The future of finance

Dr Simon Taylor, Professor Colin Lizieri, John Kelting: The future of finance

4 January 2011

The article at a glance

Financial systems, real estate markets and the changing face of banks – how smart regulation can stimulate these interlinked sectors Three leading …

The future of financeFinancial systems, real estate markets and the changing face of banks – how smart regulation can stimulate these interlinked sectors

Three leading financial experts have given their verdict on how likely the finance market, the housing market and the banks are to recover from the crash, the state of the economic recovery and attempts to plug the mistakes of the past.

In a new podcast recorded by Cambridge Judge Business School at the Cambridge University Festival of Ideas’ “Future of Finance” event, sponsored by Barclays Corporate, the three experts give an optimistic assessment of the lessons learnt from the downturn and Britain’s ability to recover in the future.

Dr Simon Taylor is a Lecturer in Finance at Cambridge Judge Business SchoolProfessor Colin Lizieri is Professor of Real Estate Finance in the Department of Land Economy at the University of Cambridge, and John Kelting is Head of Product at Barclays Corporate.

[soundcloud id=’37561405′]

Dr Simon Taylor said he thought that a recovery was on the way, but that the finance sector needed to see new entrants into its markets to be successful in the future:

“The short term problem is the wreckage left over by the financial crisis and in particular the fact that banks are not lending and the normal flow of finance that are normally lent to companies to create jobs are currently interrupted. Also in the longer term, there are some pretty serious problems ahead, and because we have never been in a situation quite like this before there is a risk that mistakes will be made in policy making.

“However, I think the industry will eventually heal itself and that we will end up stronger and offering a better service to customers, so long as there is new entry into the industry from organisations that are currently not banks, such as supermarkets and banks from other countries like China, which I think is a healthy new development in the sector.”

Professor Colin Lizieri said the commercial real estate market was sorting itself out but that for normal householders the housing market was still struggling to recover:

“We need to separate out commercial real estate from the residential real estate and in terms of the difficulties the banking sector has had it has been the commercial real estate sector that has created many of the bad loans, and there has been a very substantial correction of pricing there which is now more sensible.

“However, in the housing market there has been a much more shallow correction of house prices from there very, very, high levels and a slowing up and stagnation of the market, with the slowing up of mortgages and much less movement which has to be bad for the economy as a whole in the longer term.”

John Kelting said Barclays had not been in the difficulties others had during the crash but that the work done by the regulators since was needed and he supported it:

“Barclay’s bad debt experience wasn’t bad, and we didn’t have to be bailed out, and we didn’t have to be rescued or taken over but the industry as a whole, the stress it went through, the degree of risk taking was too great and the banks needed to manage that, which they failed to do. We as a bank support the work done by the regulators to ensure we have a properly regulated system to focus on the core of what we should be doing in banking which is to supply basic products to individual and corporate customers.”