Tag Archives: regulation

Being pro-markets, not pro-business

Being pro-business risks supporting incumbent firms against new entrants – this is not good. * Economists are generally in favour of markets as ways to organise activity. Introductory microeconomics teaches students about how a competitive market brings demand and supply together efficiently: consumers get choice in what to buy, and companies are forced to be… Continue Reading

What’s the future for peer-to-peer lending?

P2P (peer-to-peer) lending is the biggest and most developed form of alternative finance. But does it have any enduring value to add in the financial system? * P2P lending platforms have sprung up in many countries since the global financial crisis, particularly in China, where they are now in crisis. According to research from the Cambridge… Continue Reading

Regulation leads to innovation

The Chinese government is in the process of deregulating interest rates. It took the first step in July 2013 when the People’s Bank of China (PBOC) freed the banks to set the rate charged to borrowers, other than some mortgage-related restrictions. It is expected soon to stop controlling the rate paid by banks to depositors.… Continue Reading

Even now, banks are still not safely capitalised

A recent speaker on the MFin mentioned, almost in passing, that he didn’t think the Basel III regulatory system would actually be implemented, so flawed was its approach. I thought this sounded a little exaggerated but a recent speech from the the Vice Chairman of the Federal Deposit Insurance Commission (FDIC), Thomas Hoenig, suggests our… Continue Reading

Fixing the market? Stabilising the price of IPO stocks

Financial markets set the prices of assets such as stocks and bonds through the interaction of demand and supply. Deliberate attempts to fix or distort those prices, termed “market abuse” in the EU, are therefore usually illegal. But there is an exception. When companies first list their shares on a stock exchange in an Initial… Continue Reading

Ponzi and Pyramid Schemes

I was recently asked the difference between a Ponzi scheme and a pyramid scheme. They are closely related but there is a key difference, which is that a pyramid scheme is not necessarily fraudulent, though it frequently is marketed with fraudulent claims. A pyramid scheme is closely related to any financial bubble, with the difference… Continue Reading