versions of masculinity associated with this picture are seen as “the norm” in the financial services industry.</p>
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<a href="https://theconversation.com/class-and-the-city-of-london-my-decade-of-research-shows-why-elitism-is-endemic-and-top-firms-dont-really-care-199474">Class and the City of London: my decade of research shows why elitism is endemic and top firms don't really care</a>
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<p>As American academic <a href="https://www.jstor.org/stable/23416300">Karen Ashcraft</a> points out, in organisations and occupations made by and for men, it is hardly surprising that they continue to enjoy advantages and privileges; they are seen as the “natural fit”. This creates a catch-22: sexist cultures flourish where women are under-represented in positions of power, which is in turn partly due to sexist cultures. </p>
<p>Of course, women can and do compete successfully within these environments. But this often requires them to behave in ways more traditionally associated with men: demonstrating ambition above all else, “total commitment” and, most importantly perhaps, working very long hours. </p>
<p>One of the first academics to explore these tensions, <a href="https://www.wiley.com/en-gb/Capital+Culture%3A+Gender+at+Work+in+the+City-p-9780631205302">Linda McDowell</a>, who researches work and employment issues, described how the City runs on deeply embedded masculinised assumptions. She reported one female banker as making the following point in the early 1990s: “You have to be one of the boys to get on here.” </p>
<p>In 2020, one of my own research participants, a female financier with many years’ experience, made a similar point: </p>
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<p>Overt sexism is probably less common now but success is still based on more of a male model … linear careers, no breaks, long hours. </p>
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<p>Of course, suggesting this is problematic could seem sexist in itself by implying that men and women are, in some essential sense, different from each other. This notion was debunked by <a href="https://www.smithsonianmag.com/smithsonian-institution/powerful-complicated-legacy-betty-friedans-feminine-mystique-180976931/">second-wave feminists</a> who pointed out that most assumed differences between the sexes are the result of socially constructed gender stereotypes. </p>
<p>While often accused of a relatively exclusive form of feminism, centred on privileged white women, they argued this kind of thinking offers a useful justification for women’s lesser position. </p>
<p>On the other hand, feminist scholars and writers have underlined that <a href="https://www.penguin.co.uk/books/326943/the-whole-woman-by-greer-germaine/9780552774345">difference does matter when it comes to biology</a>, as the historical basis for women’s oppression. This is why challenging men’s dominant position requires substantive rather than superficial adjustments to the way society and its organisations are run. </p>
<h2>Strengthening diversity and inclusion initiatives</h2>
<p>Some related ideas have been enshrined in legislation in areas such as maternity, but diversity and inclusion agendas implemented by City firms since around the turn of this century are quite poorly equipped to address the challenge of making these substantive changes. </p>
<p><a href="https://bristoluniversitypress.co.uk/highly-discriminating">As my own research shows</a>, women’s under-representation at senior levels is often attributed to “unconscious bias” on the part of managers. Attention is directed at “de-biasing” individuals through training, with less focus on the underlying systems and structures, which tend to advantage men. </p>
<p>The move towards more flexible work does represent a more structural response. But, where a culture of long hours persists, adopting alternative working patterns might be frowned upon – “success” at work continues to depend on assimilation to dominant norms. </p>
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<p>The key problem here is that adjustments are made within existing systems rather than to the system itself. And, arguably, the most important system to address is our current model of capitalism. </p>
<p>The UK has adopted a relatively <a href="https://www.bbc.co.uk/news/business-50562518">extreme form</a> of capitalism, and financial and professional service firms have helped drive that through the <a href="https://www.theguardian.com/news/2018/oct/05/the-finance-curse-how-the-outsized-power-of-the-city-of-london-makes-britain-poorer">financialisation of our economy</a>. This aggressive pursuit of profit can be associated with individualistic, competitive and <a href="https://www.financialreporter.co.uk/reputation-of-toxic-workplace-culture-deters-half-of-finance-workers-from-accepting-">often quite toxic cultures</a>, which can be hostile to both women and men. </p>
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Read more:
<a href="https://theconversation.com/how-to-find-out-if-your-company-has-a-toxic-culture-and-if-it-supports-victims-of-workplace-bullying-204600">How to find out if your company has a toxic culture and if it supports victims of workplace bullying</a>
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<p>This is an unstable platform from which to address questions of sexism and discrimination. Instead, the latest parliamentary inquiry and City leaders should start by acknowledging that high-profile examples of poor behaviour are not necessarily an unexpected aberration from “business as usual”. More likely, they result from cultures where men (and particular versions of masculinity) remain dominant. </p>
<p>Actions in response should tackle the way certain groups or types of people and their way of working dominates financial services. But this will require a more radical approach that addresses the root causes of sexism and inequality, rather than tinkering around the edges of the problem.</p><img src="https://counter.theconversation.com/content/211134/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Louise Ashley does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Sexism and misogyny still rears its head in everyday interactions in the financial services industry, not just in the scandals that hit the headlines.Louise Ashley, Senior Lecturer in Sociology of Work, Queen Mary University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2102352023-07-28T12:52:42Z2023-07-28T12:52:42ZBank account closures don’t just affect ‘politically exposed persons’ – sex workers have struggled with financial exclusion for years<figure><img src="https://images.theconversation.com/files/539559/original/file-20230726-29-q9sqyp.jpg?ixlib=rb-1.1.0&rect=208%2C126%2C5830%2C3884&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/stressed-broke-young-asian-woman-having-2237736495">BongkarnGraphic/Shutterstock</a></span></figcaption></figure><p>The fallout over the closure of Nigel Farage’s bank account has shed light on how financial institutions handle “politically exposed persons”, whom they may view as high-risk clients. </p>
<p>Farage, the former Ukip leader, who held a bank account at the NatWest-owned private bank <a href="https://www.coutts.com/">Coutts</a>, obtained and published a <a href="https://www.telegraph.co.uk/news/2023/07/19/coutts-full-dossier-on-nigel-farage-closed-bank-account/">dossier</a> showing that the bank closed his account after identifying him as a reputational risk. The internal report stated that Farage’s views “do not align with our values”. Two executives at NatWest banking group – CEO Alison Rose and Peter Flavel, head of the bank’s Coutts division – have <a href="https://www.bbc.co.uk/news/business-66328666">since resigned</a>.</p>
<p>But people who occupy prominent public functions are not the only ones to be affected by loss of access to financial products.</p>
<p>For people working in commercial sex, the often unexplained closure or denial of bank accounts is an all too frequent occurrence. And their experiences hardly attract the same quick <a href="https://news.sky.com/story/city-minister-summons-bank-bosses-to-protect-customers-from-being-de-banked-after-farage-account-closure-12926362">government intervention</a> and response from banks as Farage.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/what-is-a-politically-exposed-person-and-why-do-the-likes-of-jeremy-hunt-and-nigel-farage-claim-the-status-prevents-them-getting-bank-accounts-209658">What is a 'politically exposed person' and why do the likes of Jeremy Hunt and Nigel Farage claim the status prevents them getting bank accounts?</a>
</strong>
</em>
</p>
<hr>
<p>Escorts, in-person sex workers, cam and pornography performers, sexual products business owners and others operating in adult entertainment have discussed their financial exclusion ordeals on <a href="https://www.news.com.au/finance/business/banking/appalling-australian-sex-worker-samantha-x-reveals-huge-banking-blow/news-story/e0d1676aa12c1472ea8c039897ef892c">social media</a> and in various <a href="https://www.theguardian.com/business/2021/oct/16/sex-discrimination-why-banks-shun-workers-in-adult-entertainment">news outlets</a> around the world for years. More recently, <a href="https://www.nswp.org/sites/nswp.org/files/Summary%20Regional%20Reports%20Economic%20Empowerment%2C%20NSWP%20-%20November%202015.pdf">sex worker organisations</a> and <a href="https://academicworks.cuny.edu/clr/vol26/iss1/4/">researchers</a> have begun collecting evidence of the extent and impact of this discrimination.</p>
<p>What is evident from the <a href="https://www.northumbriajournals.co.uk/index.php/IJGSL/article/view/1258">expanding research</a> is that, even though their commercial sex practices are legal and earnings legitimate, sex workers and adult entertainers are frequently denied or revoked access from financial products. This can include <a href="https://www.nzherald.co.nz/business/banks-refusing-services-to-sex-workers-were-easy-picking/N7N74KJGK2SH6TSJQDVQOBLDPY/">business</a> and <a href="https://columbianewsservice.com/2023/02/01/sex-workers-say-they-face-hurdles-to-banking-access/">personal bank accounts</a>, <a href="https://nationaluglymugs.org/wp-content/uploads/2022/01/BDSW_final.pdf">overdrafts</a>, <a href="https://www.9news.com.au/national/banks-blamed-for-sex-worker-slut-shaming/2f4e11bf-e7d8-4719-9237-259a0a8f3bf5">mortgages</a>, <a href="https://www.bbc.co.uk/news/uk-england-south-yorkshire-56758745">loans</a>, <a href="https://www.investordaily.com.au/markets/46043-nab-treated-me-like-garbage-sex-worker-says">merchant banking services</a>, <a href="https://www.bbc.co.uk/news/technology-55551300">credit card services</a>, <a href="https://survivorsagainstsesta.org/platforms-discriminate-against-sex-workers/">e-wallets, e-payments and more</a>.</p>
<p>A <a href="https://nationaluglymugs.org/wp-content/uploads/2022/01/BDSW_final.pdf">2021 report</a> from <a href="https://nationaluglymugs.org">National Ugly Mugs</a>, a UK charity fighting to end violence against sex workers, shows evidence of financial discrimination by various UK-based financial institutions. </p>
<p>The report highlights the experiences of sex workers who were explicitly told by banks that the decision to withhold their services was based on their involvement in the adult industry. Others received no justification for the closure or denial of bank accounts, but did not inquire further about the reasons of their exclusion, for fear of being denied accounts elsewhere.</p>
<h2>‘They do not want you at all’</h2>
<p>My ongoing research on sex work and financial exclusion with colleagues from the University of Nevada shows that people working in the legal adult entertainment industry in the US experience similar exclusions. As a sex worker operating in a legal Nevada brothel told us: </p>
<blockquote>
<p>Once the bank figures out you’re a sex worker, they don’t want to offer you any services at all whatsoever. They do not want you at all. </p>
</blockquote>
<p>Another participant told us that such exclusions can persist even after leaving sex work. She spoke of a friend who had been out of the legal brothel industry for more than a year, but was still unable to open a bank account. </p>
<p>Financial services are indispensable for carrying out most professional and personal activities. But our respondents felt they were not in any position to challenge the exclusions they faced. One told us that the fear of being permanently denied access to financial products stops them from speaking up:</p>
<blockquote>
<p>Generally banks don’t exactly say why, [and] we don’t exactly say why either because it’s so dangerous.</p>
</blockquote>
<p>She also described being “thankful that it’s not worse than that”, after having a bank account closed – but not having her funds seized.</p>
<p>Most of our respondents reported long-term freezing or loss of funds, specifically when dealing with online payment services. As most adult entertainment services are now <a href="https://onlinelibrary.wiley.com/doi/epdf/10.1111/1468-4446.12493">facilitated online</a>, access to digital financial infrastructure and e-payments is ever more important. </p>
<p>But many online payment platforms have a <a href="https://www.paypal.com/us/cshelp/article/what-is-paypal%E2%80%99s-policy-on-transactions-that-involve-sexually-oriented-goods-and-services-help384#:%7E:text=We%20don%27t%20permit%20PayPal,or%20appear%20to%20involve%2C%20minors.">ban on “sexually oriented goods or services”</a>. As Natasha Tusikov, an expert on crime, technology and regulation describes, this is a form of <a href="https://www.emerald.com/insight/content/doi/10.1108/S1521-613620210000026005/full/pdf">sexual censorship</a> that leaves people with limited digital payment options, many of which charge high fees. </p>
<figure class="align-center ">
<img alt="Photo of Nigel Farage speaking at an event, against a dark background" src="https://images.theconversation.com/files/539763/original/file-20230727-17-ltpufz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/539763/original/file-20230727-17-ltpufz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/539763/original/file-20230727-17-ltpufz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/539763/original/file-20230727-17-ltpufz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/539763/original/file-20230727-17-ltpufz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/539763/original/file-20230727-17-ltpufz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/539763/original/file-20230727-17-ltpufz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Not everyone has the political or media power to speak up about their bank account closure.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/newport-wales-uk-september-21st-2019-1551047501">ComposedPix/Shutterstock</a></span>
</figcaption>
</figure>
<h2>The toll of financial exclusion</h2>
<p>Having to hide their occupation, living in a constant state of fear of being “debanked” (losing access to bank accounts) has a heavy toll on sex workers’ lives. This even more so for undocumented migrants, or others who face discrimination on the basis of their race, class, gender and sexuality. </p>
<p>Financial exclusion is not only a source of anxiety and depression, but has harmful <a href="https://action.freespeechcoalition.com/files/FinancialDiscriminationandtheAdultIndustry.pdf">ripple effects</a>. It prevents people from accessing loans and mortgages, it reduces opportunities to save, plan finances for the future or change occupation. It can lead to homelessness and loss of financial autonomy. </p>
<p>As one of our respondents told us, missing a rent payment and getting evicted can lead to suicide: </p>
<blockquote>
<p>When someone is debanked, people die, and I want to say this bluntly. This is a deadly issue.</p>
</blockquote>
<p>Sex workers and organisations who advocate for their rights are challenging these practices. In 2021, a group of UK-based sex worker-led organisations <a href="https://drive.google.com/file/d/1GQCV62TnDfq8Pibn9GaRKghIOYCP3u90/view">wrote an open letter</a> demanding the end of financial exclusion by financial institutions. In the US, <a href="https://www.acceptancematters.org">sex workers</a> and civil rights organisations have been campaigning to stop payment platforms from <a href="https://www.aclu.org/news/lgbtq-rights/paypal-and-venmo-are-shutting-out-sex-workers-putting-lives-and-livelihoods-at-risk">shutting down sex workers’ accounts</a> without due process, and to challenge the <a href="https://www.aclu.org/news/lgbtq-rights/how-mastercards-new-policy-violates-sex-workers-rights">exclusionary adult content policies</a> of credit card networks.</p>
<p>But as our participants pointed out, the stigma that surrounds the adult entertainment industry prevents many from coming forward. Some are concerned that publicly challenging financial institutions might result in being permanently banished from them. Unlike well-known political figures, vulnerable people in a stigmatised industry have limited expectations of redress after being excluded from financial services.</p><img src="https://counter.theconversation.com/content/210235/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Isabel Crowhurst received funding from the ESRC Impact Acceleration Account for research mentioned in the article.</span></em></p>Escorts, sex workers and other adult entertainers often do not feel they have the power to challenge debanking.Isabel Crowhurst, Reader in Sociology, University of EssexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2088882023-07-05T15:45:23Z2023-07-05T15:45:23ZWhy banks once flocked to Canary Wharf’s high-tech superstructures, but are now starting to return to the City<figure><img src="https://images.theconversation.com/files/535727/original/file-20230705-25-m26a2j.jpg?ixlib=rb-1.1.0&rect=29%2C5%2C3951%2C2757&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Canary Wharf, London.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/canary-wharf-business-banking-area-sunset-1498895684">IR Stone/Shutterstock</a></span></figcaption></figure><p>HSBC is moving its UK headquarters <a href="https://www.theguardian.com/business/2023/jun/26/hsbc-to-move-to-smaller-city-of-london-headquarters-due-to-hybrid-working">from Canary Wharf back into the City of London</a> as it adjusts to the impact of hybrid work on its office space needs. </p>
<p>This could signal the reverse of the 1990s trend of banks moving out of the City in search of buildings more suited to modern banking. The City’s “Square Mile” financial district is considered the historical centre of British banking. But space and planning restrictions on building expansions made a move to Canary Wharf very appealing as <a href="https://www.jstor.org/stable/23286646">banks navigated the new world of electronic trading</a>, starting in the 1980s.</p>
<p>HSBC’s predecessor, Midland Bank, opened grand offices at 27 Poultry, next to the Bank of England, in 1924. But after its takeover by HSBC in 1992, this office was vacated for more modern premises on Lower Thames Street. </p>
<p>A subsequent move by HSBC to Canary Wharf in 2002 came more than a decade after the first tenants moved to this new site – Morgan Stanley, Credit Suisse, First Boston and Citigroup. Barclays was the last major UK retail bank to leave the City’s Lombard Street for Canary Wharf in 2005. </p>
<p>HSBC is now heading back to the City 21 years later, possibly at the forefront of another wave of migration, as UK-based banks adjust to the world of hybrid working practices. If bank staff are working from home for two or three days in a week, space is less crucial. Indeed, <a href="https://uk.finance.yahoo.com/news/uk-office-occupancy-hits-highest-150826953.html">office vacancies in London are rising</a>, particularly in <a href="https://www.theguardian.com/business/2023/jul/05/it-has-lost-its-appeal-canary-wharf-faces-an-uncertain-future">Canary Wharf</a>. The City of London, although never down and out, appears to be in ascendance again. </p>
<p>Our <a href="https://www.cambridge.org/core/journals/enterprise-and-society/article/quiet-victory-national-provincial-gibson-hall-and-the-switch-from-comprehensive-redevelopment-to-urban-preservation-in-1960s-london/DA166BDF81D6AE1B2C5433543281DCE7">previous research</a> into the flight of banks to Canary Wharf showed it was driven by conservation movements that aimed to preserve the City’s historical buildings. In particular, National Provincial Bank (later NatWest) wanted to transform its headquarters in the 1960s from a prestigious Victorian building into a skyscraper fit for modern banking.</p>
<h2>Fighting to modernise</h2>
<p><a href="https://www.researchgate.net/figure/Exterior-view-of-Gibson-Hall-Illustrated-London-News-1866_fig4_337788669">Gibson Hall</a>, National Provincial Bank’s original home in the City of London, was built in 1865 and served as the bank’s headquarters for over a century. Victorian banks preferred large, grand, highly-decorated buildings in prime locations for their head offices. They wanted to project wealth, reliability, stability and success. In 1894, the German travel writer <a href="https://www.britannica.com/biography/Karl-Baedeker">Karl Baedeker</a>, wrote in his <a href="https://books.google.co.uk/books/about/London_und_Umgebungen.html?id=3itwcES-3UMC&redir_esc=y">guidebook to London</a> that Gibson Hall was a “beautiful, in Byzantine-Roman style, richly decorated hall with polished granite columns and polychromatic decoration”.</p>
<figure class="align-left ">
<img alt="An ornate stone building with arched door and window, topped by statues. Skyscrapers in the background." src="https://images.theconversation.com/files/535779/original/file-20230705-9468-m26a2j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/535779/original/file-20230705-9468-m26a2j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/535779/original/file-20230705-9468-m26a2j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/535779/original/file-20230705-9468-m26a2j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/535779/original/file-20230705-9468-m26a2j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/535779/original/file-20230705-9468-m26a2j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/535779/original/file-20230705-9468-m26a2j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Gibson Hall, Threadneedle Street, London.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/gibson-hall-sunset-1862-directors-national-169006781">Kiev.Victor/Shutterstock</a></span>
</figcaption>
</figure>
<p>However, by the 1960s, the Victorian style of Gibson Hall appeared old-fashioned, while the building itself had become ill-suited to modern banking methods. Telephones and computers required wiring and cables that the building had not been built to accommodate. Also, when Gibson Hall was first constructed, just 100 employees worked in the London office. By 1964, this figure had grown to 1,866, excluding non-clerical staff, according to information we found in the NatWest Group archives.</p>
<p>So, National Provincial’s leaders thought replacing Gibson Hall with a new skyscraper would better reflect the needs, size and status of a large and growing modern bank. It could also escape the constraints of an historic building that was no longer fit for purpose.</p>
<p>Unfortunately for National Provincial, <a href="https://eprints.bbk.ac.uk/id/eprint/18794/">a tide of preservation sentiment</a> was building throughout Britain by the 1960s. In 1964, when a public enquiry was held into the demolition of Gibson Hall, our archival research shows attitudes were firmly in favour of preservation of historic buildings.</p>
<p>The preservation movement was fuelled by the demolitions of several London landmarks in the early 1960s, including <a href="https://www.londonremembers.com/subjects/city-of-london-coal-exchange">the Coal Exchange</a> in Lower Thames Street and the “<a href="https://www.theguardian.com/artanddesign/2017/nov/07/euston-arch-rail-london-demolished-1961">Euston Arch</a>” entrance to Euston station, both Grade II listed. This <a href="https://books.google.co.uk/books/about/A_Broken_Wave.html?id=24uwAAAAIAAJ&redir_esc=y">provoked public outcry</a>. A preservation order placed on Gibson Hall in 1964 blocked National Provincial from demolishing its Victorian home to replace it with a modern tower block.</p>
<h2>Out with the old</h2>
<p>Many banks had offices and branches in Victorian or Edwardian buildings at this time. The preservation order placed on Gibson Hall gave a clear signal that such buildings should stand. By the 1980s there was still a powerful conservation lobby. </p>
<p>But City firms’ need to expand and update their office space took on a new urgency following financial deregulation, known as the “Big Bang”, in 1986. As well as replacing face-to-face share dealing with <a href="https://www.bbc.co.uk/news/business-37751599">electronic trading</a>, the reforms allowed more banks to start trading, not just advise investors.</p>
<p>In addition to computers, banks now wanted large floor spaces for their traders. They needed more equipment and connections for computers and air conditioning to stop the tech overheating. It was more cost-efficient to house this activity in an open-plan environment where cables could be run through the space more easily. Ventilation systems would also operate better in open areas versus small, individual offices.</p>
<p>The Canary Wharf development on London’s Isle of Dogs seemed to offer everything the banks needed at this time. It had been <a href="https://www.taylorfrancis.com/books/mono/10.4324/9780203036464/property-masters-scott">designated as an Enterprise Zone</a>, which removed virtually all planning constraints. This allowed for the construction of a new financial hub unencumbered by the delays inherent in planning enquiries.</p>
<figure class="align-center ">
<img alt="Skyscraper with HSBC sign and logo, amid other skyscrapers, blue sky." src="https://images.theconversation.com/files/535731/original/file-20230705-28-p5ks5m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/535731/original/file-20230705-28-p5ks5m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/535731/original/file-20230705-28-p5ks5m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/535731/original/file-20230705-28-p5ks5m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/535731/original/file-20230705-28-p5ks5m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/535731/original/file-20230705-28-p5ks5m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/535731/original/file-20230705-28-p5ks5m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">HSBC head office, Canary Wharf, London.</span>
<span class="attribution"><span class="source">Chrispictures/Shutterstock</span></span>
</figcaption>
</figure>
<p>Of course there were teething problems during the construction Canary Wharf – not least the impact of the 1989-92 property crash on <a href="https://realestate.wharton.upenn.edu/working-papers/the-crash-and-rebound-of-canary-wharf/">financing for the build</a>. But it eventually gave UK banks what they had wanted for so long: a free hand to build huge skyscrapers. These superstructures not only housed much-needed modern technology, they also served as a monument to their inhabitants’ economic power and prestige. </p>
<p>The movement of HSBC’s headquarters signals another potential shift for banks, but this time to smaller offices to accommodate changing working practices once again. While HSBC was not the first bank to move to Canary Wharf 30 years ago, other banks could follow its lead this time to head bank to the City as hybrid working affects these companies and their employees.</p><img src="https://counter.theconversation.com/content/208888/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>British banks moved to Canary Wharf in search of space and modern facilities but hybrid working needs could drive banks back to the City of London’s smaller spaces.Lucy Newton, Professor in Business History, Henley Business School, University of ReadingPeter Scott, Professor of International Business History, University of ReadingVictoria Barnes, Reader in Commercial Law, Brunel University LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2055112023-06-27T16:00:54Z2023-06-27T16:00:54ZWelsh mining towns had alternative currencies 200 years ago – here’s what the crypto world could learn from them<figure><img src="https://images.theconversation.com/files/532005/original/file-20230614-21-yyoovi.jpg?ixlib=rb-1.1.0&rect=0%2C28%2C2400%2C1156&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A halfpenny token issued by the Parys Mining Company of Anglesey in 1788. The hooded druid design was used for many years and was the first of hundreds of token designs.</span> <span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Conder_Token_1788_Anglesey_Halfpenny_DH275_composite.jpg">BrandonBigheart/Wikimedia</a></span></figcaption></figure><p><em>You can also read this article <a href="https://theconversation.com/dyma-beth-allair-byd-crypto-ei-ddysgu-or-arian-cyfredol-oedd-yn-cael-ei-dalu-i-weithwyr-yng-nghymru-canrifoedd-yn-ol-205424">in Welsh</a>.</em></p>
<p>The global cryptocurrency market has seen a number of recent setbacks: from the collapse of the <a href="https://www.ft.com/content/c10bc6f7-abbe-45dc-9367-042186c3336f">Terra/Luna system in May 2022</a> to the failure of <a href="https://www.ft.com/content/913ff750-d1f4-486a-9801-e05be20041c1">FTX</a>, one of the largest crypto exchanges in the world. </p>
<p>Because of these factors, and other concerns over cryptocurrencies’ <a href="https://ccaf.io/cbnsi/cbeci/ghg">carbon emissions</a>, these assets <a href="https://www.bloomberg.com/news/articles/2022-09-30/does-crypto-owe-anyone-an-apology-after-2-trillion-of-losses">lost US$2 trillion in value</a> (£1.5 trillion) in 2022.</p>
<p>But while cryptocurrencies get a lot of attention today, in some ways they are not a revolutionary concept. Hundreds of years ago, workers in Wales were often paid with alternative currencies instead of money.</p>
<p>These currencies were physical tokens that represented and were linked to the value of real money. Many cryptocurrencies work in a similar way, acting as digital tokens that <a href="https://www.oecd.org/finance/The-Tokenisation-of-Assets-and-Potential-Implications-for-Financial-Markets-HIGHLIGHTS.pdf">represent a ledger of financial assets</a> (this is known as “tokenisation”).</p>
<p>Digital currencies are also not reliant on any central authority, such as a <a href="https://www.bloomberg.com/opinion/articles/2021-03-15/cryptocurrencies-are-rising-so-are-the-stakes-for-governments">government or bank</a>, to uphold or maintain their network of exchange. Again, this is similar to how physical tokens were used by Welsh mining companies. </p>
<h2>Currency crisis</h2>
<p>Towards the end of the 18th century the coinage of Britain was in a deplorable state due to the severe <a href="https://coinsandhistoryfoundation.org/2021/07/13/eighteenth-century-britain-coinage-in-crisis/#:%7E:text=The%20production%20of%20silver%20coins,of%20coins%20made%20from%20it.">shortages</a> of silver and copper coins. During the Industrial Revolution people migrated from the countryside into mining and manufacturing centres. But living in towns required money, and the ability to pay wages was impossible for businesses without small change. </p>
<p>With an influx of new workers using money, new shops were opened to meet demand, creating more jobs that required payment in coins. Although the production of counterfeit coins was illegal and <a href="https://www.jstor.org/stable/4091719">punishable by death</a>, it was not illegal to produce tokens with other designs which could be used instead of coins. </p>
<p>The first great era of token production during the <a href="https://education.nationalgeographic.org/resource/industrial-revolution-and-technology/">first Industrial Revolution</a> began in 1787 with the issue of the <a href="https://www.britishmuseum.org/collection/term/BIOG214134">Parys Mining Company</a> token. This company mined at Parys Mountain on the Welsh island of Anglesey. It briefly produced more copper than any other mine in the world during the Industrial Revolution. </p>
<figure class="align-center ">
<img alt="A quarried landscape of brown and orange earth." src="https://images.theconversation.com/files/531672/original/file-20230613-15-vt2pzd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/531672/original/file-20230613-15-vt2pzd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/531672/original/file-20230613-15-vt2pzd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/531672/original/file-20230613-15-vt2pzd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/531672/original/file-20230613-15-vt2pzd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/531672/original/file-20230613-15-vt2pzd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/531672/original/file-20230613-15-vt2pzd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">What Parys mountain on Anglesey looks like today.</span>
<span class="attribution"><a class="source" href="https://pixabay.com/photos/anglesey-parys-mountain-wales-3816220/">rhianjane/Pixabay</a></span>
</figcaption>
</figure>
<p>It also used the high-quality ore from its mine to produce tokens which could be exchanged for official coin at full value at any one of its shops or offices. This made the Parys Mining Company the first company in the world to issue tokens. These were described as the “<a href="http://provincialtokencoinage.weebly.com">premier tokens</a>” of the 18th century by that era’s coin experts.</p>
<p>Soon, practically every town in Britain was producing its own tokens. This was driven in part by a shortage of government coinage and improvements in coin manufacturing by <a href="https://globalcapitalism.history.ox.ac.uk/files/case28-matthewboultonscoinspdf">Matthew Boulton’s Soho Mint</a> in Birmingham, who also turned his hand to tokens. </p>
<p>By the turn of the 19th century, the total supply and fast circulation of tokens, foreign coins and other substitutes probably <a href="http://projects.exeter.ac.uk/RDavies/arian/welsh.html">exceeded</a> those of the official coin of the country.</p>
<p>The process of tokenisation was subsequently seen in other countries, in particular the United States. Mining and logging camps in the 19th century US were typically owned and operated by a single company, often <a href="https://www.jstor.org/stable/1992612">in remote</a> locations with poor access to cash. </p>
<p>These companies would often pay their workers in “scrip”, or tokens. The workers, given the limited places they could spend scrips, had little choice but to purchase goods at company-owned stores. By placing large mark ups on goods, the <a href="https://rethinkq.adp.com/artifact-coal-company-scrip-miners/">company</a> could increase their profits and enforce employee loyalty. </p>
<figure class="align-left ">
<img alt="A close up of a silver coin on a green background." src="https://images.theconversation.com/files/531992/original/file-20230614-19842-dbn8gn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/531992/original/file-20230614-19842-dbn8gn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=576&fit=crop&dpr=1 600w, https://images.theconversation.com/files/531992/original/file-20230614-19842-dbn8gn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=576&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/531992/original/file-20230614-19842-dbn8gn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=576&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/531992/original/file-20230614-19842-dbn8gn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=724&fit=crop&dpr=1 754w, https://images.theconversation.com/files/531992/original/file-20230614-19842-dbn8gn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=724&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/531992/original/file-20230614-19842-dbn8gn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=724&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A Parys penny produced by the Parys Mining Company.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Parys_Penny.jpg">Obscurasky/Wikimedia</a></span>
</figcaption>
</figure>
<p>While the production of tokens by the Parys Mining Company were spurred on by the first Industrial Revolution, the adoption and popularity of Bitcoin and other cryptocurrencies has been hastened by the <a href="https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/">fourth Industrial Revolution</a>.</p>
<p>Although they are more than 200 years apart, the history of these tokens have important lessons for today’s cryptocurrencies. First, for cryptocurrencies to succeed there needs to be various ways for individuals to accumulate the crypto/tokens, plus a demand and use for the crypto that means it holds its value, and trusted environments where exchange for goods and services can take place.</p>
<p>And second, for cryptocurrencies to be successful and sustainable in the long term they must uphold their original purpose of having an ecosystem that remains independent of a single company or government. Efforts to lock cryptocurrencies to a single organisation do not look positive, for example Facebook’s failed attempt to <a href="https://www.coindesk.com/layer2/2022/01/28/reflecting-on-facebooks-hilarious-well-deserved-crypto-failure/">launch a cryptocurrency</a>, announced in 2019. </p>
<p>The tokens of Welsh mining companies inherently failed when the closures of the mine or shops led to the removal of one or more of the three components of the ecosystem. And then people left with the tokens lost their money, a lesson for us today.</p><img src="https://counter.theconversation.com/content/205511/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A Welsh mining company was the first to issue tokens to workers as an alternative form of payment.Edward Thomas Jones, Senior Lecturer in Economics / Director of the Institute of European Finance, Bangor UniversityLaurence Jones, Lecturer in Finance, Bangor UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2019322023-03-16T20:36:02Z2023-03-16T20:36:02ZSilicon Valley Bank’s failure: Could something similar happen in Canada?<figure><img src="https://images.theconversation.com/files/515913/original/file-20230316-20-l7tgno.jpg?ixlib=rb-1.1.0&rect=155%2C133%2C4591%2C3117&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The U.S. Federal Deposit Insurance Corporation seized the assets of Silicon Valley Bank on March 10, 2023, marking the largest bank failure since Washington Mutual during the height of the 2008 financial crisis. </span> <span class="attribution"><span class="source">(AP Photo/Jeff Chiu)</span></span></figcaption></figure><p>American business magnate Warren Buffett <a href="https://buffett.cnbc.com/video/1994/04/25/1994-berkshire-hathaway-annual-meeting-highlights.html">once famously observed</a>: “You don’t find out who has been swimming naked until the tide goes out.” </p>
<p>Silicon Valley Bank was exposed last week by rising interest rates, leading to an old-fashioned bank run — where the bank’s customers rush to withdraw their money all at once.</p>
<p>The failure of the <a href="https://www.cbc.ca/news/business/silicon-valley-bank-failure-1.6775730">16th-largest bank in the U.S.</a> highlights the vulnerability of its niche business model in the digital age. </p>
<p>Could something similar happen in Canada? For the largest Canadian banks, the answer is no. But for smaller, niche financial service firms, recent history suggests they should not be complacent.</p>
<h2>A vulnerable business model</h2>
<p>The first step to assessing any vulnerability in Canada is understanding why Silicon Valley Bank failed. </p>
<p>Silicon Valley Bank ran a risky business. It used <a href="https://ir.svb.com/financials/annual-reports-and-proxies/default.aspx">short-term cash deposits from technology clients</a> to buy longer maturity U.S. mortgage bonds. This maturity mismatch may be profitable in good times, but can wipe out an investor in bad times. </p>
<p>The rise in interest rates over the past year <a href="https://www.nytimes.com/2023/03/10/business/silicon-valley-bank-stock.html">resulted in US$2 billion of losses</a> on Silicon Valley Bank’s bonds. Facing a potential credit downgrade, the bank tried but failed to raise equity to shore up its balance sheet. </p>
<p>When this news spread over social media, it led to <a href="https://www.wsj.com/video/series/wonder-land-henninger/wsj-opinion-was-svb-the-first-twitter-fueled-bank-run/76F43147-EE59-4969-9799-CD97BB8CDB88">rapid online withdrawals of deposits</a> that drained Silicon Valley Bank’s cash reserves. U.S. regulators seized the bank to stop the bank run. </p>
<h2>Short-term deposits fund long-term bonds</h2>
<p>Silicon Valley Bank’s vulnerability can be seen by comparing its balance sheet to its peers. At the end of 2022, Silicon Valley Bank depended on short-term customer deposits to finance more than 80 per cent of its US$212 billion in assets. </p>
<figure class="align-center ">
<img alt="A bar graph that compares Silicon Valley Bank's funding with the funding of its five closest peers, the biggest four U.S. banks and the biggest five Canadian banks.
" src="https://images.theconversation.com/files/515903/original/file-20230316-18-qj9ati.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/515903/original/file-20230316-18-qj9ati.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=436&fit=crop&dpr=1 600w, https://images.theconversation.com/files/515903/original/file-20230316-18-qj9ati.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=436&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/515903/original/file-20230316-18-qj9ati.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=436&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/515903/original/file-20230316-18-qj9ati.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=548&fit=crop&dpr=1 754w, https://images.theconversation.com/files/515903/original/file-20230316-18-qj9ati.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=548&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/515903/original/file-20230316-18-qj9ati.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=548&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Silicon Valley Bank funding compared to the funding of peers in the U.S. and Canada.</span>
<span class="attribution"><span class="source">(Michael R. King)</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>The five closest regional banks — Capital One Financial, First Republic Bank, KeyCorp, M&T Bank and U.S. Bancorp — had a similar share of assets. But the <a href="https://www.statista.com/statistics/799197/largest-banks-by-assets-usa">Big Four U.S. banks</a> — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — had more diversified funding. </p>
<p>Silicon Valley Bank invested this cash in mortgage bonds and other securities, representing 60 per cent of its assets. Silicon Valley Bank’s figure was almost three times higher than its closest peers, and more than double the U.S. Big Four. </p>
<figure class="align-center ">
<img alt="A bar graph that compares Silicon Valley Bank's assets with the assets of its five closest peers, the biggest four U.S. banks and the biggest five Canadian banks.
" src="https://images.theconversation.com/files/515906/original/file-20230316-28-l4630k.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/515906/original/file-20230316-28-l4630k.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=436&fit=crop&dpr=1 600w, https://images.theconversation.com/files/515906/original/file-20230316-28-l4630k.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=436&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/515906/original/file-20230316-28-l4630k.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=436&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/515906/original/file-20230316-28-l4630k.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=548&fit=crop&dpr=1 754w, https://images.theconversation.com/files/515906/original/file-20230316-28-l4630k.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=548&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/515906/original/file-20230316-28-l4630k.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=548&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Silicon Valley Bank assets compared to the assets of peers in the U.S. and Canada.</span>
<span class="attribution"><span class="source">(Michael R. King)</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>To offset this risk, Silicon Valley Bank held more cash than its closest peers at six per cent of assets. But when the bank run started, the fire sale of bonds at a loss was not enough to offset the electronic withdrawal of deposits.</p>
<h2>How safe are Canadian banks?</h2>
<p>Could a similar bank run happen north of the border? The answer for Canada’s largest banks is no. </p>
<p><a href="https://www.investopedia.com/terms/b/bigfivebanks.asp">Canada’s Big Five banks</a> — Royal Bank, TD Bank, Scotiabank, the Bank of Montreal and CIBC — remain among the safest in the world. They are <a href="https://cba.ca/CBA-Statement-on-resiliency-of-Canadas-banking-system">large, diversified and well capitalized</a>. They have experienced leadership and are closely monitored by a respected banking supervisor.</p>
<p>Canada’s Big Five have nearly identical funding profiles to the Big Four U.S. banks. The Big Five’s larger share of loans makes them arguably safer, as <a href="https://www.cmhc-schl.gc.ca/en/consumers/home-buying/mortgage-loan-insurance-for-consumers/faqs-mortgage-loan-insurance">most Canadian mortgages are insured by the Canada Mortgage and Housing Corporation</a>.</p>
<p><a href="https://cdn.theconversation.com/static_files/files/2557/230315_SVB_vs_comps_Share_Prices.xlsx?1678994757">Financial markets agree with this assessment.</a> As of yesterday, the share prices of Canada’s Big Five were down 16 per cent on average over the past 52 weeks, similar to the 13 per cent drop for the Big Four U.S. banks. </p>
<p>By contrast, Silicon Valley Bank’s share price was down 80 per cent before trading halted last Friday. And Silicon Valley Bank’s five closest peers were down 40 per cent on average.</p>
<h2>Innovation increases risk</h2>
<p>This analysis does not imply there are no vulnerable players in Canada’s financial system. Silicon Valley Bank demonstrates that innovative, niche business models are more vulnerable. </p>
<figure class="align-center ">
<img alt="An FDIC sign that says 'Each depositor insured to at least $250,000' posted in a window" src="https://images.theconversation.com/files/515914/original/file-20230316-24-a53d3n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/515914/original/file-20230316-24-a53d3n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/515914/original/file-20230316-24-a53d3n.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/515914/original/file-20230316-24-a53d3n.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/515914/original/file-20230316-24-a53d3n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/515914/original/file-20230316-24-a53d3n.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/515914/original/file-20230316-24-a53d3n.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An FDIC sign is posted on a window at a Silicon Valley Bank branch in Wellesley, Mass., on March 11, 2023.</span>
<span class="attribution"><span class="source">(AP Photo/Peter Morgan)</span></span>
</figcaption>
</figure>
<p>This pattern fits the history of bank runs. The U.K. had not experienced a bank run in 140 years until <a href="https://www.bis.org/publ/shin_2009.pdf">the 2007 demise of Northern Rock</a>. This niche lender relied on short-term funding from other banks to finance long-term mortgages. This mismatch brought down the lender when interbank markets froze at the start of the <a href="https://www.britannica.com/event/financial-crisis-of-2007-2008">2007-08 global financial crisis</a>.</p>
<p>Canada <a href="https://www.theglobeandmail.com/report-on-business/home-capital-saga-real-estate/article34972594/">had a partial bank run in 2017</a>. Home Capital Group was a niche lender that offered uninsured mortgages to less creditworthy Canadians. This risky business was funded by high interest savings accounts and other deposits. When Home Capital’s depositors lost confidence, the partial bank run was only halted when a group of Canadian institutional investors threw Home Capital a $2 billion lifeline. </p>
<h2>Three pillars underpin trust</h2>
<p>These bank runs are a reminder that trust in banking is built on three pillars: risk management, deposit insurance and banking supervision. </p>
<p>All banks use leverage, making risk management a key success factor. Canada’s largest banks have demonstrated this ability over many decades, most recently during the global financial crisis. </p>
<p>Eligible deposits in Canada are <a href="https://www.cdic.ca/your-coverage/how-deposit-insurance-works/">insured by the Canada Deposit Insurance Corporation</a>, a Crown corporation that insures up to $100,000 per account held at member institutions.</p>
<p>Federal financial institutions are <a href="https://www.osfi-bsif.gc.ca/Eng/osfi-bsif/Pages/default.aspx">supervised by the Office of the Superintendent of Financial Institutions</a>, which monitors capital levels and risk taking. </p>
<p>These three pillars are being tested <a href="https://theconversation.com/silicon-valley-bank-how-interest-rates-helped-trigger-its-collapse-and-what-central-bankers-should-do-next-201697">as rising interest rates expose weaknesses</a> in the global financial system. A decade of cheap money has fuelled many innovations and niche business models.</p>
<p>With an economic slowdown underway, more failures in the global financial system are bound to happen.</p><img src="https://counter.theconversation.com/content/201932/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael R. King has consulted for banks (RBC, TD), regulators (BCSC, OSC, CDIC, Bank of Canada, BIS), institutional investors (BCI), government bodies (BDC, ISED, ECCC), entrepreneurs, and industry associations. He owns shares in Canadian and US banks. He has received research funding from SSHRC, Scotiabank, BMO, Tangerine Bank, and the Pacific Institute for Climate Solutions (PICS). </span></em></p>Large Canadian banks are likely not at risk of bank failures, but history suggests smaller, more niche financial service firms could be.Michael R. King, Associate Professor, Gustavson School of Business and Lansdowne Chair in Finance, University of VictoriaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1971252023-01-04T19:57:01Z2023-01-04T19:57:01ZStock exchanges: has Paris really stolen the limelight from the City of London?<figure><img src="https://images.theconversation.com/files/502901/original/file-20230103-101864-tn6tqf.jpeg?ixlib=rb-1.1.0&rect=0%2C3%2C1024%2C763&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Daily trading is worth around $3.7 trillion in London compared to $200 billion in Paris. </span> <span class="attribution"><a class="source" href="https://creativecommons.org/licenses/by-sa/4.0/">Wikimedia</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>In late 2022, the <a href="https://www.lesechos.fr/finance-marches/marches-financiers/paris-ravit-a-londres-la-place-de-premiere-bourse-europeenne-1878797">French press exulted at the news that Paris’s market capitalisation had overtaken London’s</a>. While these financial centres have been <a href="https://www.cairn.info/histoire-de-la-bourse--9782707171665-page-47.htm">competing for more than two centuries</a>, Paris faded from view from 1914 to 1985 before enjoying <a href="https://academic.oup.com/book/8065/chapter-abstract/153455884?redirectedFrom=fulltext">“a renaissance”</a>. We read that it has now topped London as Europe’s biggest stock exchange. But what does that mean?</p>
<p>To grasp this, we first need to get our heads around the concept of market capitalisation, which can be defined as the total value of shares in a particular company listed on a stock exchange. As shares represent the property rights of the companies that issued them, the capitalisation of a stock exchange therefore measures the value of the corresponding companies.</p>
<p>However, this value is virtual, both because it represents future profits, and because the company could not convert it into money without selling all its shares and thereby tanking them. A rise in capitalisation is therefore only a promise.</p>
<p>It should also be remembered that:</p>
<ul>
<li><p>Not all companies are listed, because although listing allows access to market financing, it entails costs and risks</p></li>
<li><p>There are other sources of financing than the markets, in particular banks</p></li>
<li><p>It is quite possible for a company in a given country to choose to be listed on a stock exchange in a different country.</p></li>
</ul>
<h2>Off-index stocks carry Paris</h2>
<p>On 23 June 2016, the day of the United Kingdom’s referendum on leaving the European Union, the London Stock Exchange’s capitalisation amounted to around 2,900 billion euros, compared to 1,750 in Paris. Since then, the pound sterling has fallen against the euro (-6%) and the London stock market index has risen less than the Paris index: 14% for the FTSE compared to 30% for the CAC All-tradable. However, these two effects combined explain only a quarter of Paris’s catch-up.</p>
<p>Understanding the rest will require that we look beyond stock indices to weigh in factors such as market entries and exits, or “small” stocks price variations that are not accounted for by indexes.</p>
<p>Paris shows limited entries/exits (<a href="https://www.proactiveinvestors.co.uk/companies/news/999581/paris-may-be-bigger-but-london-remains-europe-s-ipo-destination-999581.html">less than 5 billion per year</a>, with a slightly positive balance) by comparison to London. Though London has a much higher volume of Initial Public Offerings (IPOs), acquisitions still cause the City to bleed much capital: as early as 18 July 2016, <a href="https://www.theguardian.com/business/2016/jul/18/arm-holdings-to-be-sold-to-japans-softbank-for-234bn-reports-say">Japan’s SoftBank bought microprocessor maker ARM</a> for £24bn, precipitating ARM’s delisting. While others followed suit, the total net flows still represent less than 5% of the variation in the difference between London and Paris. In the end, we will have to look to non-index shares – i.e., the shares of the smallest companies – which have grown much faster in Paris (+150%) than in London, to understand the three quarters of the variation.</p>
<p>If we focus on the companies listed in Paris, we see that they are not all French: take <a href="https://www.boursorama.com/cours/societe/profil/1rPMLBBO/">Be-Bô</a>, a health start-up domiciled in Geneva; or <a href="https://www.boursier.com/actions/cours/kompuestos-ES0105425005,FR.html">Kompuestos</a>, a Spanish plastics specialist. These two cases differ in important regards, however: the former corresponds to an IPO in Paris, whereas the latter refers to the additional listing in Paris of a company previously introduced on the Madrid stock exchange. So, should the capitalisation of Kompuestos be counted for Paris or for Madrid?</p>
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À lire aussi :
<a href="https://theconversation.com/la-preuve-par-trois-paris-londres-il-ny-a-pas-match-138786">La preuve par trois : Paris–Londres, il n’y a pas match !</a>
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<p>Let’s start out by counting for Paris the shares that are held by people living in France, as is customary. Plus, let’s also include all foreign shares held by residents, even when shares are not actually listed (i.e., traded in real time) on the stock exchange.</p>
<p>In these circumstances, London clearly outperforms Paris. Indeed, the City has a special infrastructure called CREST, which acts as a depository for international securities and issues digital certificates representing foreign shares to UK residents. When all foreign-listed shares are taken into account, the capitalisation held by UK residents is $6.2 trillion, compared to $3.7 trillion for mainland France, as suggested by <a href="https://www.ft.com/content/db5d516a-4b35-4e85-8b02-4ddd73b48e0b?accessToken=zwAAAYSmkdgEkdPbXVFqSzVOhdOLAk3dc7SOCw.MEUCIBROqiacUrVTAAxdwUO6SKav_eIvOveicHxmsjJQ3Y9iAiEArFO07n4_rAb7HnEM7sWtePRX4Hfkj4or5Yekf1BWd_w&sharetype=gift&token=54fe1a0e-83cd-4079-b4c4-9848520ea920">the <em>Financial Times</em></a>. The difference is largely explained by <a href="https://www.oecd.org/daf/fin/private-pensions/Pension-Funds-in-Figures-2021.pdf">pension funds</a> whose asset value is 3,000 billion USD in the UK compared to less than 100 billion in France.</p>
<h2>The City’s ancillary “services”</h2>
<p>Aside from shares, bonds also account for a good chunk of global capitalisation: <a href="https://www.icmagroup.org/market-practice-and-regulatory-policy/secondary-markets/bond-market-size/">$128,000 billion at the end of 2020</a>, with Paris contributing almost 4% to the pie, i.e., a little more than London. On the other hand, the most important market in terms of volume is certainly the foreign exchange market: here, London generates over <a href="https://www.bis.org/statistics/rpfx22.htm">38% of global activity</a> with more than $3.7 trillion in daily transactions, by comparison to $200 billion in the case of Paris. In the area of finance, London also leads through the large number of international contracts drafted under British law by UK law firms.</p>
<p>For example, the first <em>sukuk</em> (sharia-compliant investment certificates) issued by an American company were contracts based on an <em>ad hoc</em> vehicle listed on the London Stock Exchange and <a href="https://www.sukuk.com/sukuk-new-profile/ge-capital-sukuk-ltd-999/">paying a periodic dividend in London</a>. Ships, buildings, containers, works of art: London firms know how to draft the contract necessary to acquire any one of those assets under a favourable tax regime in a chosen jurisdiction (e.g., a Jersey trust or a Bahamian special purpose vehicle) by arranging appropriate financing. In comparison, Paris offers mainly conventional financing means and no special legal regimes.</p>
<p>It is because of these ancillary “services” that London has been the <a href="https://www.longfinance.net/programmes/financial-centre-futures/global-financial-centres-index/gfci-publications/global-financial-centres-index-31/">second-largest global financial centre</a> since the post-war period, well ahead of Paris. London still employs over a million people in the financial sector, <a href="https://stats.oecd.org/Index.aspx?DataSetCode=SNA_TABLE3">25% more than Paris</a>. However, the gap between the two stock exchanges has narrowed since Brexit prompted finance professionals to relocate to Paris – the so-called <a href="https://www.dartmouthpartners.com/brexodus-to-paris/">“Brexodus”</a>.</p>
<p>One is left to wonder how this trend might impact the rest of the economy, including in terms of growth. It should be remembered that while <a href="https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=DE-FR">Germany’s GDP is 40% higher than France’s</a>, its <a href="https://www.fese.eu/statistics/">market capitalisation is 40% lower</a>. A sobering reminder for the French that, whatever the markets’ <a href="https://www.etfstream.com/news/paris-takes-crown-of-biggest-european-stock-market-from-london/">new-found esteem for their country</a>, a company’s value is ultimately based on far more than indexes.</p><img src="https://counter.theconversation.com/content/197125/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Pierre-Charles Pradier est président du conseil de surveillance de FIFA Clearing House.</span></em></p>Although Paris’s capitalisation overtook London’s in late 2022, the City of London is still Europe’s leading financial centre. Understanding why will require that we look beyond stock indices.Pierre-Charles Pradier, Maître de conférences en Sciences économiques, LabEx RéFi, Université Paris 1 Panthéon-SorbonneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1883192022-10-12T15:49:27Z2022-10-12T15:49:27ZYoung people in poorer places are often failed by banks – here’s what needs to change<figure><img src="https://images.theconversation.com/files/487550/original/file-20220930-18-7c11ed.jpg?ixlib=rb-1.1.0&rect=62%2C53%2C5928%2C3934&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Entrepreneurs need more support.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/stock-photo-female-african-grocery-seller-2015689781">Shutterstock/Kehinde Olufemi Akinbo</a></span></figcaption></figure><p>As the global population grows, it has been estimated that by 2030 the world will need more than <a href="https://www.worldbank.org/en/topic/smefinance">600 million new jobs</a>. Many of these will be required in developing countries, where young people <a href="https://www.repository.cam.ac.uk/handle/1810/292310">already struggle</a> to <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/dpr.12528">find work</a>, <a href="https://www.ilo.org/global/publications/books/WCMS_556949/lang--en/index.htm">pay is low</a>, and working conditions are often poor. </p>
<p>With few opportunities for <a href="https://www.ilo.org/global/topics/decent-work/lang--en/index.htm">decent work</a>, many of the world’s poorest young people are self-employed or start their own businesses. Indeed, the <a href="https://www.worldbank.org/en/topic/smefinance">World Bank</a> considers small- and medium-sized enterprises (SMEs) to be a key element of new employment opportunities in lower-income economies.</p>
<p>But starting a business anywhere is fraught with risk. Failure rates are <a href="https://businesselitesafrica.com/2020/03/18/nigerias-startup-failure-rate-tops-african-peers-at-61/">as high as</a> 75% in Ethiopia and Rwanda, 74% in Ghana, and 67% in Zimbabwe. </p>
<p>Failure is more likely where interest rates are high and when prospective entrepreneurs lack collateral, which blocks <a href="https://www.gpfi.org/">proper financial support</a> – a vital part of the survival of new businesses and the new jobs they can create.</p>
<p>Unfortunately, secure financial support is not as widely available as it might be. In developing countries, just <a href="https://www.afi-global.org/thematic-areas/youth/">15% of young people</a> have saved money with a formal financial institution. Our <a href="https://standardcharteredbank.turtl.co/story/futuremakers-2022-insights-advancing-inclusive-finance/page/1">survey</a> highlights the varied experiences of young people (under 35) from low-income communities using financial services. </p>
<p>And it’s not only support for start-ups that our survey shows is lacking – we also saw a more basic failing of the financial sector for individuals, and particularly women.</p>
<p>Many of the people we surveyed (from 21 countries including Sri Lanka, Sierra Leone and Malaysia) preferred to take a more informal route to getting money. Around 83% said they turned to their family for financial support, 16% to <a href="https://onlinelibrary.wiley.com/doi/epdf/10.1111/j.0012-155X.2006.00490.x">community</a> <a href="https://www.findevgateway.org/blog/2022/05/sharing-risk-micro-equity-savings-groups">savings schemes</a>, and 9% to informal money lenders. </p>
<p>For some, the financial services (both informal and via traditional banks) they receive have a positive impact – but for others, they can be ruinous. The failure to pay back loans can lead to some young people <a href="https://publications.iom.int/system/files/pdf/debt_and_the_migration_experience_insights_from_southeast_asia_2.pdf">fleeing their homes</a>. </p>
<figure class="align-center ">
<img alt="Graph showing where young people turn for financial help." src="https://images.theconversation.com/files/488499/original/file-20221006-24-oy1rpz.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/488499/original/file-20221006-24-oy1rpz.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=365&fit=crop&dpr=1 600w, https://images.theconversation.com/files/488499/original/file-20221006-24-oy1rpz.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=365&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/488499/original/file-20221006-24-oy1rpz.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=365&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/488499/original/file-20221006-24-oy1rpz.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=459&fit=crop&dpr=1 754w, https://images.theconversation.com/files/488499/original/file-20221006-24-oy1rpz.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=459&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/488499/original/file-20221006-24-oy1rpz.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=459&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">What our respondents told us about where they seek financial help.</span>
<span class="attribution"><span class="source">Author provided</span></span>
</figcaption>
</figure>
<p>And while formal finance might seem like the safer option, we found a widespread lack of trust in formal financial services. Most (62%) did not want to get involved with formal banking, while nearly a third (30%) had little money to spend and nothing to save, rendering financial services irrelevant. Almost half (45%) had never considered traditional financial products and services to be relevant. </p>
<p>Other major barriers to formal banking include lack of documentation or <a href="https://www.weforum.org/agenda/2019/06/women-finance-least-developed-countries-collateral/">collateral</a>. There may also be prohibitively <a href="https://www.economist.com/finance-and-economics/2020/05/21/why-interest-rates-are-so-high-in-africa">high interest rates</a> to contend with. </p>
<p>Overall, our survey indicates that young people value the security and predictability that banks can offer, but often consider these benefits to be out of their reach. </p>
<p>Compared with older adults, young people are <a href="https://www.un.org/esa/socdev/documents/youth/fact-sheets/youth-financial-inclusion.pdf">33% less likely to save in general, and 44%</a> less likely to have a formal savings account. Nevertheless, research indicates that <a href="https://data.worldbank.org/indicator/FX.OWN.TOTL.40.ZS?end=2021&locations=ZG&start=2021&view=map">prioritising savings</a>, however small, over loans enables young people to create digital savings records and build good financial habits.</p>
<p>Making small, consistent savings significantly contributes to young people’s, and particularly women’s, <a href="https://www.womensworldbanking.org/wp-content/uploads/2021/08/WWB-The-Power-of-Jan-Dhan-Report-Web.pdf">financial empowerment</a>. Research across sub-Saharan Africa and South Asia shows that both <a href="https://www.adb.org/sites/default/files/publication/574821/adbi-wp1098.pdf">financial and digital literacy</a> are key to boosting economic resilience. </p>
<h2>Financial health</h2>
<p>The situation is a problem for the banks too. For them – and businesses generally – the growing youth population in emerging economies represents a relatively untapped market of millions of potential customers, clients and staff.</p>
<p>When it comes to providing loans, high interest rates are often justified due to the risk of lending, but it is time to rethink this approach. </p>
<p>For example, do banks have to treat young entrepreneurs as really high risk? Can assessment <a href="https://www.gpfi.org/">criteria be more flexible</a> for young prospective customers? And could new forms of assessing credit, based on building a financial and savings history rather than on access to collateral, be accepted from those previously excluded? </p>
<p>Credit can support a young person’s growth – or ruin them by depleting their financial health. For instance, <a href="https://www.cgap.org/sites/default/files/publications/Working-Paper-A-Digital-Credit-Revolution-Oct-2018.pdf">research</a> into new digital borrowing schemes saw high levels of late payment, with 31% of borrowers defaulting in Tanzania and 12% in Kenya. </p>
<p><a href="https://www.unsgsa.org/publications/financial-health-introduction-financial-sector-policymakers">Other research shows</a> that the type of credit matters. Long-term business loans improve financial health, whereas immediate credit to meet day-to-day needs tends to be detrimental. </p>
<p>Making <a href="https://www.unsgsa.org/sites/default/files/resources-files/2021-09/UNSGSA%20Financial-health-introduction-for-policymakers.pdf">financial health</a> the new goal would mean supporting people towards financial stability – to get to a point where they can withstand financial shocks and feel secure. </p>
<p>Young people will grow up in the unfolding <a href="https://www.thebritishacademy.ac.uk/publications/knowledge-frontiers-cop26-briefings-young-people-and-climate-change/">climate crisis</a>, which our research shows is <a href="https://www.repository.cam.ac.uk/handle/1810/330714">already disrupting</a> lives and livelihoods. They need banks to seriously rethink what they are offering. A <a href="https://data.worldbank.org/indicator/FX.OWN.TOTL.40.ZS?end=2021&locations=ZG&start=2021&view=map">wider uptake</a> of formal financial services could provide young people in developing economies with a safer way to build and grow the businesses that will create some of those 600 million new jobs.</p><img src="https://counter.theconversation.com/content/188319/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anna Barford works at the University of Cambridge Institute for Sustainability Leadership and her Research Fellowship is funded by a philanthropic donation from Unilever. Anna also consults to Business Fights Poverty, who receive funding from Standard Chartered. </span></em></p><p class="fine-print"><em><span>Stephanie Shankland is a PhD Candidate at the University of East Anglia. She is also a freelance researcher and writer for Business Fights Poverty (who receive funds from Standard Chartered) and for the Economist Intelligence Unit annual Country Commerce Reports.</span></em></p>Better financial support is vital for growing populations.Anna Barford, Prince of Wales Global Sustainability Fellow, University of CambridgeStephanie Shankland, PhD Candidate, University of East AngliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1800922022-04-17T06:35:57Z2022-04-17T06:35:57ZDigital banking is the in-thing – but it excludes many users in Tanzania and Senegal<figure><img src="https://images.theconversation.com/files/455515/original/file-20220331-7236-9063z8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Financial systems have evolved to allow contactless payments but people who cannot use digital services are being left behind.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/close-up-shot-of-a-woman-using-contactless-payment-royalty-free-image/1317311182">Getty Images</a></span></figcaption></figure><p>Across countries in Africa, only 33% of adults have an <a href="https://globalfindex.worldbank.org/">account</a> at a bank or another financial institution. Among the women, this rate is only 27%. </p>
<p>Financial services like accounts, credit cards and retirement plans allow people to protect their savings, earn interest, borrow for big expenses like a house or medical bills, and even start their own businesses. This is why financial inclusion is mentioned in <a href="https://www.uncdf.org/financial-inclusion-and-the-sdgs">eight</a> out of 17 of the Sustainable Development Goals. </p>
<p>But opening and maintaining these kinds of accounts can be difficult when banks are difficult to reach. To solve this, <a href="https://www.worldbank.org/en/topic/financialinclusion/overview">some</a> have proposed using digital technologies to reach the “unbanked”. </p>
<p>Services like mobile money, which allow people to use their mobile phones to make or receive payments, have become quite popular. In recent years, more than 157 mobile money operators like M-Pesa and Orange <a href="https://www.weforum.org/agenda/2021/09/mobile-money-africa-prevalence-economics-technology/">have</a> taken off across the African continent. </p>
<p>These have become even more popular for contactless communication during the COVID-19 pandemic. In response to the pandemic and lockdowns, the use of mobile money <a href="https://cenfri.org/articles/covid-19s-impact-on-mobile-money-in-rwanda/">increased</a> more than three times in Rwanda. Many governments in sub-Saharan Africa <a href="https://www.gsma.com/mobilefordevelopment/programme/mobile-money/gsma-mobile-money-regulatory-response-to-covid-19-tracker-and-analysis/">waived</a> mobile money fees and increased transaction limits to encourage use. </p>
<p>This means people who cannot use these digital services are being left behind as the financial system evolves. My <a href="https://academic.oup.com/ooec/article/doi/10.1093/ooec/odac001/6540090?login=true">research</a> across countries has found evidence for significant barriers which contribute to inequalities in who is able to use digital financial services. These barriers include lack of access to a mobile phone, expensive mobile airtime, lack of financial literacy, and the infrastructure for the reliable service needed to make financial transactions. </p>
<p>Governments and service providers will have to remove these barriers before access to finance can become more equal.</p>
<h2>Location matters</h2>
<p>My research analyses data from the demographic and health surveys in 2016 and covers Senegal and Tanzania, as well as the Philippines and Nepal. The surveys asked women whether they had a financial account and whether they used a mobile phone for financial transactions. They also provided the locations where survey respondents live. </p>
<p>This survey is the first to provide cross-country data on both use of traditional finance and use of digital financial services, along with other characteristics of households like wealth and education. I linked this to other databases containing the locations of infrastructure like mobile phone towers and physical banks to complete my analysis.</p>
<p>Using various statistical and econometric methods, my research found that most banks and their users were clustered in major cities like Dakar and Dar es Salaam. </p>
<p>Inequalities were not only geographic. Use of traditional financial institutions was highest among the wealthy and well-educated. Those in the wealthiest 20% of the population were up to 21 percentage points more likely to use traditional finance than those in the poorest 20%. They may have better knowledge about financial matters or be better targeted for the products offered by commercial banks. </p>
<p>Both dimensions of inequality, by location and by wealth or education, indicate the need for new ways to reach remote areas and people otherwise excluded from the financial system. </p>
<h2>Digital access</h2>
<p>Turning from physical banks to digital banking, I found that mobile phone ownership was much higher than traditional finance use. Mobile phone ownership reached 61% in Senegal and 51% in Tanzania, while traditional finance usage was only 7% and 24%, respectively. Mobile phones were much less unequal than traditional finance. This is why many have <a href="https://documents1.worldbank.org/curated/en/187761468179367706/pdf/WPS7255.pdf">hoped</a> that delivering financial services through mobile phones could be a promising avenue for eliminating inequality in access to finance. </p>
<p>But despite high rates of mobile phone ownership, I found that mobile network quality and mobile phone service were not equally spread. Mobile phone towers were concentrated in the same major cities as banks were. In rural areas, towers were spread thin and were of lower quality, so service might become poor and unreliable. Analysing data on mobile network download speeds showed that connection could be slow outside major cities. </p>
<p>In addition, perhaps because access to these mobile networks can be <a href="https://1e8q3q16vyc81g8l3h3md6q5f5e-wpengine.netdna-ssl.com/wp-content/uploads/2021/04/3522_RegionalReport_Africa.pdf">expensive</a>, the use of digital financial technologies was also concentrated among the wealthy and well-educated, just as was the case for traditional finance. Those in the wealthiest 20% of the population were up to 16 percentage points more likely to use digital finance than those in the poorest 20%.</p>
<p>My findings are consistent with other research, which has highlighted the spatial clustering of financial institutions. A detailed <a href="https://www.elibrary.imf.org/view/books/071/24349-9781484303139-en/ch012.xml?tabs=abstract">study</a> of Senegal’s banking sector published by the International Monetary Fund summed up a similar finding: 63% of automated teller machines and 64% of points of service for traditional financial institutions in Senegal were located in Dakar. </p>
<p>In a 2020 survey covering Tanzania alone, 19% of those who did not use a bank <a href="https://www.fsdzambia.org/publication/finscope-2020-survey-topline-findings/">said</a> that this was because it was too far away. Another 37.5% said they did not have enough money to justify it, indicating that financial services were seen as costly and difficult to access.</p>
<p>Others have confirmed that mobile phones themselves can still be very expensive – and, therefore, unequal. In Tanzania, even a basic phone costs one-twentieth of <a href="https://www.gsma.com/mobilefordevelopment/resources/accelerating-affordable-smartphone-ownership-in-emerging-markets/">annual income</a> for some and a smartphone can be one-sixth of annual income. Then there’s the cost of network access. In Senegal and Tanzania, one gigabyte of mobile broadband <a href="https://1e8q3q16vyc81g8l3h3md6q5f5e-wpengine.netdna-ssl.com/wp-content/uploads/2017/02/A4AI-2017-Affordability-Report.pdf">costs</a> 10.2% and 8.7%, respectively, of average monthly income. </p>
<p>Other researchers have also shown that similar inequalities persist for cash-in or cash-out points, where users can exchange cash for mobile money. Over 47% of mobile money access points in Senegal are in <a href="https://www.centerforfinancialinclusion.org/10000-datapoints-exploring-senegals-financial-access-at-the-commune-level">Dakar</a>. Almost 15% of Tanzanians do not <a href="https://www.fsdt.or.tz/wp-content/uploads/2017/09/Finscope.pdf">live</a> within 5km of a financial access point of any kind. </p>
<h2>Financial inclusion</h2>
<p>To eliminate inequality in access to finance, providers and governments must do more than simply offer digital financial services. They must improve the infrastructure for strong mobile networks even in remote areas. Improving financial literacy and reducing the costs of digital financial services will also help these technologies reach those who have been excluded from the financial system.</p><img src="https://counter.theconversation.com/content/180092/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Laura Caron consults for the World Bank. She has recently been awarded the NSF Graduate Research Fellowship unrelated to the study on which this article was based.</span></em></p>Not only are physical banks out of reach, people also face barriers to using digital financial services.Laura Caron, PhD student in Economics, Columbia UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1721532021-11-18T14:13:47Z2021-11-18T14:13:47ZGhanaians should brace themselves: the electronic transactions tax is here to stay<figure><img src="https://images.theconversation.com/files/432590/original/file-20211118-21-1s4bvbs.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Electronic payments have expanded the Ghanaian economy</span> <span class="attribution"><span class="source">Wikimedia Commons</span></span></figcaption></figure><p>Ghana’s finance minister Ken Ofori-Atta has <a href="https://www.zawya.com/mena/en/story/Ghana_to_introduce_175_levy_on_all_electronic_transactions-TR20211117nL8N2S84CBX3/">announced</a> that the government intends to introduce an electronic transaction levy (e-levy) in the 2022 budget. He said this was to “widen the tax net and rope in the informal sector”.</p>
<p>The proposed levy, which will come into effect on 1 February 2022, is a charge of 1.75% of the value of electronic transactions. It covers mobile money payments, bank transfers, merchant payments and inward remittances. The originator of the transactions will bear the charge except for inward remittances, which will be borne by the recipient. There is an exemption for transactions up to GH¢100 (US$ 16) per day. </p>
<p>According to the Finance Minister, the total digital transactions for 2020 were <a href="https://www.myjoyonline.com/1-75-applicable-rate-to-be-charged-on-all-electronic-transactions-finance-minister/?param=">estimated</a> to be over GH¢500 billion (about US$81 billion) compared to GH¢78 billion (US$12.5billion) in 2016. Huge growth in just five years. </p>
<p>While the justification for this new levy is to widen the tax net, since the <a href="https://www.tandfonline.com/doi/full/10.1080/23311886.2019.1656383">majority of the population</a> make a living in the informal sector, it seems a convenient means to increase government revenue. Initial response to the announcement of the levy has been one of displeasure and fears that it will affect the country’s current digitisation agenda.</p>
<p>I do not expect these responses to lead to a reversal, as was done <a href="https://citinewsroom.com/2021/11/reversing-benchmark-values-justified-reduction-caused-more-harm-john-kumah/">recently</a> with the payment of benchmark values at ports. However, the government may revisit the implementation and subsequent charges given the existing cost on mobile money. </p>
<p>There are a number of reasons why the government is not likely to backtrack. Ghanaians should brace themselves for this levy.</p>
<h2>Why government may not backtrack</h2>
<p><strong>No viable alternatives:</strong> Though this e-levy may force some people to resort to the use of cash, for the majority, there is no viable alternative. At the moment, electronic payment, especially mobile money, is the most efficient and cost effective means of transferring money since it is <a href="https://www.modernghana.com/news/1073072/gh5718bn-momo-transactions-recorded-in-2020.html">widely accessible</a> in Ghana. Its wide use is because of its convenience especially in rural areas. The only alternative is to use banks, which have limited branches. And banks themselves are now digitising their services to minimise the use of cash. </p>
<p>My <a href="https://www.sciencedirect.com/science/article/abs/pii/S0166497220300365?via%3Dihub">research</a> into the use of financial technology in Ghana has shown that in the absence of practical alternatives, mobile money is the only means for many people to access financial services. The research also indicates that the cost associated with mobile money is not an inhibitor. Thus, irrespective of the e-levy, people will still use mobile money. </p>
<p><strong>Easy means of generating revenue:</strong> Successive governments have failed to find innovative solutions to expand the tax net to include the informal sector, although this sector employs the <a href="https://www.sciencedirect.com/science/article/pii/S2590291120300838">majority of Ghanaians</a> at about 85% of the urban economy. As many people, including those in the informal sector, use mobile money, the government <a href="https://www.mofep.gov.gh/sites/default/files/news/2022-Budget-Statement.pdf">sees</a> it as an easy way of taxing the informal sector. <a href="https://citinewsroom.com/2021/11/ghbudget-1-75-levy-slapped-on-momo-other-electronic-transactions/">Estimates</a> show that in 2020, the total volume of mobile money transactions was over US$99 billion (GH¢561 billion) far <a href="https://www.myjoyonline.com/momo-transactions-outstrip-cheque-by-gh232bn-in-just-four-months/?param=#:%7E:text=Total%20value%20of%20mobile%20money%20transactions%20far%20exceeded%20the%20value,about%20GH%C2%A2180%20billion.">surpassing cheque and cash transactions</a> which stood at US$29 billion. </p>
<p>Given the potential revenue the government can generate and as it is unable to devise any innovative solution to tax the informal sector, mobile money taxation appears to be the easy way out.</p>
<p><strong>Digital payment institutionalisation:</strong> In recent times, the government has embarked on <a href="https://theconversation.com/ghanas-new-mobile-money-rule-could-derail-financial-inclusion-but-there-are-answers-158770">digitalisation projects</a> to reduce the use of cash. Among these is the <a href="https://www.bog.gov.gh/wp-content/uploads/2021/08/CBDC-Joint-Press-Release-BoG-GD-3.pdf">e-currency (e-cedi) project</a>, in which the Central Bank will issue its “own version of mobile money”. The roll-out of the e-cedi may further limit the use of cash, forcing people to use electronic payments, so people will have to pay the e-levy. </p>
<p>The government is also moving to a digital only payment option for its services, to curb corruption and revenue leaks. This means that without digital payment, people may struggle to access certain services such as getting a passport or driver’s licence, registering a company or clearing goods at the port. It’s another reason people will have little choice but to pay the e-levy. </p>
<p><strong>Digital payment normalisation:</strong> With emergence of COVID and imposition of restriction on movement and the fact that mobile money, bank accounts and cards have become more <a href="https://telecomschamber.com/news-media/industry-news/ghana-launches-mobile-money-interoperability-system">closely linked</a>, many people resorted to digital transactions and payment for most of their day to day economic activities. The government <a href="https://www.mofep.gov.gh/sites/default/files/news/2022-Budget-Statement.pdf">asserts</a> that the <a href="https://www.modernghana.com/news/1119368/full-text-2022-economic-policy-and-budget-statem.html">value of digital transactions</a> rose by 120% between February 2020 and February 2021. In the previous year it rose 44%. The government is aware that most people are now accustomed to online transactions. They are convenient and people will find it difficult to revert to physical transactions. </p>
<p>Many people will not be in favour of the e-levy because of existing charges on mobile money. There is also the risk that it could derail the growth of the Ghanaian FinTech ecosystem by making Ghana unattractive for FinTech startups. For instance, this e-levy will reduce the profit margins of FinTech startups who may not wish to pass on the cost to consumers. In 2021, <a href="https://www.myzeepay.com/">Zeepay</a>, an indigenous Ghanaian FinTech Firm alone attracted about US$7.6 million <a href="https://africafeeds.com/2021/07/01/zeepay-completes-series-a-fund-raise-at-7-9-million/">investment</a>. </p>
<p>Given the direct and indirect benefits FinTech contributes to economies, this e-levy will become an additional problem for already struggling FinTech startups. It appears that the government is only thinking of short term revenue gains. Thus, government should relook at the implementation and strategically target the tax instead of the blanket e-levy on digital payment. It should be guided by lessons from other countries like <a href="https://opendocs.ids.ac.uk/opendocs/bitstream/handle/20.500.12413/16727/ICTD_WP123.pdf?sequence=1&isAllowed=y">Uganda</a> who have also implemented mobile money tax.</p><img src="https://counter.theconversation.com/content/172153/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>PK Senyo receives funding from Innovate UK, ESRC, and UKRI. </span></em></p>Taxing electronic payments is key to raising revenue form the informal sectorPK Senyo, Associate Professor in FinTech & Information Systems, University of SouthamptonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1614322021-06-30T15:16:34Z2021-06-30T15:16:34ZThe fight against economic fraud: how African countries are tackling the challenge<figure><img src="https://images.theconversation.com/files/404182/original/file-20210603-27-2nv14z.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Technology has been key in tackling fraud</span> <span class="attribution"><span class="source">Mpedigree</span></span></figcaption></figure><p>The COVID-19 pandemic has stifled many sectors of the global economy. But it has apparently <a href="https://www.hurstpublishers.com/book/criminal-contagion/">boosted the business of fraudsters</a>. Experts <a href="https://www.ukfinance.org.uk/system/files/Fraud%20The%20Facts%202021-%20FINAL.pdf">note</a> that some fraudsters have taken advantage of the new opportunities of the <a href="https://www.teiss.co.uk/covid-19-phishing-scams-sophisticated/">pandemic economy</a> and that they seem to become ever <a href="https://www.irishtimes.com/business/technology/online-scams-go-viral-as-pandemic-gives-fraudsters-new-opportunities-1.4549085">more sophisticated in their methods</a>.</p>
<p>At the same time anti-fraud measures are becoming more sophisticated too, with technology <a href="https://www.unbs.go.ug/news-highlights.php?news=2&read">playing a big part</a>, and more increasingly <a href="https://www.expresscomputer.in/exclusives/neurotags-anti-counterfeiting-ai-solution-is-helping-crack-down-on-fake-products/71649/">artificial intelligence</a>.</p>
<p>In recent years many initiatives have been put forward in the name of fighting and reducing various forms of fraud and other crimes in the economy. But have these measures actually been effective in containing fraud? Will the typical package of anti-fraud measures stop the fraud pandemic? </p>
<p>We did <a href="https://roape.net/2015/12/07/researching-anti-fraud-measures-in-the-global-south/">research</a> into major characteristics of anti-fraud measures in several African countries. In the <a href="https://www.tandfonline.com/doi/full/10.1080/03056244.2019.1660156">south</a> we looked at Malawi, Botswana, South Africa and Zambia. In the <a href="https://www.tandfonline.com/doi/full/10.1080/03056244.2020.1866524">east</a> we covered Kenya, Rwanda, Tanzania and Madagascar and in the west Ghana, Nigeria and Sierra Leone.</p>
<p>We looked at the various fraud responses to identify major dynamics and themes. We used online data from news outlets and reports on websites of private companies and governmental agencies to analyse the characteristics of anti-fraud measures across 11 countries. </p>
<p>We found a diverse set of measures had been introduced. We were able to identify 10 particular characteristics. </p>
<h2>The landscape</h2>
<p>The first notable feature was a remarkable proliferation of anti-fraud agencies and cross-agency alliances and cooperation. This was between government agencies, the government and the private sector, and at times civil society actors such as <a href="https://twitter.com/ucc_official/status/1111564692500164608">consumer protection agencies</a> too.</p>
<p>Agreements, memorandums of understanding and partnerships had been signed to encourage data collection and sharing and knowledge exchange within and across borders as different actors were brought together <a href="https://www.sabric.co.za/media-and-news/press-releases/saps-and-sabric-recommit-to-intensify-fight-against-bank-robberies/">to fight the “common enemy”</a>. </p>
<p>At the state level, new anti-fraud agencies, taskforces, squads and networks were set up regularly. One example was the <a href="https://www.cid.go.ke/index.php/sections/investigationunits/insurance-fraud-investigations-unit-ifiu.html">Kenya Police Insurance Fraud Investigations Unit</a>. We also found that a number of regulatory agencies had been established. These included competition and consumer protection authorities <a href="https://www.ccpc.org.zm/">at</a> <a href="https://www.cak.go.ke/">national</a> and <a href="https://www.arcc-erca.org/">regional</a> <a href="https://www.theeastafrican.co.ke/tea/business/eac-competition-authority-to-start-operations-in-july--1351478">level</a>.</p>
<p>Second, outreach, engagement and “empowerment” of consumers played a major role. Here, education, sensitisation and awareness raising – also among business actors – <a href="https://www.genghis-capital.com/newsfeed/kba-launches-the-annual-kaa-chonjo-awareness-campaign-to-boost-security-of-payments-platforms/">emerged strongly</a> as a way to popularise <a href="https://www.mmegi.bw/index.php?aid=64659&dir=2016/november/16">the anti-fraud fight</a>. This was promoted by a range of actors. Among them were banks, insurance providers, private consultancies, international organisations such as the International Monetary Fund and aid agencies, as well as NGOs. Regional organisations such as the Common Market for Eastern and Southern Africa were also included. </p>
<p>Third, large-scale technology was used extensively in anti-fraud measures. This was particularly the case in financial services and banking. </p>
<p>Anti-fraud software in various forms featured strongly. One example was detecting fraudulent transactions. Additional technological solutions included PIN protection techniques, enhanced chip technology for payment cards and authentication technology. </p>
<p><a href="https://www.securingindustry.com/pharmaceuticals/nigeria-insists-on-mobile-authentication-of-medicines/s40/a2083/#.YJA9m2ZKj9E">Technology</a> was <a href="https://medium.com/innovate4health/mpedigree-battles-counterfeit-drugs-through-innovative-verification-system-50de6f4a4bea">also used</a> to uncover counterfeit or substandard products. </p>
<p>Fourth, anti-fraud measures regularly came with rhetoric and language that was strong in giving a sense of alarm and urgency. The vices of fraud (and corruption) were presented as “weeds” needing to be “rooted out”. They were also referred to as a virus or a disease that needed “eradication”. </p>
<p>At times, warfare-type language was used, that is, fraud needed to be “combated” like an enemy. </p>
<p>Fifth, anti-fraud measures were regularly political in nature. Pledges to counter fraud featured in election campaigns. The rising or falling of fraud was used as a metric to determine whether politicians and public servants were effective in their roles. At times, political or business opponents of the government were allegedly targeted by the measures. And some powerful business actors reportedly got around regulations. </p>
<p>Sixth, corruption, as well as in-fights, conflicts, tensions and power struggles within and between state agencies charged with anti-fraud measures, featured too. One example was <a href="https://www.standardmedia.co.ke/nairobi/article/2001387385/kebs-staff-in-sh26m-fraud-case">Kenya Bureau of Standards</a>. In recent years, several managing directors of the bureau <a href="https://www.standardmedia.co.ke/news/article/2001377377/kebs-boss-arrested-over-graft-allegations">were accused of graft</a>. </p>
<p>The seventh feature was that many anti-fraud measures were carried out by specialised for-profit private actors. They were therefore arguably shaped by business interests, competition for anti-fraud measure contracts, and the dynamics of industries and markets.</p>
<p>We also found that international companies specialising in regulations and standards often played a role. Such commercially oriented actors were particularly active <a href="https://www.sgs.co.uk/en-gb/public-sector/product-conformity-assessment-pca/kenya-pvoc-program">in promoting the proliferation of anti-fraud measures</a>. </p>
<p>Eight, <a href="https://www.nyasatimes.com/malawi-revenue-authority-arrests-8-businesspersons-over-vat-offences/">arrests</a>, <a href="https://www.enca.com/south-africa/fake-goods-worth-r5m-seized-joburg">confiscation</a> and <a href="https://www.reuters.com/article/us-kenya-corruption/kenya-authoritiesarrest-standards-bureau-head-over-fertilizer-imports-idUSKBN1JJ0AO">destruction of items</a> were widespread in reports about anti-fraud activity. </p>
<p>Ninth, we noticed a prevalence of anti-fraud measures in efforts to increase tax revenue and inhibit illicit financial flows. Various initiatives emphasised the need to increase compliance. At times we detected tensions in moves to create an “enabling” business environment to attract foreign investment – such as low taxes – and calls to protect the national tax bases.</p>
<p>We found there was international cooperation and the involvement of civil society actors in efforts to address tax evasion and transnational money laundering. One example was the <a href="https://www.taxjustice.net/">Tax Justice Network</a>. </p>
<p>Tenth, civil society actors seemed to have a limited role – or no role at all – in various anti-fraud measure coalitions. In some cases, however, they seemed to play a larger role. One example was consumer protection agencies.</p>
<h2>Challenges</h2>
<p>A challenge we identified was that anti-fraud measures could be launched and sustained for reasons that went beyond an interest in simply fighting fraud. This included commercial interests of specialised anti-fraud firms. These were often companies that operated globally. Other interests at play included governments that used anti-fraud platforms to seek legitimacy or state agencies that sought government funding as well as new areas of operations and streams of revenues. </p>
<p>We also came across criticisms in some cases of the measures’ design, costs, bureaucracy and impracticality. There were also concerns about the heavy handed way in which some <a href="http://www.psfuganda.org/new/images/downloads/Trade/position%20paper%20on%20pre-inspection.pdf">measures were implemented</a>. There were allegations about:</p>
<ul>
<li><p>bias (for example, against small-scale actors such as traders and against poor sections of costumers) in favour of foreign, large scale multinationals; </p></li>
<li><p>opaqueness and <a href="https://ugandaradionetwork.com/story/kacita-calls-for-a-two-months-import-boycott-to-protest-pvoc">irregularities</a>; </p></li>
<li><p><a href="https://www.observer.ug/component/content/article?id=31498:a-year-later-has-pvoc-locked-out-fake-goods">effectiveness problems</a>.</p></li>
</ul>
<p>Currently, anti-fraud measures seem largely an affair between state and corporates (including business associations), and consumers. Consumers are mostly on the “receiving” end of anti-fraud measures. They are regularly encouraged to play their role by, for example, calling an anti-fraud hotline, verifying the goods they buy and not contributing to the facilitation of fraud. Aid agencies played a decisive role in some anti-fraud measure cases too.</p>
<p>Anti-fraud measures are mostly initiated and shaped by powerful actors. This includes big business, particularly transnational companies, rather than grassroots or activist organisations. They are uneven across sectors (for example, the financial sector gets significant attention), and they seem to have become a business and revenue generation vehicle in itself. </p>
<p>It is important to acknowledge that some measures certainly <a href="https://www.unbs.go.ug/">make a positive impact</a> and that efforts are made by various agencies to address internal and other shortcomings, thereby improving the effectiveness of measures. But the question remains: how can countries substantially contain “irregularities” in situations where the irregular has become widespread, routine and institutionalised? And the dominant agendas and pressures of the day – such as economic growth, profit and commercialisation – are highly conducive to fraud. </p>
<p><em>Nataliya Mykhalchenko is serving as an intern at the United Nations Population Fund. The views expressed in the article are her own.</em></p><img src="https://counter.theconversation.com/content/161432/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nataliya Mykhalchenko has received funding from the University of Leeds ESSL Summer Research Internships Scheme, and the Review of African Political Economy.</span></em></p><p class="fine-print"><em><span>Jörg Wiegratz has received funding from the British Academy/Leverhulme Trust, the Sir Ernest Cassel Educational Trust Fund, the University of Leeds ESSL Summer Research Internships Scheme, and the Review of African Political Economy.</span></em></p>Countries have adopted a wide array of measures involving a proliferation of fraud agencies.Nataliya Mykhalchenko, Research Associate, University of LeedsJörg Wiegratz, Lecturer in Political Economy of Global Development, University of LeedsLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1600242021-04-29T13:18:48Z2021-04-29T13:18:48ZIndia COVID crisis: four reasons it will derail the world economy<figure><img src="https://images.theconversation.com/files/397820/original/file-20210429-23-1erpjcn.jpg?ixlib=rb-1.1.0&rect=161%2C400%2C3045%2C2030&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">India is the fifth largest economy in the world. </span> <span class="attribution"><a class="source" href="https://unsplash.com/photos/6ALYVjYOq18">Deepak Choudhary/Unsplash</a></span></figcaption></figure><p>The second wave of the pandemic has struck India with a devastating impact. <a href="https://www.worldometers.info/coronavirus/country/india/">With over</a> 300,000 new cases and 3,000 deaths across the country each day at present, the total number of deaths has just passed the 200,000 mark – that’s about <a href="https://www.worldometers.info/coronavirus/">one in 16</a> of all COVID deaths across the world. It is also evident that the India statistics are <a href="https://www.theguardian.com/world/2021/apr/24/indias-covid-death-toll-hides-stark-truth-for-the-poor-its-even-worse">significant underestimates</a>. </p>
<p>The virulence of the second wave in India seems to be related to a confluence of factors: <a href="https://www.nytimes.com/2021/04/09/world/asia/india-covid-vaccine-variant.html">government complacency</a>, driven by poor data collection and being in denial about the reality of the data; a <a href="https://theconversation.com/q-a-indian-coronavirus-variant-what-is-it-and-what-effect-will-it-have-159269">new variant</a> with a hockey-stick shaped growth curve; and some very large and unregulated <a href="https://www.bbc.co.uk/news/world-asia-india-56770460">religious</a> and <a href="https://www.bbc.co.uk/news/56858980">political</a> events.</p>
<p>It is clear that there is now a <a href="https://theconversation.com/covid-19-in-india-an-unfolding-humanitarian-crisis-159654">humanitarian crisis</a> of significant proportions. India is a country of 1.4 billion people and makes up a sixth of the world’s population. Here are some ways in which it is also going to affect the world economy:</p>
<h2>1. A lost year for India?</h2>
<p>India is itself the fifth largest economy in the world and contributes significantly to world economic growth. With relatively high growth rates (of between 4% and 8%) and its large size, it has a significant impact on the world economy. </p>
<p>Even in early 2020, before the pandemic took hold, <a href="https://timesofindia.indiatimes.com/business/india-business/how-much-does-india-matter-for-the-global-economy/articleshow/73767258.cms">the IMF</a> had cited India’s indifferent output as the main reason for sluggish world growth figures in 2018 and 2019. The IMF downgraded its 2020 forecast to 5.8% partly because it expected more of the same from the subcontinent. Now it looks as if world growth for 2020 was down by <a href="https://conference-board.org/topics/global-economic-outlook">around 4%</a>, with India <a href="https://www.statista.com/statistics/263617/gross-domestic-product-gdp-growth-rate-in-india/">down 10%</a>. </p>
<p>Everyone <a href="https://www.imf.org/en/Publications/WEO">has been expecting</a> a great rebound in 2021 from both India and the world, but that now looks seriously doubtful. For instance, Sonal Varma, India chief economist at the investment group Nomura, <a href="https://www.cnbc.com/2021/04/27/indian-economy-may-shrink-this-quarter-as-covid-cases-soar-economists.html">predicts that</a> India’s GDP will shrink around 1.5% in the current quarter. Coupled with significant pandemic-related problems also in <a href="https://theconversation.com/covid-19-in-brazil-how-jair-bolsonaro-created-a-calamity-159066">Brazil</a> and <a href="https://theconversation.com/the-reasons-south-africas-covid-19-vaccine-programme-looks-bleak-159446">South Africa</a>, we might expect the impact on world growth to be considerable – even before taking any knock-on effects into account. </p>
<h2>2. International restrictions</h2>
<p>In terms of knock-on effects, the scale of the crisis in India is likely to mean that international restrictions remain in place for longer than hoped. In <a href="https://www.bbc.co.uk/news/world-asia-india-56907007">the words</a> of Soumya Swaminathan, the chief scientist of the World Health Organization (WHO): “The virus doesn’t respect borders, or nationalities, or age, or sex or religion.” As others <a href="https://www.washingtonpost.com/gdpr-consent/?next_url=https%3a%2f%2fwww.washingtonpost.com%2fopinions%2fglobal-opinions%2findias-sudden-coronavirus-wave-is-not-a-far-away-problem%2f2021%2f04%2f23%2ff363bda2-a3a3-11eb-85fc-06664ff4489d_story.html">have asked</a> rhetorically, can a country of this size be isolated?</p>
<p>On a recent flight from New Delhi to Hong Kong, for instance, <a href="https://www.dailymail.co.uk/news/article-9512239/Fifty-two-passengers-one-flight-Delhi-Hong-Kong-test-positive-Covid-19-landing.html">52 passengers</a> tested positive for COVID. We also know that the Indian variant <a href="https://www.bbc.co.uk/news/uk-england-leicestershire-56908995">is already</a> in the UK (while some of India’s second wave, notably in the Punjab, <a href="https://www.freepressjournal.in/india/uk-variant-in-punjab-may-be-a-threat">has been caused</a> by the UK variant).</p>
<p>Preventing this spread from India requires strict quarantines and travel restrictions. This is bad news for airlines, airports and the businesses that depend on them, so this too will have a large dampening effect on global economic growth.</p>
<h2>3. Pharma problems</h2>
<p>The pharmaceutical industry in India is the <a href="https://www.investindia.gov.in/sector/pharmaceuticals">third largest</a> in the world in terms of volume and <a href="https://www.worldstopexports.com/drugs-medicine-exports-country/">11th largest</a> in terms of value. <a href="https://www.makeinindia.com/sector/pharmaceuticals">It contributes</a> 3.5% of the total drugs and medicines exported globally and about 20% of the global exports of generic drugs. If these exports are in doubt, there will be all sorts of consequences for healthcare around the world, which will again feed through to global growth. </p>
<p>Above all, in the current situation, India produces 70% of the world’s vaccines. Serum Institute of India (SII) has been given the rights to produce the AstraZeneca vaccine for 64 low-income countries in the WHO’s <a href="https://www.who.int/initiatives/act-accelerator/covax">Covax progamme</a>, <a href="https://www.politico.eu/article/indian-producer-delhi-behind-uk-coronavirus-vaccine-shortfall/">as well as</a> 5 million doses destined for the UK. </p>
<p>The crisis in India has <a href="https://www.who.int/news/item/25-03-2021-covax-updates-participants-on-delivery-delays-for-vaccines-from-serum-institute-of-india-(sii)-and-astrazeneca">already meant</a> that these exports of the vaccine have been postponed or called off, leaving many countries vulnerable to fresh waves of the virus and probably delaying their efforts to return to business as usual. If India is unable to provide vaccine supplies to the rest of the world, we can expect spillover effects in the form of recurrent lockdowns, increased need for social-distancing measures, and a significant decrease in economic activity. </p>
<h2>4. Services not rendered</h2>
<p>India provides <a href="https://www.india-briefing.com/news/india-back-office-world-india-software-hr-digitalmarketing-19476.html/">back-office staff</a> for many activities in western Europe and the US, especially in the health and financial sectors. With these services now in jeopardy, the US Chamber of Commerce, for one, <a href="https://www.aljazeera.com/economy/2021/4/27/indias-covid-surge-imperils-global-economic-recovery-us-chamber">is concerned</a> that the Indian economy could create “a drag for the global economy”. </p>
<p>For the UK, too, trade links with India are <a href="https://theconversation.com/india-uk-is-on-a-charm-offensive-to-win-a-free-trade-deal-will-it-work-154745">especially important</a> in the aftermath of Brexit. This is demonstrated by Prime Minister Boris Johnson’s two attempts to visit in 2021 - <a href="https://www.bbc.co.uk/news/uk-politics-56800305">both cancelled</a> at the last minute because of the pandemic.</p>
<p>Given all these issues, and the humanitarian crisis unfolding, it has become imperative for the world to act quickly to help India – whether such help is requested or not. We are <a href="https://www.cidrap.umn.edu/news-perspective/2021/04/indias-covid-19-crisis-prompts-global-response">seeing signs</a> of this coming through, albeit after a short delay, from the UK (oxygen concentrators, ventilators); the US (vaccine raw materials, drugs, rapid tests and ventilators); and Germany (oxygen and medical aid). </p>
<p>Whatever is provided is likely to be a drop in the ocean of India’s requirements, but at least it demonstrates a recognition that we are in this together. The Indian government may have been ineffective in the current crisis, but failing to recognise how it will affect the world would amount to an equivalent level of complacency. If the leading powers fail to do everything they can to help out, India’s crisis will become a world crisis in short order, not only for health but also for the economy.</p><img src="https://counter.theconversation.com/content/160024/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Uma S Kambhampati does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>COVID has now claimed over 200,000 lives on the subcontinent, and the knock-on effects are likely to be substantial.Uma S Kambhampati, Professor of Economics; Head of School, University of ReadingLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1533942021-02-09T16:22:31Z2021-02-09T16:22:31ZWill the COVID pandemic cause London’s population to decline?<figure><img src="https://images.theconversation.com/files/381346/original/file-20210129-19-80nkkc.jpg?ixlib=rb-1.1.0&rect=0%2C5%2C3483%2C2292&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/aerial-view-river-thames-part-central-574107499">heliray/Shutterstock</a></span></figcaption></figure><p>The purpose of a city is to allow people to live and work close together, so social distancing has the potential to threaten cities’ very existence. </p>
<p>A recent <a href="https://image.uk.info.pwc.com/lib/fe31117075640475701c74/m/3/ab9cf413-ac81-40eb-a803-84542c05e42c.pdf">report</a> by audit and consultancy firm PwC predicts that the impact of COVID-19 will lead <a href="https://www.theguardian.com/uk-news/2021/jan/07/london-population-decline-first-time-since-1988-report-covid-home-working">London</a> to see its first population decline in decades. Is this set to be a blip, quickly reversed – or a turning point which will mark the start of long-term population decline in the city?</p>
<p>Steady population change is normally easy to forecast by projecting forward existing trends, but identifying turning points is much harder. However, we can gain insight by looking at past turning points in London’s population. </p>
<figure class="align-center ">
<img alt="Time series graph showing total population for Greater London, and its sub-divisions into inner and outer London" src="https://images.theconversation.com/files/380342/original/file-20210124-23-a70ep4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/380342/original/file-20210124-23-a70ep4.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=467&fit=crop&dpr=1 600w, https://images.theconversation.com/files/380342/original/file-20210124-23-a70ep4.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=467&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/380342/original/file-20210124-23-a70ep4.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=467&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/380342/original/file-20210124-23-a70ep4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=587&fit=crop&dpr=1 754w, https://images.theconversation.com/files/380342/original/file-20210124-23-a70ep4.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=587&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/380342/original/file-20210124-23-a70ep4.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=587&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Greater London population 1851-2019.</span>
<span class="attribution"><span class="source">1961-2019: Office of National Statistics mid-year population estimates; 1851-1951: calculations by author from GB Historical GIS</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>The graph shows that from 1850 the population of Greater London grew steadily, before declining between 1951 and 1988. This was then followed by new expansion.</p>
<p>By 1900, inner London was almost completely built up, and improved public transport let people live further from work, so expansion moved outward. The population decline in the city after 1950 was the product of <a href="https://www.jstor.org/stable/1796533?seq=1">government policy</a>. The <a href="https://www.historytoday.com/green-belt">green belt</a> limited London’s sprawl, and bombed inner city areas were rebuilt at lower densities. Inner city residents moved to new and expanded towns built beyond the green belt.</p>
<figure class="align-center ">
<img alt="Table showing percentage change in total population of local government wards in each ten-year period 1951 to 2011" src="https://images.theconversation.com/files/380341/original/file-20210124-13-1sjwvzo.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/380341/original/file-20210124-13-1sjwvzo.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=235&fit=crop&dpr=1 600w, https://images.theconversation.com/files/380341/original/file-20210124-13-1sjwvzo.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=235&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/380341/original/file-20210124-13-1sjwvzo.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=235&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/380341/original/file-20210124-13-1sjwvzo.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=295&fit=crop&dpr=1 754w, https://images.theconversation.com/files/380341/original/file-20210124-13-1sjwvzo.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=295&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/380341/original/file-20210124-13-1sjwvzo.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=295&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Inter censal population change 1951-2011, by distance from central London.</span>
<span class="attribution"><span class="source">Calculations by author from 1961 census report and later Census Small Area Statistics.</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>This table shows the impact of these policies. Together with colleagues, I used detailed statistics from every census between 1951 and 2011 to estimate the populations of each local government ward, as defined in 2011. We then grouped the wards into rings by their distance from the centre of London, and calculated rates of change for each decade. The ring with fastest growth is shown in green, and the most rapid decline (or slowest growth) in blue.</p>
<p>In all decades from 1951 to 1991, the innermost ring, within five miles of Nelson’s Column, shrank fastest. The band between 15 and 20 miles out roughly corresponds to the green belt, and in the 1950s the next ring out, containing the original new towns, grew fastest. After this, the fastest growth took place far outside any definition of Greater London, but was still based on workers commuting into London or otherwise serving London’s economy.</p>
<p>The second turning point is emphatic: from 1991, the innermost ring went directly from decline to being the fastest growing part of the city. There are a number of reasons for this. Firstly, 1980s dock closures and manufacturing decline freed up large areas for new housing, often apartment complexes clustered around transport links. </p>
<p>Secondly, the deregulation of London’s financial markets in 1986 – known as the “<a href="https://www.investopedia.com/terms/b/bigbang.asp">Big Bang</a>” – boosted London’s financial services, while pre-internet computer networks allowed London to dominate financial markets globally. This resulted in longer working hours, discouraging long commutes from outside the city. </p>
<p>More broadly, increased <a href="https://www.lse.ac.uk/geography-and-environment/research/lse-london/documents/Reports/2020-LSE-Density-Report-digital.pdf">population density</a> in inner London was a result of the rise of the “<a href="https://www.dezeen.com/2020/11/02/coronavirus-cities-affordable-creatives-richard-florida/">creative city</a>”. Cultural industries are hard to identify in employment statistics, but London is clearly a dominant world city not just in finance but in sectors such as fashion and video production. </p>
<p>These sectors do not need large or specialised factories, but do need easy interaction between many small firms, and a flexible, often freelance workforce – so they gravitated not to science parks but to old workshops in central districts like Soho and Shoreditch.</p>
<h2>The impact of lockdown</h2>
<p>The immediate consequences of the pandemic are clear: after a year confined to their homes, city dwellers are looking for more space. Upmarket estate agent <a href="https://www.knightfrank.co.uk/research/article/2020-12-29-country-house-price-growth-finishes-2020-on-a-high">Knight Frank</a> has described 2020 as “dominated by the escape to the country trend”. A particularly high proportion of London’s workers normally sit at computer screens, allowing for a rapid shift to home working. If any London residents have second homes in the country – something that does not show up in existing census data – they may have been spending more time there. </p>
<p>These trends are real, and maybe permanent. However, the counter-argument is that once social distancing ends, the gravitational pull of the city will reassert itself. Inner London’s post-1990 resurgence was driven by creative sectors that now appear well suited to home working, so we need to understand what more they need from a location than a computer and a network connection. </p>
<figure class="align-center ">
<img alt="View of street and shops" src="https://images.theconversation.com/files/381350/original/file-20210129-17-bhfbg8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/381350/original/file-20210129-17-bhfbg8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/381350/original/file-20210129-17-bhfbg8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/381350/original/file-20210129-17-bhfbg8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/381350/original/file-20210129-17-bhfbg8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/381350/original/file-20210129-17-bhfbg8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/381350/original/file-20210129-17-bhfbg8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Creative industries have flocked to locations like Soho in central London.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-may-15-2019-shopping-1525225043">JJFarq/Shutterstock</a></span>
</figcaption>
</figure>
<p>London’s gravitational pull is partly lifestyle. A young and educated workforce prefers nightclubs and theatres to large gardens, so long as they are not closed. The ease of international travel from London – before quarantine – is also a draw. But for businesses, too, the higher costs of operating from a city are accompanied by real economic benefits. </p>
<p>Creativity is far harder in isolation: many of us are learning that we can write, compose or even perform from home, but this is not always enjoyable or inspiring. Sustaining creative industries needs cities. In financial services, traders can beat the financial markets only if they know something the other guy does not, so need access to to less formal information circuits – to gossip.</p>
<p>The networks that led to London’s dominance of financial services from the early 1990s promoted a division of labour around the globe, with routine back office work moving from towns like Worthing to locations such as India. However, the dealmakers, and elite workforces in many other globalised sectors, did not disperse – despite inner London’s higher costs.</p>
<p>As long as the pandemic is brought to an end, then, it is unlikely to lead to a turning point in London’s population. While the internet allows for remote working, the past 30 years has shown that the value of working in close proximity with others can outweigh this benefit.</p><img src="https://counter.theconversation.com/content/153394/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Humphrey Southall has undertaken projects funded by the Greater London Authority, the European Union Regional Policy Directorate (DG6) and the Centre for Cities to redistrict historical census data so as to construct long-run time series, and this article draws on the results. The original construction of the historical GIS used for redistricting and the computerisatioon of historical census statistics were funded by the Aurelius Trist, the Big Lottery Fund, the Economic and Social Research Council, the Joint Information Systems Committee, the Leverhulme Trust, the Marc Fitch Fund, the Nuffield Foundation, the Population Investigation Committee and the Wellcome Trust. He is a member of the Labour Party. </span></em></p>Once the pandemic is over, London’s gravitational pull is likely to come back into play.Humphrey Southall, Professor of Historical Geography, University of PortsmouthLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1546242021-02-08T13:27:55Z2021-02-08T13:27:55ZFinancial services: how London can take advantage of Brexit to become more successful<figure><img src="https://images.theconversation.com/files/382571/original/file-20210204-14-7ln8gq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">City limits?</span> <span class="attribution"><a class="source" href="https://unsplash.com/photos/gujCA6GquHs">Jack Gibson</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>In the weeks since the Brexit free-trade deal <a href="https://www.bbc.com/news/uk-politics-55435930">was announced</a> on December 24, people in the UK have been coming to terms with the fact that “free” <a href="https://www.bbc.co.uk/news/business-55752541">does not mean</a> completely free. But while much of the focus has been on the Northern Irish border and the row over vaccines, the financial services sector, centred around the City of London, is also going through substantial upheaval.</p>
<p>The sector contributed <a href="https://commonslibrary.parliament.uk/research-briefings/sn06193/">£132 billion</a> or 7% of the UK economy in 2019 and <a href="https://www.statista.com/statistics/298370/uk-financial-sector-total-financial-services-employment/">employs over 1 million</a> people, half of them in banking. It came out of the talks with what is essentially a “no deal”, since services were not covered at all. </p>
<p>During the announcement, the UK prime minister, Boris Johnson, said that the deal “perhaps does not go as far as we would like” for financial services. This was primarily a reference to “equivalence”, which is the way that EU regulators grant market access to firms from a country outside the bloc, on the basis of deciding that the financial rules are similar to their own (and will remain so). </p>
<p>There was no such commitment to equivalence in the deal – only a memorandum of understanding that talks would stay open and there would be an agreement on financial services regulation by March 31 that would hopefully include equivalence. The City of London <a href="https://www.cityam.com/city-of-london-lobby-urges-eu-to-grant-uk-financial-services-firms-widespread-access-to-its-markets/">has been calling on</a> Brussels to grant equivalence in these negotiations, but there is not much optimism that it will happen either in that timeframe or in any comprehensive way. </p>
<p>One major consequence is that UK financial institutions must trade euro-denominated shares and bonds from within the euro-bloc. Some temporary measures are in place to keep trades moving, such as the UK’s Financial Conduct Authority <a href="https://www.fca.org.uk/news/statements/temporary-transitional-power-derivatives-trading-obligation">allowing UK companies</a> to trade EU derivatives until June, but this business will also probably be lost after that. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/382575/original/file-20210204-22-1mix9ls.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Shot of City of London from a distance" src="https://images.theconversation.com/files/382575/original/file-20210204-22-1mix9ls.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/382575/original/file-20210204-22-1mix9ls.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/382575/original/file-20210204-22-1mix9ls.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/382575/original/file-20210204-22-1mix9ls.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/382575/original/file-20210204-22-1mix9ls.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/382575/original/file-20210204-22-1mix9ls.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/382575/original/file-20210204-22-1mix9ls.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Jobs are going, but there are no signs of an exodus.</span>
<span class="attribution"><a class="source" href="https://unsplash.com/photos/m90xK4akjyo">Lauris Rozentals</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>One estimate from October 2020 <a href="https://www.ey.com/en_uk/news/2020/09/ey-financial-services-brexit-tracker-fs-firms-continue-moving-staff-ahead-of-brexit-deadline">suggested that</a> even back then, £1.2 trillion in assets and 7,500 jobs had been moved in anticipation of what was to come. On <a href="https://www.ft.com/content/a434b756-afe0-454d-9d70-ef2d42ea8d55">the first day</a> that trading shifted back to continental bourses on January 1, the volume amounted to nearly €6 billion (£5.3 billion). </p>
<p>There are still no signs of a mass exodus, however. For example, Deutsche Bank <a href="https://www.ft.com/content/3eaac146-e140-490b-9c97-73e026b7dc13">initially suggested</a> that it may move up to 4,000 jobs to Frankfurt, but now that number looks more likely to be in the low hundreds. This could reflect a “wait-and-see” approach from financial institutions, or perhaps the benefits of being part of a cluster with a large support network of lawyers, accountants, risk specialists and so on, whose practices have evolved over decades to become world class. </p>
<p>Nonetheless, jobs relocated due to lack of equivalence are unlikely to come back if it is granted for particular market segments later, because routines and practices become settled. This could combine with the prospect of the “all-in-one-place” benefits of locating in London being diminished by the pandemic – if Zoom meetings are <a href="https://theconversation.com/five-charts-that-reveal-how-remote-working-could-change-the-uk-154418">increasingly the norm</a>, is being part of a cluster of connected businesses in one area still as important? </p>
<h2>Professional strengths</h2>
<p>But it’s not all bad news. One major City segment unaffected by Brexit is currency trading. While shares and bonds usually trade in the market where they are issued, currency trading takes place globally – mostly involving US dollar pairs, followed by pairs involving the euro and yen. </p>
<p>The UK <a href="https://www.bis.org/statistics/rpfx19.htm">has 43%</a> of the global forex market, and this has increased by six percentage points in three years. The next highest is the US, with 16.5% and declining, while the Asian centres of Japan, Hong Kong and Singapore have predominantly been static. </p>
<p>In forex, London has several important advantages. The location and timezone are a midpoint between the US and Asia. It has scale in having <a href="https://colresearch.typepad.com/colresearch/2018/06/banks-in-the-city-and-across-the-uk.html">such a significant number</a> of international banks in one city, plus the network of supporting services. By comparison, EU expertise is scattered among centres such as Amsterdam, Frankfurt and Dublin. London also has the <a href="https://www.ft.com/content/f0a2dc6e-0263-11e7-ace0-1ce02ef0def9">infrastructure required</a> for state-of-the-art high-frequency trading, not least the transatlantic cabling landing stations and data centres.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/382582/original/file-20210204-16-56se4k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Two professionals working behind laptops" src="https://images.theconversation.com/files/382582/original/file-20210204-16-56se4k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/382582/original/file-20210204-16-56se4k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/382582/original/file-20210204-16-56se4k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/382582/original/file-20210204-16-56se4k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/382582/original/file-20210204-16-56se4k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/382582/original/file-20210204-16-56se4k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/382582/original/file-20210204-16-56se4k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">London’s finance cluster remains hard to beat.</span>
<span class="attribution"><a class="source" href="https://unsplash.com/photos/5fNmWej4tAA">Scott Graham</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>So London will probably continue to dominate this market, and is well placed to benefit from a likely rise in the trade in emerging markets currencies. Their total trade <a href="https://www.bis.org/statistics/rpfx19.htm">now exceeds the yen</a>, with the Chinese remnimbi the largest. Outside Hong Kong, more remnimbi are traded in London than anywhere else – more than £300 billion worth in 2019. London has also seen an increase in the issuance of remnimbi-denominated bonds issued outside of China (known as “dim sum bonds”). </p>
<p>In important areas like these, London will be competing much more with Asia than with Europe. London is also likely to continue to be a world leader in providing a place where disputes can be resolved and best practices can be monitored and maintained. </p>
<h2>The right approach to the future</h2>
<p>The pre-eminence in finance that London enjoys because of its cluster of specialists points to a vital issue as the UK emerges from Brexit: the key to the future is to maintain and enhance standards and regulatory oversight so that major firms continue to have confidence in London as a place to do business, resolve disputes and so on. Get this right and they will continue to invest.</p>
<p>No longer having to coordinate and agree with 27 EU countries should enable the UK to be more nimble in this regard, which could be a big advantage in attempting to corner emerging areas such as green investment and fintech. This could include developing and regulating new financial products that allow investors to positively engage with climate-change finance and cryptocurrencies. This would be a more beneficial approach to taking the financial sector forward than to focus on deregulation in a “<a href="https://www.thisismoney.co.uk/money/markets/article-9144307/Big-Bang-2-0-Radical-shake-planned-breathe-life-City-London.html">big bang 2.0</a>”. </p>
<p>The unavoidable reality is that financial services business and jobs will continue to be lost as a result of Brexit. But with a thoughtful, future-focused approach to managing the sector, there is also plenty of scope for it to rebound.</p><img src="https://counter.theconversation.com/content/154624/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David McMillan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The question now is, how to turn a crisis into an opportunity.David McMillan, Professor in Finance, University of StirlingLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1534862021-01-19T16:54:17Z2021-01-19T16:54:17ZBrexit: financial services face continued uncertainty – here’s why <figure><img src="https://images.theconversation.com/files/379264/original/file-20210118-23-1v0izht.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">shutterstock</span> </figcaption></figure><p>Since the <a href="https://theconversation.com/so-parliament-gets-a-pre-brexit-vote-but-what-will-it-be-voting-on-68248">UK</a> voted to leave the EU, financial services has been largely absent from Brexit discussions. This is despite the fact that financial services are an important piece of the UK economy. They account for around <a href="https://www.cityoflondon.gov.uk/supporting-businesses/economic-research/research-publications/city-statistics-briefing">around 10%</a> of total tax receipts in the UK and <a href="https://www.ons.gov.uk/businessindustryandtrade/internationaltrade/bulletins/internationaltradeinservices/2018">40% of</a> the financial services sector’s exports go to the EU.</p>
<p>Furthermore, as soon as the then UK prime minister <a href="https://theconversation.com/theresa-may-confirms-itll-be-a-hard-brexit-heres-what-that-means-for-trade-71417">Theresa May</a> announced that Brexit would mean the end of free movement between the UK and the EU, it was clear that UK financial services would face significant changes to their EU operations as a result of Brexit.</p>
<p>Most notably, financial services firms knew that from January 1 they would lose their <a href="https://theconversation.com/london-banking-will-struggle-to-escape-brexit-trap-61929">passporting</a> rights, which allowed them to sell their services into the EU from their UK base without the need for additional regulatory clearance.</p>
<h2>Goodbye passporting, hello equivalence</h2>
<p>The EU-UK Trade and Cooerpation Agreement (TCA) does not, and was not designed to, provide a substitute for the EU market access available to UK firms through passporting. In a document stretching to over 1,200 pages, only four and a half focus on financial services. </p>
<p>In order to access the single market, UK based financial services firms now have to either comply with the regulatory requirements for market access set at the level of individual member states or rely on equivalence decisions. Equivalence is an EU system that gives single market access to financial firms in third countries such as the UK if their home rules are considered by Brussels to be “equivalent” to, or as robust as, regulation in the bloc.</p>
<figure class="align-center ">
<img alt="Senior executive hand holding UK passport against blurred background of world globe and camera" src="https://images.theconversation.com/files/379284/original/file-20210118-15-1ux4gs7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/379284/original/file-20210118-15-1ux4gs7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=361&fit=crop&dpr=1 600w, https://images.theconversation.com/files/379284/original/file-20210118-15-1ux4gs7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=361&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/379284/original/file-20210118-15-1ux4gs7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=361&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/379284/original/file-20210118-15-1ux4gs7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=454&fit=crop&dpr=1 754w, https://images.theconversation.com/files/379284/original/file-20210118-15-1ux4gs7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=454&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/379284/original/file-20210118-15-1ux4gs7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=454&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Equivalence doesn’t provide the same degree of certainty as passporting.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/senior-executive-hand-holding-uk-passport-789443077">Steve Heap/Shutterstock</a></span>
</figcaption>
</figure>
<p>Neither is a like-for-like replacement for the common EU-wide market access the UK had through passporting. Seeking permissions on a state-by-state basis will add complexity and hence costs for financial services firms.</p>
<p>Relying on equivalence brings changes in UK-EU financial services trade because it does not cover the same range of financial activities as passporting. </p>
<p>Retail banking services, including lending, payments and deposit taking are not included, for example. Neither does equivalence provide the same degree of certainty as passporting because the EU can remove equivalence determinations with 30 days’ notice.</p>
<p>One of the most significant causes of uncertainty currently for UK financial services is when and if equivalence determinations might be taken by the EU. In the <a href="https://www.gov.uk/government/publications/new-withdrawal-agreement-and-political-declaration">2019 political declaration</a> that set out the framework for the future relationship between the EU and UK, both sides agreed to try to finalise their respective equivalence decisions by mid-2020, but the deadline was not met.</p>
<p>The EU has adopted a cautious approach to equivalence since then. It has only made two time-limited equivalence decisions in areas of strategic importance for the EU (derivatives clearing and the settling of Irish securities).</p>
<h2>The way ahead</h2>
<p>Equivalence decisions were not formally part of UK-EU trade negotiations. However, during the negotiations it was expected that a deal would have made equivalence more likely than under a no-deal scenario. </p>
<p>There is evidence in the deal that this is true. The European Commission has <a href="https://ec.europa.eu/info/sites/info/files/eu-uk_trade_and_cooperation_agreement-a_new_relationship_with_big_changes-brochure.pdf">identified</a> future equivalence decisions as one of a number of unilateral EU measures available to the EU within a wider set of “pillars of cooperation” between the UK and the EU.</p>
<p>Under the terms of the TCA, the UK and the EU have committed to agreeing a <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/948093/TCA_SUMMARY_PDF.pdf">Memorandum of Understanding</a> relating to financial services regulation by March. This is likely to cover issues related to financial market stability alongside the outstanding equivalence issues. As such, whilst the UK’s financial services sector is now trading outside the single market, negotiations are continuing on how it will trade with the EU in the future. </p>
<figure class="align-center ">
<img alt="Close up view of British currency GBP - One Pound coin balancing on its edge in the centre of the logo of the European Union." src="https://images.theconversation.com/files/379481/original/file-20210119-18-10pa6dr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/379481/original/file-20210119-18-10pa6dr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/379481/original/file-20210119-18-10pa6dr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/379481/original/file-20210119-18-10pa6dr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/379481/original/file-20210119-18-10pa6dr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/379481/original/file-20210119-18-10pa6dr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/379481/original/file-20210119-18-10pa6dr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Financial services jobs have moved from London to the EU.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-april-2019-close-view-1360294616">Ceri Breeze/Shutterstock</a></span>
</figcaption>
</figure>
<p>However, there is little evidence that equivalence decisions are forthcoming. The EU has <a href="https://ec.europa.eu/commission/presscorner/detail/en/qanda_20_2532">reiterated</a> that it will not rush equivalence determinations. Indeed, as time passes, in many ways the prospects for EU equivalence determinations diminish. </p>
<p>Equivalence can be thought of as a perishable good. As firms begin to operate without it by, for example, moving assets, activities or employees out of London to other European financial centres, so the potential for these corporate decisions to be reversed diminishes if an equivalence determination is made. </p>
<p>For example, there has been a large shift in Euro-denominated share trading from London to European financial centres such as Paris and Amsterdam since January 1 2021. This has been an area of financial services activity that London has historically dominated within Europe. Financial services jobs have also been moved from London to the EU, although the rate has been lower than many anticipated. Firms are currently awaiting the outcome of current EU-UK negotiations on the future of financial services before making a final decision about where to base their operations.</p>
<p>Additionally, part of the EU’s caution in granting equivalence reflects its desire to learn more about the UK’s plans for any possible divergence from EU regulation after Brexit. This is a key domestic policy question for the UK <a href="https://www.ft.com/content/1a2c7e3d-2bd9-4f9c-90c1-0732df98488e">currently</a>. </p>
<p>Brexit centred, in many ways, around a desire to “take back control”. But little is currently known about how this new found control will be exercised in financial services. The outcome of negotiations surrounding regulatory cooperation and EU decisions on equivalence due in 2021 should be watched closely as these will be central in determining what Brexit means in practice for financial services.</p><img src="https://counter.theconversation.com/content/153486/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sarah Hall receives funding from the Economic and Social Research Council. She is a Senior Fellow at the UK in a Changing Europe.</span></em></p>The UK’s financial services sector has been planning for a considerably reduced market access.Sarah Hall, Professor of Economic Geography, University of NottinghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1411392020-07-02T14:50:21Z2020-07-02T14:50:21ZSouth African banks need to do more to ensure financial inclusion<figure><img src="https://images.theconversation.com/files/343717/original/file-20200624-132982-wsv5jy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Photo by Frédéric Soltan/Corbis via Getty Images</span></span></figcaption></figure><p>An analysis of financial inclusion in South Africa shows that affordability limits poor households’ access to formal financial services. <a href="https://www.african-review.com/view-paper.php?serial=20200501144727-278204">In our study</a>, which looked at people’s use of financial goods and services between 2008 and 2015, we found that there was a general increase in use. But this was severely skewed to households with higher incomes.</p>
<p>Financial inclusion is broadly defined as the ability of people to access a range of affordable financial services. Among these are bank and savings accounts, loans and insurance products. Households that are financially excluded can’t take part in various forms of savings or wealth accumulation. These range from paying bills via direct debit to gaining favourable forms of credit.</p>
<p>The key policy implication of our findings is that more financial services should target low-income households. It should be a priority, given the high rate of exclusion among the poor. </p>
<h2>Measuring use based on income</h2>
<p>In general, there are four dimensions of financial inclusion: access, usage, quality and welfare. In our study, we focus on usage. </p>
<p>The financial services available in South Africa range from the well-known ones such as bank accounts and credit cards to the less well known ones such as hire purchase agreements and loans with “mashonisa” (loan sharks). In the South African context, a bank account remains the most used financial service. The number of unbanked adult individuals decreased from 17 million to 14 million between <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1813-6982.2004.tb00127.x">2003</a> and <a href="http://www.statssa.gov.za/?page_id=1854&PPN=P0318&SCH=7348">2017</a>.</p>
<p>Our study is the first to thoroughly investigate the data from the <a href="http://www.nids.uct.ac.za/images/documents/what-is-NIDS.pdf">National Income Dynamics Study</a>. This study interviews the same households (if possible) every two years to track the changes in their income and non-income welfare over time. </p>
<p>One standout feature of the study is that it asks household heads about their usage of 14 financial services. </p>
<p>With the aid of some statistical techniques, we developed an aggregate financial usage index to investigate the profile of people who were comprehensively financially included.</p>
<h2>What we found</h2>
<p>The study found that the increased use of financial products and services was mostly associated with higher income households. The other characteristics of individuals and households that showed higher usage of financial services were: middle-aged, male, white, more educated, urban residents in Western Cape and Gauteng provinces. They came from bigger households with more employed members.</p>
<p>The likelihood of complete financial exclusion was more prevalent in poor rural households living in the Eastern Cape, KwaZulu-Natal and Limpopo provinces. Almost invariably, these households were made up of black people. The study also found that households with low real per capita income and fewer employed members were associated with greater likelihood of financial exclusion. Households bigger in size and headed by middle-aged people were associated with significantly higher financial inclusion and lower likelihood of complete financial exclusion.</p>
<p>The table below presents the proportion of households with at least one adult member having some form of the observed financial services. The results indicate that there has been an increase in the use of most financial services between waves 1 (2008) and 4 (2014/2015). In particular, the proportion of households that have at least one member with a bank account increased from almost 57% in wave 1 (2008) to over 78% by wave 4 (2014/2015), while those with a personal loan from a bank nearly doubled (8.63% to 16.41%) between the first (2008) and last waves (2014/2015). </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/343724/original/file-20200624-132965-1igt05z.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/343724/original/file-20200624-132965-1igt05z.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/343724/original/file-20200624-132965-1igt05z.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=445&fit=crop&dpr=1 600w, https://images.theconversation.com/files/343724/original/file-20200624-132965-1igt05z.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=445&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/343724/original/file-20200624-132965-1igt05z.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=445&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/343724/original/file-20200624-132965-1igt05z.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=559&fit=crop&dpr=1 754w, https://images.theconversation.com/files/343724/original/file-20200624-132965-1igt05z.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=559&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/343724/original/file-20200624-132965-1igt05z.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=559&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Proportion of households with at least one adult having some form of financial services.</span>
<span class="attribution"><span class="source">Author supplied</span></span>
</figcaption>
</figure>
<p>We also considered variables from informal financial sources, such as loans from mashonisa (loan sharks), which have increased from 1.69% in wave 1 to 2.97% in wave 4, and loans from a family member, friend or employer, which increased from less than 2.85% to 8.76%. The use of other important services, such as hire purchase agreements, store cards and pension or retirement annuity plans, also increased across the four waves. There is a decrease in the use of some of the major financial services. For example, households where at least one member reported to have a home loan or bond were at 8.63% in wave 1 and gradually declined over the years, ending up at 5.68% by wave 4. There was also a slight decline in study loans and vehicle finance.</p>
<p>One finance source that particularly stands out is the use of credit cards, which decreased from 12.5% (wave 1) to 9.74% (wave 4). </p>
<p>In all four waves, households that were regarded as poor had relatively lower rates of use of each source of finance.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/343725/original/file-20200624-132972-1objgy2.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/343725/original/file-20200624-132972-1objgy2.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/343725/original/file-20200624-132972-1objgy2.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=436&fit=crop&dpr=1 600w, https://images.theconversation.com/files/343725/original/file-20200624-132972-1objgy2.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=436&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/343725/original/file-20200624-132972-1objgy2.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=436&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/343725/original/file-20200624-132972-1objgy2.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=548&fit=crop&dpr=1 754w, https://images.theconversation.com/files/343725/original/file-20200624-132972-1objgy2.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=548&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/343725/original/file-20200624-132972-1objgy2.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=548&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Poor households had relatively lower rates of use.</span>
</figcaption>
</figure>
<p>The figure below shows the proportion of households that were completely financially excluded (they didn’t have any of the 14 sources of finance). It more than halved between the first (36.77%) and fourth (16.40%) waves.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/343726/original/file-20200624-133013-1gs2ib7.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/343726/original/file-20200624-133013-1gs2ib7.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/343726/original/file-20200624-133013-1gs2ib7.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=439&fit=crop&dpr=1 600w, https://images.theconversation.com/files/343726/original/file-20200624-133013-1gs2ib7.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=439&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/343726/original/file-20200624-133013-1gs2ib7.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=439&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/343726/original/file-20200624-133013-1gs2ib7.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=552&fit=crop&dpr=1 754w, https://images.theconversation.com/files/343726/original/file-20200624-133013-1gs2ib7.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=552&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/343726/original/file-20200624-133013-1gs2ib7.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=552&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Proportion of households completely financially excluded.</span>
</figcaption>
</figure>
<h2>What next?</h2>
<p>Supporting alternative, black finance access and usage is one possibility. This may range from low-cost bank accounts and products to advanced technologies that deliver financial services to the excluded in a swift, affordable and efficient manner. </p>
<p>Other countries can be used as a case study. </p>
<p>For instance, in India, the government and private providers have worked together to grow access to financial products such as insurance at a lower cost. The Indian government founded a social security fund that finances insurance companies to subsidise insurance premium policies offered to poorer households. This initiative has provided over <a href="https://www.social-protection.org/gimi/gess/ShowRessource.action;jsessionid=yWZDNJblhn3GOxUg9oeY_m7VGnYmb9h-NN-Q5AjRJKXqpxrTDEzf!-1463413688?lang=EN&ressource.ressourceId=7533">two million poor Indians with access to insurance policies</a>.</p>
<p>The promotion of money pools is also another option. <a href="https://journals.sagepub.com/doi/abs/10.1007/s12114-013-9171-9">A study</a> conducted from five Caribbean countries showed that money pools, where poor people pool their money and create collective banks, helped people save. In Cameroon, the practice of lending and saving through kinship and financial networks was found to be more trusted than the mainstream. </p>
<p>This clearly calls for a proactive financial system that promotes such channels and one that is trusted by the general public, especially low-income earners.</p>
<p>But financial inclusion initiatives directed at the poor should be closely monitored. This is because <a href="https://developingeconomics.org/2019/07/31/misunderstanding-the-average-impact-of-microcredit/">they don’t always have a positive impact</a>, particularly on poor people.</p><img src="https://counter.theconversation.com/content/141139/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>More financial services should target low-income households in South Africa.Velenkosini Matsebula, Lecturer, Economics, University of the Western CapeDerek Yu, Professor, Economics, University of the Western CapeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1125402019-03-05T09:49:14Z2019-03-05T09:49:14ZGender pay gap hasn’t been fixed by transparency – fines may force companies to act<figure><img src="https://images.theconversation.com/files/261901/original/file-20190304-92310-1bdkb8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Ink Drop / Shutterstock</span></span></figcaption></figure><p>Despite huge amounts of publicity and government efforts to tackle the the gender pay gap, it remains a serious issue. It affects women <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/genderpaygapintheuk/2018">in most industries</a>: from artists and academics to journalists and doctors.</p>
<p>We’ve <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/bjir.12448">researched</a> some of the particular problems facing the UK’s finance industry when it comes to the gender pay gap. Across finance as a whole, women earn 27.2% less than men an hour, on average. When it comes to bonuses the gap is nearly 50%. Our research shows how this plays out at different levels of the finance industry.</p>
<p>Progress on gender pay issues in this sector has been too slow, fragmented and uneven over the past ten years. The UK government introduced legislation requiring employers with more than 250 employees to report annually their gender pay gap publicly beginning April 2018. The principle is that greater transparency will reduce the gender pay gap, but the evidence so far suggests this is not enough.</p>
<p>The gender pay gap is a global phenomenon. At Davos, IMF chief, Christine Lagarde raised the gender imbalance in the financial sector, <a href="https://www.theguardian.com/business/2019/jan/24/davos-head-of-imf-warns-against-rising-fat-cat-pay">saying</a>: “The numbers are just appalling … you have 20% of board members in the financial sector who are women, and you only have 2% of CEOs who are women.” This, despite the fact that it is “business common sense … that diversity actually precipitates productivity and is good for all”.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/261906/original/file-20190304-92298-5z0s32.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/261906/original/file-20190304-92298-5z0s32.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/261906/original/file-20190304-92298-5z0s32.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/261906/original/file-20190304-92298-5z0s32.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/261906/original/file-20190304-92298-5z0s32.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/261906/original/file-20190304-92298-5z0s32.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/261906/original/file-20190304-92298-5z0s32.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">IMF chief, Christine Lagarde: ‘The numbers are just appalling’.</span>
<span class="attribution"><span class="source">Alexandros Michailidis / Shutterstock.com</span></span>
</figcaption>
</figure>
<h2>Our findings</h2>
<p>The financial services industry was called out in the UK government <a href="https://webarchive.nationalarchives.gov.uk/+/www.hm-treasury.gov.uk/d/walker_review_261109.pdf">inquiries</a> that followed the 2008-09 financial crisis for receiving £1.3 trillion of taxpayer support and for unsafe pay policies (including bonus culture), which contributed to the recession. At the same time, the government’s Equality and Human Rights Commission <a href="https://www.equalityhumanrights.com/sites/default/files/financial_services_inquiry_report_0.pdf">exposed</a> the particularly large gender pay gap in the sector, long working hours, inflexible work and a male-biased culture. </p>
<p>We began our research expecting that this kind of exposure and public dislike of the sector might well have led responsible organisations to radically review their culture and pay systems. Yet, we were aware that the state initiatives only put voluntary pressure on financial services to reform their pay and culture, so we might see little change.</p>
<p>Indeed, overall, we found there to be only a marginal decline in the pay gap since the recession – rather than a radical change. Our study exposed differences between groups, with the gender pay gap substantially higher among the financial industry’s highest earners. Between 2009 and 2017 the gap ranged from 13.8% among the lowest earners (that is, at the 10th quantile) compared to 58.6% among the highest earners (90th quantile), resulting in the irony that the more successful the woman, the greater the pay gap between her and her male counterpart.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/261297/original/file-20190227-150694-fh7pni.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/261297/original/file-20190227-150694-fh7pni.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/261297/original/file-20190227-150694-fh7pni.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=380&fit=crop&dpr=1 600w, https://images.theconversation.com/files/261297/original/file-20190227-150694-fh7pni.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=380&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/261297/original/file-20190227-150694-fh7pni.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=380&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/261297/original/file-20190227-150694-fh7pni.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=477&fit=crop&dpr=1 754w, https://images.theconversation.com/files/261297/original/file-20190227-150694-fh7pni.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=477&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/261297/original/file-20190227-150694-fh7pni.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=477&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://discover.ukdataservice.ac.uk/catalogue/?sn=7985">Data: Labour Force Survey</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>So Lagarde is right to call for more diversity in the financial services sector, but it is not enough to simply promote women and then pay them less than men in the same positions. </p>
<p>We were not only concerned with exposing inequality at the highest levels but across the spectrum of roles and wages. At the lower levels of pay, while the pay gap was less, there was no improvement over the period we looked at. </p>
<p>Our paper also identified contradictory patterns. Despite the decline in trade union membership in recent decades, trade unions still had a positive effect – union membership and collective bargaining led to a reduction in the gender pay gap.</p>
<p>But, particularly concerning is that ethnicity was related to a higher pay gap and the study also uncovered a post-recession increase in working hours, which contributes to an increase in the pay gap as women often bear the brunt of caring responsibilities. As an earlier survey and evidence to the Treasury’s <a href="https://publications.parliament.uk/pa/cm200910/cmselect/cmtreasy/482/482.pdf">Women in the City</a> report on increased working hours by the union Unite also found, long working hours and “presenteeism” are part of a male culture in which women may be excluded as not “fitting in” or exclude themselves as this way of working is disproportionately time greedy.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/gender-pay-gap-reporting-rules-should-extend-to-ethnicity-and-class-heres-why-92863">Gender pay gap reporting rules should extend to ethnicity and class – here's why</a>
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</em>
</p>
<hr>
<h2>Window dressing?</h2>
<p>It is clear that financial firms are investing in diversity strategies. But it is hard not to wonder how much of the investment is window dressing, or else just poorly implemented. A striking example is <a href="https://www.lloydsbankinggroup.com/our-group/responsible-business/inclusion-and-diversity/">Lloyds Banking group’s</a> Inclusion and Diversity Strategy. Lloyds’ strategy to improve the pay gap is to increase the proportion of women in senior roles so that “the gender gaps will reduce over time”. This strategy and their wider diversity initiatives have received external recognition, and the bank has received <a href="https://www.lloydsbankinggroup.com/our-group/responsible-business/inclusion-and-diversity/">numerous accolades</a>. </p>
<p>But, despite their prize-winning diversity initiatives, Lloyds’ Banking Group <a href="https://www.lloydsbankinggroup.com/globalassets/our-group/responsible-business/reporting-centre/gender-pay-gap-report-2017-18-final.pdf">reported</a> an average pay gap figure of 31.5% in 2018 (the average for the sector is 27.2%) and its bonus gap was more than 60% (the average is just under 50%).</p>
<p>The sector as a whole continues to be steeped in discriminatory practices with respect to pay and unequal treatment favouring men and disincentivising women through the persistence of its alpha-male culture and associated long hours. Financial services has undoubtedly introduced and promoted positive diversity initiatives, but these have been undermined by things like discretionary bonuses and increasingly long working hours. </p>
<p>Plus, it is clear that gender equality is still not a strategic priority with the effect that the second round of reporting due in April 2019 is already indicating a worsened pay gap <a href="https://www.personneltoday.com/pay-benefits/gender-pay-gap-pay-benefits/">for four in ten firms</a>. Change is unlikely without external pressure, whether from unions, women’s networks and pressure groups. But ultimately the state must introduce more financial sanctions on those organisations that show no progress in closing the gender pay gap.</p><img src="https://counter.theconversation.com/content/112540/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Geraldine Healy receives funding from the PROGRESS Programme of the European Union, Reference no. JUST/2013/PROG/AG/4890/GE.</span></em></p><p class="fine-print"><em><span>Mostak Ahamed does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Progress on gender pay issues in finance especially has been too slow, fragmented and uneven.Geraldine Healy, Professor of Employment Relations, Queen Mary University of LondonMostak Ahamed, Lecturer in Finance, University of Sussex Business School, University of SussexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1112212019-02-07T12:25:29Z2019-02-07T12:25:29ZShould I stay or should I go? Brexit is forcing City firms to make some tough decisions<figure><img src="https://images.theconversation.com/files/257701/original/file-20190207-174861-1a5x7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/canary-wharf-large-business-shopping-development-87531808?src=m31XRRPCExjvbsg1CX_lIw-1-2">QQ7/Shutterstock</a></span></figcaption></figure><p>The City of London has <a href="https://www.theguardian.com/business/nils-pratley-on-finance/2019/jan/30/so-just-when-exactly-will-the-city-press-the-no-deal-panic-button">not been as vocal</a> as other industry sectors during the Brexit negotiations, but it is perceived to be dissatisfied. The UK’s future relationship with the EU remains unclear – and if there’s one thing most businesses do not like it’s <a href="https://theconversation.com/brexit-why-uncertainty-is-bad-for-economies-64334">uncertainty</a>. This is why the City broadly <a href="https://www.theguardian.com/politics/2018/nov/26/business-leaders-rally-behind-mays-brexit-deal-amid-fears-of-crashing-out">approves of</a> Theresa May’s <a href="https://theconversation.com/brexit-draft-withdrawal-agreement-experts-react-107027">withdrawal agreement</a>. At the very least, it stops Britain crashing out of the EU without a deal on March 29.</p>
<p>But, with UK politicians <a href="https://theconversation.com/brexit-deal-flops-theresa-may-survives-so-what-happens-now-109975">not signing off on this agreement</a>, uncertainty persists. And, as Brexit’s 11th hour creeps closer, we are able to see just how different financial firms are dealing with the UK’s impending departure from the EU. </p>
<p>Arguments as to the effects of Brexit on the City range from the <a href="https://www.politico.eu/article/brexit-the-city-of-london-is-already-dying/">catastrophic</a> to the <a href="https://www.centreforlondon.org/publication/the-london-intelligence-issue-6/">negligible</a>. Reams of data and statistics have been produced to illustrate these extreme positions and multiple standpoints in between. The effect has – predictably – been confusion. Is the City really threatened by Brexit or not? </p>
<p>Perhaps unsurprisingly, attitudes vary from firm to firm and the answer can be found by untangling the different aspects of City business. Firms dealing with managing the investments of wealthy international clients and funds <a href="https://www.bloomberg.com/opinion/articles/2018-04-30/banks-seem-oddly-unconcerned-about-brexit">are less affected</a> by a regulatory rupture between the UK and the EU. Yes, there may be some costs involved in moving funds around to meet regulatory requirements as they evolve, but there are also opportunities. </p>
<p>Regulatory and tax arbitrage – where firms capitalise on legal loopholes and inconsistent requirements in different countries – is how much of the City makes its money. So a new subdivision of systems and requirements within Europe would open up <a href="https://publications.parliament.uk/pa/ld201719/ldselect/ldeucom/66/66.pdf">opportunities</a> for savings and new products. The significant amounts of money involved in this aspect of the City’s business ensure that a great deal of the current financial structure will remain in place, no matter what shape Brexit eventually takes.</p>
<h2>Uneven movement abroad</h2>
<p>Other aspects of the City’s business are more <a href="https://www.pwc.co.uk/financial-services/assets/pdf/impact-of-brexit-on-fs-in-europe.pdf">vulnerable</a>. Losing the “passporting” rights that allow banks to ply their services across the EU means that those parts of the City engaged in insurance, commercial and retail banking will no longer be able to service their European clients. As much was admitted in the government’s no-deal preparation <a href="https://theconversation.com/no-deal-brexit-experts-on-what-the-uk-governments-advice-means-102074">notices</a>. And even if a Brexit deal is signed off before March 29, the loss will occur after the end of the transition period. </p>
<p>Subsequently, for the part of the City’s banking and insurance sectors that deal with what we call the real economy (standard retail clients and businesses) their business model is up in the air. The only safe solution is to relocate to an EU member state or wind down contracts they will not be able to service in the future.</p>
<p>This explains the uneven movement of City firms in response to Brexit. Some move funds and some of their people by establishing or augmenting a base in Europe. For example, <a href="https://www.bbc.co.uk/news/business-47060676">Barclay’s bank</a> recently obtained court approval to move a massive €190 billion fund to Ireland. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/257702/original/file-20190207-174870-1bado1k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/257702/original/file-20190207-174870-1bado1k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=389&fit=crop&dpr=1 600w, https://images.theconversation.com/files/257702/original/file-20190207-174870-1bado1k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=389&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/257702/original/file-20190207-174870-1bado1k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=389&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/257702/original/file-20190207-174870-1bado1k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=488&fit=crop&dpr=1 754w, https://images.theconversation.com/files/257702/original/file-20190207-174870-1bado1k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=488&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/257702/original/file-20190207-174870-1bado1k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=488&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Barclays’ London headquarters.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-october-2018-barclays-building-canary-1212345334?src=G5_HvEypN-mEopOAfQ2AjA-1-24">Willy Barton / Shutterstock.com</a></span>
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</figure>
<p>But this movement isn’t just in one direction – those firms that used to serve British clients from an EU location are now relocating to London. <a href="https://www.reuters.com/article/us-britain-eu-citigroup-uk/citi-plans-new-uk-bank-as-part-of-brexit-reorganization-idUSKCN1MF231">Citibank</a>, for example, is setting up a new British bank that will be headquartered in London to ensure it can service its retail clients in the UK after Brexit. Previously, this business was covered by its Citibank Europe headquarters in Dublin. Of course, the money involved reflects the relative strength and volume of the client base. This is why the movement away from the City makes headlines, while the opposite is primarily of interest to clients affected. </p>
<p>For other firms, changes brought about by Brexit are so fundamental that they no longer need to maintain a UK presence. Those will <a href="https://uk.reuters.com/article/us-eurozone-banks-ecb/ecb-takes-over-supervision-of-two-banks-leaving-uk-due-to-brexit-idUKKBN1OD0Z6">move</a> their regulated operations or <a href="https://www.independent.co.uk/news/uk/politics/brexit-jacob-rees-mogg-scm-ireland-city-move-eu-withdrawal-dublin-a8398041.html">relocate</a> the entirety of their funds, with Frankfurt, Paris and Dublin being the main <a href="https://www.politico.eu/article/jpmorgan-goldman-sachs-banks-finance-world-getting-on-with-exit-from-uk/">beneficiaries</a> in the field of financial services.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/ireland-is-in-prime-position-to-profit-from-brexit-relocations-77876">Ireland is in prime position to profit from Brexit relocations</a>
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<p>A less-reported consequence of all this movement is that City firms might also be examining their <a href="https://newint.org/features/2018/11/19/will-brexit-break-investor-state-lawsuit-system">legal options</a> in terms of suing the British government for the losses incurred by relocations, or loss of market access. So far <a href="https://academic.oup.com/icsidreview/article/33/2/380/5004350">only a few have the jurisdiction</a> to sue – investors from countries that have signed some form of treaty with the UK that includes investor-state dispute settlement clauses. These will be primarily firms from outside Europe that had settled in the City in order to serve European clients, which may argue that the UK government’s handling of Brexit violated their legitimate expectations of moving to (and investing) in UK offices. But, depending on the extent of losses, and the final form of Brexit, lawyers are likely to be busy investigating.</p>
<p>Will there still be a City of London in April? The answer is yes. But it will be different, no matter which shape Brexit eventually takes. In markets, actions speak louder than words, and booming sales of <a href="https://www.bbc.co.uk/news/av/uk-england-leeds-46842937/hundreds-buying-brexit-box-amid-food-supply-fears">Brexit survival packs</a> are certainly not a good sign.</p><img src="https://counter.theconversation.com/content/111221/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ioannis Glinavos does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Some banks are moving their operations out of London. Others are moving in to serve British clients they might not be able to reach from the EU.Ioannis Glinavos, Senior Lecturer in Law, University of WestminsterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1053912018-10-25T02:06:26Z2018-10-25T02:06:26ZBank codes of conduct: add bars to the window dressing and make them legally binding<figure><img src="https://images.theconversation.com/files/242191/original/file-20181025-71042-dye2xr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">To protect bank customers, the law could mandate behaviour defined in a code of conduct to be strictly liable, and breaches criminal.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Banks don’t need 10 commandments to do the right thing, but just six, <a href="https://financialservices.royalcommission.gov.au/Pages/interim-report.aspx">says the head of the banking royal commission</a>.</p>
<p>The first of those commandments set out by Commissioner Kenneth Hayne is to “obey the law”. The other five relate to ethical conduct: do not mislead or deceive; be fair; provide services fit for purpose; deliver services with reasonable care and skill: and when acting for another, act in their best interests.</p>
<p>Banks are, in fact, <a href="https://download.asic.gov.au/media/3336163/rg121-published-25-august-2015.pdf">required as a condition of their banking licence</a> to treat customers “efficiently, honestly and fairly”. In addition to the <a href="https://www.ausbanking.org.au/code/banking-code-of-practice/">ABA Code of Banking Practice</a>, which covers the industry, banks also have “codes of conduct” that they promote with assurances any breaches will be dealt with harshly.</p>
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Read more:
<a href="https://theconversation.com/banking-royal-commissions-damning-report-things-are-so-bad-that-new-laws-might-not-help-104058">Banking Royal Commission's damning report: 'Things are so bad that new laws might not help'</a>
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<p>Often this is mere window dressing. The truth is that most codes of conduct are just glossy, aspirational documents handed to new employees then promptly forgotten until an excuse to fire someone is needed. Their lie has been exposed by the many examples of dishonest, illegal, deceptive, fraudulent, grossly incompetent or grossly negligent conduct revealed by the royal commission.</p>
<p>How to make codes of conduct real tools of good behaviour rather than exercises in deceptive advertising? The answer is to enshrine Justice Hayne’s six commandments in every bank’s code of conduct, and make any breach to that code criminal.</p>
<h2>Codes of conduct</h2>
<p>Major banks publish their official codes of conduct prominently. The codes are endorsed by boards, and clearly state there are censures for code breaches. For example, the <a href="https://www.nab.com.au/content/dam/nabrwd/documents/policy/corporate/code-of-conduct.pdf">National Australia Bank code</a> threatens staff with termination for breaches. </p>
<p>These codes are effectively a company’s promise about how it will behave and what it will deliver. Any failure to uphold it could potentially be pursued in court – by the corporate regulator, individuals or a <a href="https://www.theadviser.com.au/breaking-news/36662-cba-shareholders-asked-to-submit-claim-on-class-action">class action</a> – as misleading and deceptive conduct.</p>
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Read more:
<a href="https://theconversation.com/codes-of-conduct-making-things-clear-is-better-than-keeping-it-real-39498">Codes of conduct: making things clear is better than 'keeping it real'</a>
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<h2>Value to customers</h2>
<p>In general, the banks have viewed their codes as <a href="https://www.investopedia.com/terms/c/comfort_letter.asp">non-binding statements of comfort</a> with no real enforceable value to aggrieved customers. </p>
<p>Two legal rulings in recent years, though, have taken a different view.</p>
<p>In 2015 the Victorian Supreme Court of Appeal ruled (in <em><a href="http://www.commbarmatters.com.au/2016/02/25/court-of-appeal-confirms-banking-code-obligation-to-exercise-care-skill-and-diligence/">Doggett v CBA</a></em>) that the Commonwealth Bank of Australia had breached the Code of Banking Practice by failing to exercise care and diligence in forming a view on a borrower’s ability to repay a loan. The bank had been chasing two loan guarantors for more than $3 million. </p>
<p>The Court of Appeal followed this up with a 2016 ruling that the National Australia Bank had no claim to demand nearly $4 million from a man who had agreed to be a loan guarantor. The judgement in <a href="https://www.abc.net.au/news/2016-07-22/nab-landmark-court-case-could-have-far-reaching-consequences/7653414"><em>NAB v Rose</em></a> found the NAB officer involved in the loan had breached two clauses of the Code of Banking Practice by failing to tell the guarantor he should seek independent advice or offer him a 24-hour cooling-off period. </p>
<h2>Value to shareholders</h2>
<p>While failing to uphold its code of conduct may make a bank liable to customers, failing to report breaches makes it potentially liable to shareholder action. This is because shareholders arguably rely on those promises to guide their investment decisions. </p>
<p>In 2017 shareholders <a href="https://www.theguardian.com/australia-news/2017/aug/08/commonwealth-bank-shareholders-sue-over-inadequate-disclosure-of-climate-change-risks">sued</a> the Commonwealth Bank for inadequately disclosing bank risks from climate change. They did so on the basis of the bank’s duty to notify investors of material matters under section 299A of the Corporations Act. </p>
<p>Though the lawsuit was dropped when CBA acknowledged these risks in its 2017 annual report and promised to report climate change risks in the future, this case shows shareholders expect banks to declare all risks, not merely credit and market risk. </p>
<p>APRA’s <a href="https://www.apra.gov.au/sites/default/files/CBA-Prudential-Inquiry_Final-Report_30042018.pdf">prudential report</a> into the CBA, published in April, also highlighted the importance of risk from reputational damage from practices inconsistent with its code of conduct.</p>
<p>This may be why ANZ has become the first Australian bank to publicly report such breaches. However, the information in its reports is meagre. The reports do not identify how significant a breach is, actions taken, managerial sanctions or lessons learnt.</p>
<h2>Changing climate</h2>
<p>Regulators, and to some extent political parties in government, have traditionally been reluctant to pursue banks too aggressively (as evidenced by the protracted delay in calling the <a href="https://www.abc.net.au/news/2014-06-26/senate-inquiry-demands-royal-commission-into-asic-cba/5553102">financial services royal commission</a>).</p>
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Read more:
<a href="https://theconversation.com/royal-commission-shows-banks-have-behaved-appallingly-but-weve-helped-them-do-it-103998">Royal Commission shows banks have behaved appallingly, but we've helped them do it</a>
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<p>Growing public anger and the revelations at the royal commission have now changed the operating climate. There is now serious risk that all conduct (even those inconsistent with a bank’s code of conduct) are fair game for legal challenges.</p>
<h2>Statutory reform</h2>
<p>Public reporting of code breaches should be standard industry practice. Banks should see such reporting as one step in rebuilding public confidence and trust. Shareholders have no other way to assess a company’s expected behavioural standards except through its published code of conduct. </p>
<p>But just reporting failures to meet minimum conduct standards doesn’t change a bank’s culpability in breaching its responsibilities in the first place. If a board fails to take remedial action when that code is breached, it should be held liable for providing false or misleading information <em>and</em> breaking contractual guarantees. </p>
<p>Codes of conduct should be an area where the banking royal commission’s final report recommends specific reforms. </p>
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Read more:
<a href="https://theconversation.com/there-is-nothing-sacrosanct-about-corporate-culture-we-can-and-must-regulate-it-102788">There is nothing sacrosanct about corporate culture; we can and must regulate it</a>
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<p>To protect customers, the law could mandate behaviour defined in a code of conduct to be strictly liable, and breaches criminal, and allow <a href="https://dictionary.law.com/Default.aspx?selected=692">exemplary damages</a> to be awarded. </p>
<p>Even if <a href="https://www.smh.com.au/business/banking-and-finance/weak-watchdog-slammed-for-reluctance-on-enforcement-20180927-p506fx.html">regulators are reluctant to enforce the law to protect customers</a>, making it clear that codes of conduct are legally binding and breaches strictly liable will allow more individuals and class actions to confidently sue banks that fail to uphold the minimum standards of behaviour society expects.</p>
<p>To most of us Justice Hayne’s guidelines for ethical conduct might seem like stating the obvious, but apparently bankers need to be told explicitly.</p><img src="https://counter.theconversation.com/content/105391/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Benjamin Koh has previously given evidence and provided policy recommendations to the Parliamentary Joint Committee on Corporations and Financial Services: Inquiry into the life insurance industry and Inquiry into Whistleblower protections in the corporate, public and not-for-profit sectors. His evidence was cited in the Financial Services Royal Commission.</span></em></p><p class="fine-print"><em><span>Pat McConnell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Banks have viewed their codes of conduct as non-binding statements of comfort. They need to enforce them under pain of legal penalty.Benjamin Koh, Honorary Associate, Faculty of Business, School of Management, University of Technology SydneyPat McConnell, Visiting Fellow, Macquarie University Applied Finance Centre, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1043332018-10-03T10:27:28Z2018-10-03T10:27:28ZPolitics Podcast: Clare O'Neil on Labor’s listening tour for banking victims<p>Shadow minister for financial services Clare O'Neil, who is leading Labor’s “roundtables” for victims of the banks and other financial institutions, says the ALP exercise will give a voice to people in areas the Royal Commission hasn’t had time to visit.</p>
<p>“There’s vast swathes of the country where the commission hasn’t been at all.” she tells The Conversation. “I just utterly reject that this is a political exercise”, she says in answer to government criticism.</p>
<p>O'Neil says she has “a lot of confidence” in Commissioner Kenneth Hayne but is concerned that with only four months until the final report there have not yet been any policy proposals. “It’s just that I think we will get to a better result if the government gives the commissioner more time.”</p><img src="https://counter.theconversation.com/content/104333/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Shadow minister for financial services Clare O'Neil says the ALP exercise will give a voice to people in areas the Royal Commission hasn't had time to visit.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1020742018-08-24T12:49:12Z2018-08-24T12:49:12ZNo-deal Brexit: experts on what the UK government’s advice means<p>The UK government is releasing a series of <a href="https://www.gov.uk/government/collections/how-to-prepare-if-the-uk-leaves-the-eu-with-no-deal#money-and-tax">“technical notices”</a> outlining what might happen if the country leaves the European Union without striking a deal for its future relationship with the bloc. While Dominic Raab,Secretary of State for Exiting the European Union, stressed that this scenario was far from the preferred option, <a href="https://www.reuters.com/article/uk-britain-eu/red-tape-border-delays-if-no-brexit-deal-britain-warns-firms-idUSKCN1L72AA">he added</a> that the country needs to have a “a sensible, responsible and realistic conversation about what a no-deal situation really means in practice”. </p>
<p>Here’s what the technical papers reveal about what a no-deal Brexit Britain might look like. </p>
<h2>Trade</h2>
<p><strong>Stephen Roper, professor of enterprise, University of Warwick</strong></p>
<p>Supply chain disruption at the Channel ports seems almost certain in the event of a no-deal Brexit because of the customs and border checks that will have to be introduced. Firms that do not currently export or which only export to the EU will be worst off. </p>
<p>Currently, for most goods, this requires little or no customs paperwork. This changes immediately if there is no deal and, here, the government’s <a href="https://www.gov.uk/government/collections/how-to-prepare-if-the-uk-leaves-the-eu-with-no-deal#importing-and-exporting">advice in the technical papers</a> is helpful in outlining the steps necessary before March 29 2019. Any preparations impose costs on businesses. But many of these may be prepared to wait and see what emerges from the Brexit negotiations.</p>
<p>For firms which currently export outside the EU a no-deal Brexit will bring few surprises. In the case of no deal you simply fill in exports paperwork for sales in France in the same way that in the past you did for the US or China. This, of course, costs you time and money which French consumers may or may not be prepared to pay for. Customs duties may also be payable.</p>
<p>For firms trading across the Irish border, the government’s advice is much less helpful. Here, the key suggestion seems to be to contact the “Irish government about preparations”. But who firms trading across the Irish border should contact is not clear. And, even if firms do find the right person in the Irish government, would they have any answers?</p>
<h2>Can we talk about Northern Ireland?</h2>
<p><strong>Feargal Cochrane, professor of international conflict analysis, University of Kent</strong> </p>
<p>I am a nervous flyer – borderline phobia level – though being an academic I have to suck it up and get on the plane on a regular basis. But I always know where my emergency exits are, how many rows back my seat is (it matters in terms of the crash survival stats) and I always listen to the safety demo while everyone else is squeezing out one last tweet from their phones before take off. </p>
<p>So I was very excited about the release of the UK government’s “no-deal” technical impact papers about what to do if the worst should happen – especially the paper dealing with a hard border in Ireland. But, on the day of release, no such paper emerged. Given that the Irish border is one of the most <a href="https://theconversation.com/where-the-uks-brexit-plan-and-customs-bill-leave-northern-ireland-100098">prominent obstacles</a> in the Brexit negotiations and the most talked about in terms of the implications of a no-deal outcome, this was a little surprising and disappointing.</p>
<p>The closest these papers came to being relevant to the Irish border issue, was in discussing post-Brexit trade. After the usual blether about commitments to <a href="https://theconversation.com/uk/topics/good-friday-agreement-37019">the Belfast Agreement</a> and the deep and meaningful relationship between Britain and Ireland, the UK government’s advice to its citizens in Northern Ireland affected by a no-deal outcome was as follows: “We would recommend that, if you trade across the land border, you should consider whether you will need advice from the Irish government about preparations you need to make.” </p>
<p>This has gone down like the proverbial bucket of cold sick in Ireland. Manufacturing Northern Ireland condemned the advice as “madness”, while Hilary Benn, chairman of the House of Commons Exiting the European Union Committee, called it an <a href="https://www.theguardian.com/politics/2018/aug/23/madness-northern-ireland-firms-on-ask-dublin-brexit-advice">“abdication of responsibility”</a>. The nationalist SDLP’s Brexit spokesperson Claire Hanna, claimed that the reason there was no technical paper on a no-deal hard border in Ireland was because writing one would force the UK government to confront the <a href="https://www.theguardian.com/politics/2018/aug/23/madness-northern-ireland-firms-on-ask-dublin-brexit-advice?CMP=share_btn_tw">level of damage</a> this would inflict.</p>
<p>The pilot of the plane has effectively shrugged their shoulders and said: “Hey I don’t know how to fly this thing, call that guy in Aer Lingus.” Even the crappiest airline tells you where the life jackets are and how to fit the oxygen mask, but so far as Air UK is concerned, over a no-deal Brexit in Northern Ireland, it’s a case of BRACE, BRACE, BRACE. </p>
<h2>The City</h2>
<p><strong>Ioannis Glinavos, senior lecturer in law, University of Westminster</strong></p>
<p>The government has finally offered some clarity on what the loss of financial passporting means in practice in the case of a no-deal Brexit. <a href="https://www.bankofengland.co.uk/prudential-regulation/authorisations/passporting">Passporting</a> allows financial services companies within the EU single market to operate across the bloc without requiring a licence in each country. What the relevant <a href="https://www.gov.uk/government/publications/banking-insurance-and-other-financial-services-if-theres-no-brexit-deal/banking-insurance-and-other-financial-services-if-theres-no-brexit-deal">government paper</a> reveals is that instead of a no-deal Brexit giving more options to a post-2019 Britain, it demotes it to a rule taker, hostage to the EU’s wishes. This loss of control is clear from the document’s oft-repeated admission that while the British government will do whatever it can to ensure continuity for those offering services to the UK, it cannot ensure the same for those exporting financial services. While this outcome could be expected, this stark admission is novel and noteworthy. </p>
<p>A no-deal outcome means a closed door to UK financial services exporters and exposes them to costs, both in seeking alternative avenues to operate by opening branches in the European Economic Area and in settling breach of contract claims, when alternatives are unavailable. Considering this, one key piece of information missing from the papers released so far is whether and how the government intends to compensate British businesses for the consequences stemming from a potential failure to reach a deal. Admitting potentially costly results of a no-deal Brexit, yet offering nothing but the hope it won’t happen, will not appease Britain’s biggest export industry. </p>
<p><strong>Alan Shipman, lecturer in economics, The Open University</strong></p>
<p>The relative calm with which UK financial services have greeted the possibility of a no-deal Brexit does not assure their high street customers there won’t be adverse impacts. UK finance is dominated by “wholesale” investment bank and financial market operations, <a href="https://www.export.gov/article?id=United-Kingdom-Financial-Sector">concentrated in the City of London</a>. The City’s decades-long global focus stops it from seething about the possible loss of some EU trade. And, even with no Brexit deal, the City can expect to keep much of its international foreign exchange, equity, bond, futures, options, corporate finance and wealth management business, as the EU seeks to avoid both the disruptions that would attend an <a href="https://www.pwc.co.uk/the-eu-referendum/brexit-cost-to-europe-of-fragmenting-financial-services.html">overnight attempt to capture these</a>, and the long-term damage that an oversized financial sector <a href="https://www.ecb.europa.eu/press/key/date/2010/html/sp100415.en.html">may have inflicted on the UK’s real economy</a>.</p>
<p>While households benefited indirectly in the past from retail banks’ close links to wholesale operations, which could sometimes lower borrowers’ costs and raise savers’ returns, these have already been <a href="https://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN06171">weakened by a post-2008 crisis separation of the two</a>. Regulatory intervention has also stopped banks from cross-subsidising better deals for typical households by exploiting (among others) <a href="http://webarchive.nationalarchives.gov.uk/20111202184328/http://www.competition-commission.org.uk/rep_pub/reports/2002/462banks.htm">small business borrowers</a> and <a href="https://www.theguardian.com/money/2015/jan/02/payday-loans-caps-fca">high-cost credit users</a>. And the cheapening of mortgages by bundling the sub-prime with the solvent <a href="https://web.northeastern.edu/econsociety/what-caused-the-financial-crisis/">blew up spectacularly in 2008</a>.</p>
<p>Banking, insurance and even fund management services remain largely confined within national borders, the UK having chosen to leave when the EU is still <a href="https://www.centralbank.ie/news/article/protecting-and-enhancing-the-single-market-for-financial-services-a-regulatory-perspective---speech-by-gerry-cross-director-of-policy-and-risk">far from unifying its market for them</a>. A no-deal Brexit may add to the cost and complication for those making or receiving payments (including pensions) <a href="https://metro.co.uk/2018/08/23/no-deal-brexit-will-cost-you-more-when-online-shopping-and-on-holiday-7876140/">across the new EU border</a>. But for most, the impact on what flows into their bank account (and what they need to insure against) – due to impacts on other sectors of the economy – will be noticed far more than changes in the way those services run.</p>
<h2>Medicine</h2>
<p><strong>Philip Crilly, pharmacy teaching fellow, Kingston University</strong></p>
<p>The secretary of state for health and social care, Matt Hancock, <a href="https://www.gov.uk/government/publications/letter-to-the-health-and-care-sector-preparations-for-a-potential-no-deal-brexit">told pharmaceutical companies</a> to stockpile an extra six weeks’ worth of medicines to ensure a seamless supply in case no deal is reached on Brexit. There are already <a href="https://www.pressreader.com/uk/the-sunday-telegraph-money-business/20180422/281629600870620">problems getting a supply of some drugs</a>, so any restrictions on supply could make things much worse. GPs and pharmacists will need to work closely to find alternative drug options for those affected.</p>
<p>There are many high-risk conditions in which patients must remain on a specific brand of drug, such as some epileptic medications, so discontinuing the drug isn’t an option, or patients need to be weaned off that drug slowly and started on a new one well before any stock outages occur. Ultimately, a GP and pharmacist body needs to come together to draw up a list of high-risk conditions and high-risk drugs and these must be prioritised to ensure that the drug supply doesn’t stop.</p>
<h2>Universities and research</h2>
<p><strong>Andrew Gunn, researcher in higher education policy, University of Leeds, and Helen Carasso, course leader, MSc in Higher Education Policy, University of Oxford</strong></p>
<p>No deal would have numerous ramifications for <a href="http://www.researchcghe.org/publications/the-brexit-white-paper-what-does-it-mean-for-higher-education-and-research/">higher education</a>, including <a href="https://www.erasmusplus.org.uk/">Erasmus+</a> – the EU programme which provides grants for educational exchanges. </p>
<p>The UK government has <a href="https://www.gov.uk/government/news/chancellor-philip-hammond-guarantees-eu-funding-beyond-date-uk-leaves-the-eu">promised to underwrite all</a> successful Erasmus+ bids made before withdrawal. And the UK <a href="https://www.gov.uk/government/publications/joint-report-on-progress-during-phase-1-of-negotiations-under-article-50-teu-on-the-uks-orderly-withdrawal-from-the-eu">intends to continue participating</a> in the scheme until 2020. However, the <a href="https://www.gov.uk/government/publications/erasmus-in-the-uk-if-theres-no-brexit-deal">guidance states</a>: </p>
<blockquote>
<p>[The] government will need to reach agreement with the EU for UK organisations to continue participating in Erasmus+ projects and is seeking to hold these discussions with the EU.</p>
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<p>This indicates there is no guarantee UK students would be able to participate after March 2019. This may create difficulties for universities, for example where a language degree involves a placement in Europe as part of the course. </p>
<p>Nevertheless, <a href="https://publications.europa.eu/en/publication-detail/-/publication/49350560-0d56-11e8-966a-01aa75ed71a1/language-en">more students and staff</a> from elsewhere in the EU come to the UK, compared to the number who go the other way – so it is likely that universities in the EU will be keen to find a way to keep that option open after Brexit. </p>
<p>Another issue is that UK researchers may be unable to access EU funding – such as the <a href="https://ec.europa.eu/programmes/horizon2020/en/what-horizon-2020">Horizon 2020</a> scheme which is a significant funding source for <a href="https://royalsociety.org/%7E/media/policy/Publications/2017/2017-05-technopolis-role-of-EU-funding-report.PDF">UK research</a>. The chancellor has already <a href="https://www.gov.uk/government/publications/uk-participation-in-horizon-2020-uk-government-overview">guaranteed funding</a> for all successful projects submitted to the EU prior to exit day, for their full duration. But this guarantee only covers funding for UK participants, <a href="https://www.gov.uk/government/publications/horizon-2020-funding-if-theres-no-brexit-deal">not their European collaborators</a>. This may present difficulties where a UK body is currently responsible for distributing funding on to non-UK partners, if they no longer have access to this money.</p><img src="https://counter.theconversation.com/content/102074/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Gunn has received funding from Worldwide Universities Network, the British Council (administering the Newton Fund), the UK Higher Education Academy, Kantar Public, UEFISCDI Romania, the UK Political Studies Association, the New Zealand Political Studies Association and the UK Quality Assurance Agency. Andrew Gunn concurrently holds visiting academic positions internationally.</span></em></p><p class="fine-print"><em><span>Helen Carasso has received funding for research through an ESRC research centre.</span></em></p><p class="fine-print"><em><span>Stephen Roper is Director of the ESRC-funded Enterprise Research Centre at Warwick Business School.</span></em></p><p class="fine-print"><em><span>Alan Shipman, Feargal Cochrane, Ioannis Glinavos, and Philip Crilly do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>From trade to medicines, the UK government’s ‘just in case’ planning is revealing.Ioannis Glinavos, Senior Lecturer in Law, University of WestminsterAlan Shipman, Lecturer in Economics, The Open UniversityAndrew Gunn, Researcher in Higher Education Policy, University of LeedsFeargal Cochrane, Professor of International Conflict Analysis, School of Politics and International Relations, University of KentHelen Carasso, Course Leader - MSc in Higher Education Policy, University of OxfordPhilip Crilly, Pharmacy Teaching Fellow and PhD student (Digital health), Kingston UniversityStephen Roper, Professor of Enterprise and Director of the Enterprise Research Centre, Warwick Business School, University of WarwickLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1014532018-08-15T02:10:35Z2018-08-15T02:10:35ZWhat if we expected financial services to be more like health services?<p>Earlier this year the chief of a financial planning firm <a href="http://www.abc.net.au/news/2018-04-26/royal-commission-ends-for-day-after-witness-collapses/9700692">collapsed in the witness stand</a> during Australia’s ongoing royal commission into misconduct in the financial services industry. He had to be taken to hospital in an ambulance – some would say a fitting metaphor for the state of the industry.</p>
<p>Fortunately for him the health care system doesn’t operate like the financial planning industry. If it did he might have been “treated” according to what was most profitable for the ambulance service rather than what was best for his well-being.</p>
<p>The <a href="https://financialservices.royalcommission.gov.au/Pages/default.aspx">Financial Services Royal Commission</a> is exposing abundant evidence of unethical misconduct. Customers are being charged fees for services they never get or ever need, getting inappropriate advice, being offered irresponsible loans and sold worthless insurance contracts. It shows up an industry riddled with conflicts of interest and obsessed with extracting profits from customers in any way conceivable.</p>
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<a href="https://theconversation.com/treasury-admits-corporate-governance-is-broken-but-baulks-at-systemic-fixes-100882">Treasury admits corporate governance is broken but baulks at systemic fixes</a>
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<p>Sound familiar? The 2007-09 Global Financial Crisis was in large part caused by the same “profit at all costs” culture. It fuelled high-risk home lending to ordinary people who couldn’t afford it. Why haven’t things changed?</p>
<p>Despite the lessons of the GFC and a regulatory crackdown, the central problem with the global financial services industry is that, unlike the health industry, it has long stopped caring about its customers’ well-being.</p>
<p>Financial services, such as payments and basic forms of credit and insurance, are now essential for the economy and society to function. For this reason, the large financial services firms often receive privileges such as market protection and implicit government guarantees worth billions of dollars, underwritten by taxpayers. So how has the bar been allowed to sink so low? </p>
<h2>The mindset behind the scandals</h2>
<p>At the heart of the problem lies the mental model that the finance industry applies to itself and the world around it. </p>
<p>This thinking is dominated by the neoclassical model of economics in which people are “rational actors” who always do what is best for them. And they supposedly interact with each other through perfect markets, leading to the efficient allocation of resources. </p>
<p>While everyone understands this as an idealised abstraction, the impact of this working assumption is profound. It has led to an “input-oriented” model. Banks and other financial services companies are exclusively concerned with providing whatever inputs – financial products and services – their customers demand. </p>
<p>Bewildering arrays of products are sold using state-of-the-art marketing techniques, irrespective of whether the customers actually need them.</p>
<p>Undesired outcomes are often considered to be the customer’s responsibility. If the customer ends up with too much credit card debt, possibly as a result of aggressive marketing, don’t blame the bank.</p>
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<a href="https://theconversation.com/embedding-regulators-in-banks-can-help-change-cultures-of-wrongdoing-despite-the-risks-101238">Embedding regulators in banks can help change cultures of wrongdoing, despite the risks</a>
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<p>Regulatory and public policy responses are also premised on this model. The dominant approach in financial regulation focuses on disclosure, requiring firms to provide more and more information about their financial products. </p>
<p>Product disclosure statements are now often hundreds or thousands of pages long. These are littered with legal and financial jargon that is often incomprehensible even to experts. Rather than clarifying the nature of financial products, disclosure requirements have only made them more opaque.</p>
<p>This rationalist approach has led the industry and regulators to promote financial literacy education as a solution to the problem. The idea is to educate consumers about financial products and services to help them navigate the financial system and make good decisions. </p>
<p>The Australian government <a href="http://kmo.ministers.treasury.gov.au/media-release/059-2018/">spends tens of millions of dollars on financial literacy programs</a> such as its <a href="https://www.moneysmart.gov.au/">MoneySmart</a> program. The Bank of England recently launched <a href="https://www.bankofengland.co.uk/education/econome">econoME</a>, a program with very similar aims. </p>
<p>This approach ignores a core aspect of finance. Many financial problems that consumers face are highly complex. For example, determining a person’s optimal lifetime saving and investment strategy to provide an adequate income in retirement is a formidable problem, even for a finance expert with a supercomputer. </p>
<p>It is beyond the capability of the average person to work out many financial decisions on their own, and we shouldn’t expect people to do so – just as we don’t expect the average person to perform brain surgery.</p>
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<a href="https://theconversation.com/royal-commission-scandals-the-result-of-poor-regulation-not-literacy-99441">Royal commission scandals the result of poor regulation, not literacy</a>
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<h2>Focus needs to shift to financial well-being</h2>
<p>If we accept that many aspects of finance are hard, we will need to give up on the rationalist model. Instead we need to switch to an outcome-focused model in which, as with the health care system, the primary concern is for people to reach a set of outcomes or goals – a certain level of financial well-being, for example.</p>
<p>Services offered by banks and regulations imposed by governments would then be evaluated on the extent to which they offer to improve people’s financial well-being. Banks would only offer services that have been shown to improve one or more dimensions of their customers’ financial well-being, aligning their interests more closely with those of their customers.</p>
<p>Financial services and their regulation would look radically different. For example, fewer decision options and simpler products would be more effective in improving financial well-being. New technologies such as artificial intelligence could likely play an important role in this new world of finance. </p>
<p>Importantly, both the development of services and their regulation should be based on evidence and delivered under a set of professional standards monitored by an independent standards-setting body. This would be similar to the processes and institutions used in the health system. Providers of financial services would then be subject to both a fiduciary duty and product liability.</p>
<p>The future of finance doesn’t lie in ever more regulation, or ever more sophisticated technology to squeeze higher margins out of legacy products. The future of finance lies in the rediscovery of what finance is for – to improve the financial and economic well-being of society.</p><img src="https://counter.theconversation.com/content/101453/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The financial services industry is in need of a new paradigm to rediscover what finance is for – to improve the financial and economic well-being of society.Paul Kofman, Professor of Finance, The University of MelbourneCarsten Murawski, Associate Professor in the Department of Finance and co-director of the Brain, Mind & Markets Laboratory, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/993742018-07-06T07:07:15Z2018-07-06T07:07:15ZThe Royal Commission revealed financial services woes for many Indigenous customers. Here’s what can be done<p>For those of us who advocate for Indigenous consumers of financial services, it was both a relief and distressing to hear the evidence given this week at the <a href="https://financialservices.royalcommission.gov.au/Pages/default.aspx">Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry</a>. </p>
<p>The evidence presented issues that fall into two main categories: </p>
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<li>structural issues, arising from the operations of financial institutions not well adapted to the day to day circumstances of Indigenous people’s lives. (These include distance, language diversity, cultural obligations specific to Aboriginal and Torres Strait Islander community members, health, access to education and financial literacy, engagement in the economy) and;</li>
<li>the need for stronger regulation and enforcement activity to deter sharp practice and punish illegal conduct.<br></li>
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<p>With enough will, informed policy and effective resourcing, most of the structural issues can be overcome. The second one will require stronger regulation and proper penalties. </p>
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<a href="https://theconversation.com/want-to-boost-aboriginal-financial-capability-spend-time-in-communities-99210">Want to boost Aboriginal financial capability? Spend time in communities</a>
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<h2>A lack of products and services that are fit for purpose</h2>
<p>Aboriginal and Torres Strait Islander peoples face barriers to accessing mainstream banking, credit, insurance and superannuation services. That’s particularly true where the products and services are not fit for purpose, or where the services simply don’t exist.</p>
<p>As evidence from Financial Counselling Australia’s Lynda Edwards <a href="https://financialservices.royalcommission.gov.au/public-hearings/Documents/transcripts-2018/transcript-3-july-2018.pdf">showed</a>, many Indigenous people live hundreds of kilometres from branches. Road conditions can be poor. People might be cut off by wet weather for months at a time. Vehicles can be unreliable. And, as senior family support worker Thy Do explained, branch <a href="https://financialservices.royalcommission.gov.au/public-hearings/Documents/transcripts-2018/transcript-5-july-2018.pdf">staff can be unhelpful</a> (to put it politely). </p>
<p>Consumer advocates also provided evidence of language barriers where English is the third or fourth language spoken, and product features like interest rates and insurance premiums are not well understood. </p>
<h2>Cultural obligations</h2>
<p>Cultural and family obligations also need to be factored into products and services to meet the needs of Indigenous customers. </p>
<p>Cultural and family obligations can provide a very effective financial safety net for Indigenous people. They can also impact on the resources of particular people. These relationships need to be understood by front line and policy staff. As Lynda Edwards from Financial Counselling Australia <a href="https://financialservices.royalcommission.gov.au/public-hearings/Documents/transcripts-2018/transcript-3-july-2018.pdf">said</a>:</p>
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<p>We have culture and kinship within our communities, and the understanding that one person can be responsible for another and the environment that they live in, so having kinship, which is a type of cultural obligation, will actually play a role in people’s financial affairs, and unfortunately most of the financial services don’t understand cultural obligation when it comes to hardship policies.</p>
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<p>Cultural obligations and extended family relationships also need to be considered when superannuation is paid on a person’s passing. In the absence of a nominated beneficiary, proper respect for cultural and family relationships may require the superannuation be paid to someone other than the usual legally recognised beneficiaries. It may be, perhaps, an Aunt or Uncle who can distribute across the family.</p>
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Read more:
<a href="https://theconversation.com/the-way-banks-are-organised-makes-it-hard-to-hold-directors-and-executives-criminally-responsible-93638">The way banks are organised makes it hard to hold directors and executives criminally responsible</a>
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<h2>These issues <em>can</em> be addressed</h2>
<p>It may sound complex. But these structural conditions <em>can</em> be addressed effectively by mainstream banks, credit unions, insurers and superannuation funds. They simply need the sustained commitment to be informed, innovative and be willing to develop and resource effective options. </p>
<p>Good work has been done, including the <a href="https://financialservices.royalcommission.gov.au/public-hearings/Documents/transcripts-2018/transcript-3-july-2018.pdf">fee-free ATM trial</a> discussed at the Royal Commission. <a href="https://www.financialcounsellingaustralia.org.au/Corporate/News/FCA-welcomes-ACCC-determination-extending-fee-free">Consumer advocates</a> lobbied to solve the problem of customers being driven into a debit balance and incurring dishonour fees when doing everyday banking. Things like checking the bank balance, or withdrawing cash where the only ATM available does not belong to their bank can result in high fees.</p>
<p>Fifteen banks continue to provide fee-free services in relation to 85 ATMs in remote areas. While there have been some bumps in the implementation, the removal of these fees is <a href="https://www.ausbanking.org.au/media/media-releases/media-release-2017/fee-free-atms-to-continue-in-remote-communities">a good example</a> of a solution to structural issues in the system.</p>
<p>Substantial work has also been done over the years by the Australian Bankers Association and <a href="http://www.austrac.gov.au/aboriginal-andor-torres-strait-islander-people">Austrac</a> to recommend practical solutions for customer identification, which can be complicated. Again, there are no easy fixes, but informed, innovative, flexible thinking builds knowledge and skill and creates solutions that can work across cultures, languages and experience. </p>
<p>Individual mainstream financial institutions have also made strong, genuine commitments to improve services. Like many of the issues heard at the Royal Commission, the trick will be in ensuring that this commitment is resourced and delivered across the institution, making its way to the front line staff and the customer. </p>
<h2>Regulation and enforcement</h2>
<p>Appallingly, where reasonable people see an Indigenous community battling low employment and economic hardship, others see a business opportunity. </p>
<p>These are often the smaller, less regulated financial service providers. They include pay day lenders and “rent to buy” traders who lease out common household goods like furniture and electrical goods to consumers who can’t access mainstream credit.</p>
<p>These loans or rental arrangements can come with very high interest rates, direct debits and confusing contracts. People often believe they are paying the goods off rather than renting them and may have no right to own at the end of the lease period. Some leases go on indefinitely. </p>
<p>Solution like increased employment, economic engagement, access to No Interest Loans (NILS) and financial literacy are all crucial. </p>
<p>However, predatory practices are ripe for stronger regulation and have only escaped due to industry lobbying and a lack of government will. </p>
<p>The Australian Securities and Investments Commission (ASIC) has made excellent recommendations to regulate this sector and provide <a href="https://download.asic.gov.au/media/3038267/rep-426-published-17-march-2015.pdf">more protection</a> for vulnerable consumers.</p>
<p>Engagement in the economy is dependent on access to our financial services system. Indigenous Australians have much to offer and much to gain from a suitably adapted system, relatively safe from predatory practices. We all hope that the Royal Commission will bring renewed enthusiasm for increasing the kinds of informed, innovative adaptations that take Indigenous peoples’ circumstances into account and increase our participation.</p><img src="https://counter.theconversation.com/content/99374/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Robynne Quiggin is member of the Wiradjuri nation of central western New South Wales. She is chair of Westpac's Indigenous Advisory Committee and sits on their Stakeholder Advisory Committee. She is a member of IAG's Indigenous Advisory Committee and of the NSW Financial Legal Rights Service Advisory Committee. She formerly sat on the Board of the Indigenous Consumer Assistance Network (ICAN).
</span></em></p>With enough will and resourcing, many of the structural issues that make financial services a trial for many Indigenous consumers can be overcome. But we need more regulation to deter sharp practice.Robynne Quiggin, Professor, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/958892018-05-01T11:21:40Z2018-05-01T11:21:40ZView from The Hill: The waves of “reputational damage” spread far and wide<p>The Liberals are always urging the business community to get onto the political battlefield and argue for what it believes, rather than leaving the space to the ACTU, GetUp! and others on the left.</p>
<p>The Business Council of Australia in particular has felt the heat. In 2016 Victorian Liberal president Michael Kroger said of the BCA, “these people have got no idea how to influence public opinion” and called for its chief executive, Jennifer Westacott, to be sacked.</p>
<p>Now the BCA has taken up the challenge to join the fray, a decision that might be described as “courageous”, in the <em>Yes Minister</em> use of the word. Westacott is on the frontline in what has become the toughest of gigs, given the shocking disclosures, and subsequent fallout, in the financial sector.</p>
<p>Just this week, on Monday AMP’s chairman Catherine Brenner quit, while a day later the Australian Prudential Regulation Authority (APRA) released a scathing report on Commonwealth Bank wrongdoing after an inquiry into allegations that it facilitated money laundering.</p>
<p>With the BCA conducting an “<a href="https://www.australia-at-work.com.au/">Australia at Work</a>” advertising campaign to counter anti-business sentiment and running local forums around the country in conjunction with Sky, Westacott was on <a href="https://www.6pr.com.au/podcast/dont-allow-anti-business-agenda-to-feed-off-banking-rc/">Perth radio</a> on Tuesday prosecuting the message.</p>
<p>The BCA represents some 130 of the biggest companies – among them, all four major banks and AMP.</p>
<p>Questioned about corporate bad behaviour including that perpetrated by other major companies as well as the financial institutions, Westacott admitted “we’ve got huge issues in the business community to fix, and my advice to boards and to CEOs is to fix them and fix them fast”.</p>
<p>“Business has got to get back to its purpose of providing excellent service to its customers, treating its employees properly, treating its suppliers properly,” she said. She pointed to the BCA having pushed its companies to pay small businesses in 30 days – a good move, but surely a very modest one, in the wider scheme of things.</p>
<p>But Westacott’s warning was: “If we allow [the bad behaviour] as an opportunity for this anti-business movement that has been there … for a long time, to get a stranglehold on the policy agenda of our country, we will be poorer for it”.</p>
<p>Earlier, in Tuesday’s Australian, Westacott <a href="https://www.theaustralian.com.au/opinion/engine-of-australias-prosperity-in-need-of-support/news-story/40cdf5994786401c1b892c6098229ce2">wrote</a> that indefensible behaviour “has handed anti-business campaigners a fresh excuse to seek to punish the engine of Australia’s prosperity.”</p>
<p>Just as, anyone into scoring tit-for-tat points could say, the bad behaviour of some unions – the most notable being the Construction, Forestry, Maritime, Mining and Energy Union – has handed the anti-union campaigners very useful weaponry.</p>
<p>That’s what happens with reputational damage. Its impact can be both deep and broad. This is one reason why some companies are very concerned, for example in their climate change and environmental policies, with living up to what they understand to be the “social licence” they have.</p>
<p>Very obviously, reputational damage is a hazard for governments. We see this as Treasurer Scott Morrison (who incidentally, unlike his predecessor Joe Hockey, is not personally close to the big end of town) struggles in responding to the serial revelations about the financial sector.</p>
<p>In this case, the reputational damage has two dimensions.</p>
<p>Firstly, the fact the government resisted the royal commission until it could do so no longer means people apply a discount to the various measures it did take - for example the provision in the 2017 budget that before appointing senior executives and directors, banks need to register them with APRA.</p>
<p>On Tuesday Morrison was out with strong language saying that the APRA report condemning the CBA “should be a wake-up call for every board member in the country”. He’s quite right. But Labor was quick to counter by claiming that Morrison – as shown by his opposition to the banking royal commission – “gets the big calls wrong”.</p>
<p>Secondly, the banks’ bad name has boosted the case of those arguing that they should not receive a company tax cut, via the package the government is trying to get through the Senate. The economic argument that there are separate issues involved finds it hard to compete with the more emotive one.</p>
<p>Late last week there was a notable example of a minister trying to repair personal reputational damage she’d suffered.</p>
<p>In an excruciating TV interview Minister for Financial Services Kelly O'Dwyer, following the government talking points, had refused to acknowledge the government should have called the royal commission earlier. She was pilloried. A few days later, off her own bat after Malcolm Turnbull had admitted prompter action would have left the government better off politically, she said, “With the benefit of hindsight we should have called it earlier. I am sorry we didn’t, and I regret not saying this when asked earlier this week.”</p>
<p>In talking about the campaigning it will undertake as the election approaches Westacott says the BCA will “take on issues across the political spectrum”. In practice, however, the BCA will be seeking to reinforce the case of one side.</p>
<p>“Some will claim this is yet another anti-GetUp! campaign,” Westacott wrote.</p>
<p>GetUp! certainly sees it that way. On Tuesday the activist group was appealing for funds to help it “double down on our organising efforts for the next election, and leverage the latest in technology and tactics, to start winning the fight against destructive corporate power.”</p><img src="https://counter.theconversation.com/content/95889/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan owns bank shares.</span></em></p>Westacott is on the frontline in what has become the toughest of gigs, given the shocking disclosures, and subsequent fallout, in the financial sector.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.