How can finance direct capital to productive uses that support the real economy over the long term?
One answer is to encourage it via financial regulation. This seems a novel idea, since most current regulation was written with other purposes in mind, but new proposals to make finance serve the real economy better are starting to emerge. For example, the EU’s “Long term investment” workstream.
There are many problems that regulation could help fix. For example, small and medium-sized businesses need more bank lending and long-term finance; investment chains have too many intermediaries who are incentivised with short-term pay awards; financial markets are notoriously short-term; and there is a proliferation of new investment techniques and products that are not really “investments” at all but financial bets.
“Making finance serve society” means restoring finance and financial markets to their original purposes, something that Finance Watch believes should be at the heart of all new regulation. To read more about the social value of financial markets, see Part I of our position paper "Investing not betting".
Book presentation: Le capital de l’abondance à l’utilité
14 April 2017
Financial policy for future generations
29 March 2017
Robert Jenkins' partial list of bank misdeeds
26 October 2016
Webinar on Capital Markets Union
11 May 2015