Media advisories

Media advisories are timely opinion and insight on breaking news stories from Cass faculty.

9 February

Professor Keith Cuthbertson of Cass Business School responds to David Cameron's comments on the positive impact of women in company boardrooms, by calling for a quota system:

Currently in the UK about 10% of company directors, 9% of high court judges, 14% of university Vice Chancellors and one member of the Supreme Court are women. Yet there are lots of women out there who score highly on educational levels and general work experience. What's going on? Why is the representation of women on boards so low?

Lord Davies in his recent report provides a major reason for this. Over 50% of board appointments are via personal friendships, only 4% have formal interviews and only 1% are advertised. Competitive entrance, as for example in the UK civil service is thought to provide a fair and efficient way of appointing quality people - contrast this with the UK companies' approach to board appointments.

Lord Davies and presumably Mr Cameron reject quotas partly on the grounds of tokenism - a woman will feel inferior to the men if she is appointed under a quota system - even if she had to beat say 15 other well qualified women candidates for the post. This would be true if the talent pool of women was small. But with an average board size of 15 you only need 1,500 qualified women today, in the whole of the UK (let alone the world) to have 100% women on the boards of all the FTSE100 companies.

Cameron is not being bold enough. By not setting quotas for women on boards, he keeps the Catch 22 situation going - boards can always say to women, we can't appoint you to our board because you have no boardroom experience.

Another reason why quotas are important is that they get us to a critical mass. With more women on boards, they can act as mentors for future potential women members and push for measures to remove the glass ceiling on internal promotions to high level posts.

Cameron is right to say that this is about "quality not just equality". The evidence is that more women on boards result in a better performance for firms - where the women have the same education and experience as the men. Quotas in Norway resulted in a rise in "women on board" to 40% over 2002 to 2009. Even in Norway a change in the law and legislative fines were needed to finally achieve the quota. Cameron's usual warm words of encouragement to UK women on this matter will do nothing to break-the-ice with his Nordic hosts. Instead he should learn from them and introduce quotas.

2 February

Responding to the launch of Facebook's IPO process, and the decision by Mark Zuckerberg and his allies to retain an iron grip on the company, Professor of Global Innovation at Cass Business School, Ajay Bhalla, said:

"Research shows that when founder-led firms go for IPO listing they often carry 'founder premium', especially when the founder opts for maintaining control rather than diluting it.

"This means that by maintaining control Zuckerberg sends a clear signal to stakeholders, investors and customers that the company will retain a consistent strategic focus.

"Zuckerberg is following in the footsteps of charismatic founders such as Jobs, Gates, Brin and Page who, by retaining control, were able to direct their vision without much interference from other majority shareholders.

"As the firm continues to evolve from being a network player to one which can make in-roads into diverse segments, such as mobility and enterprise, Zuckerberg's control over the firm will continue to generate interest and send reputation signals which are likely to generate greater shareholder wealth than would otherwise be the case."

30 January

Commenting on plans by French President Nicholas Sarkozy to introduce a 0.1 per cent tax on financial transactions from August, Professor Philip Booth of Cass Business School, said:

"By introducing a transactions tax, President Sarkozy hopes to make the financial sector pay for the damage caused by the crisis and repair the hole in French government finances. He will achieve neither objective. The EU and member states are already taking action - much of which is appropriate - to ensure that, in the future, banks that make bad business decisions are wound up safely and do not impose burdens on the taxpayer. Transactions taxes on the other hand are arbitrary and the burden of the tax is likely to be placed on the users of financial products - those who have mortgages, need foreign exchange cover for business transactions, and so on. In fact, the likely result of a transactions tax in France is that business will move elsewhere and economic recession in France will be entrenched. It is, indeed, incredible that one of the world's most over-taxed and over-regulated developed economies should be imposing more taxation as part of a so-called recovery package."

30 January

Responding to the news that RBS CEO Stephen Hester has turned down his controversial bonus, Veronica Hope-Hailey, Professor of Strategic Human Resource Management at Cass Business School comments:

"The decision of the new CEO of RBS to decline his bonus should be welcomed as a step along the path to restoring employee and public trust in both banks as employers and senior bankers as individuals.

We know that people assess trustworthiness using several criteria. The first is Ability - is this person sufficiently competent to do his job? There is every evidence that Stephen Hester is doing a good job of improving performance at RBS. However to restore the trust of the public, who are also RBS' shareholders and customers, ability is a necessary but insufficient criteria.

Two other leadership attributes must be demonstrably visible to employees and society at large in order to restore trust. One is Benevolence. A trustworthy leader has to demonstrate a concern for people beyond his immediate concern. Do they have a sense of their responsibility towards broader society? If he had taken this bonus Stephen Hester ran a high risk of being seen as entirely "self serving" to the average member of the British public trying to battle with the consequences of his predecessor's decisions.

Another leadership attribute which creates a sense of trustworthiness is Integrity: does a leader appear to operate with some kind of moral code which resonates with those constituencies they serve, in this case their employees, their customers and the general public as shareholders. The public and RBS employees are in a questioning mood. They are asking how can it be morally right for the leader of one of the culprit organisations to be offered such a high bonus at the same time as critical public services and jobs are being cut to balance government budgets following the bank's bail out.

From what I have read about Stephen Hester there is every evidence to suggest he is a deeply moral and honourable individual and this probably accounts for his excellent and wise decision to decline the bonus.

However the recent record of many other senior bankers is causing society to hold leaders to account in these two areas of benevolence and integrity. Any CEO or member of a bank remuneration committee who cannot grasp this is out of touch with the current mood of the British public.

Based on my current research on trust repair across all sectors I can assure senior leaders of this. To seem unconcerned about the need to demonstrate both benevolence and integrity is a dangerous place to be, especially given the fact that the great British public owns some of these financial institutions and also constitutes a large proportion of their customer base."

25 January

Responding to comments by Martin Wheatley, Head of the Financial Conduct Authority (FCA), who said regulators should ban potentially dangerous products to protect consumers from themselves, Professor Gulnur Muradoglu of Cass Business School's Behavioural Finance Working Group, said:

"The emphasis on an active rather than a passive role in consumer protection in financial markets is extremely progressive. This takes the UK one step ahead of the US and Europe.

"Many of the triggers of the 2008 financial crisis were behavioural. The underestimation of risk by almost everyone in the economy was behavioural, as was the optimism, greed and herding of investors. These are all part of human nature, and will not change. Therefore a new regulatory stance is needed that will help to make investors, especially those on low income and the elderly, less vulnerable not only to others' biases but also to their own."

25 January

Commenting on the release of the latest GDP figures that show the economy contracted by 0.2% in the three months to December, Professor Philip Booth from Cass Business School, said:

"It is not surprising that the latest economic growth figures are grim given the headwinds from the eurozone. However, this should not tempt the government to change track on deficit reduction. There is no evidence that increasing government borrowing will increase economic growth. Indeed, if anything, part of the setback in growth has been caused by the necessary reversal of the irresponsible government borrowing in the immediate post-crash period.

"Whilst the government cannot solve the eurozone crisis, it can radically deregulate the UK economy to create the best possible conditions for economic growth. The government must press ahead with planning reform and begin to deregulate the British labour market. In this area, the government has been moving in precisely the wrong direction and it must change course."

18 January

Commenting on the battle for tougher regulation of the Bank of England, Bob Garratt, Visiting Professor at Cass Business School said:

The publication of contrasting models for the future governance of the Bank of England shows from the Bank's proposal a classic example of a Chief Executive wanting the future oversight by their board of directors to be as weak as possible. The Bank is one of our oldest companies and comes under the Companies Act. Given its national importance It should be a model of effective corporate governance. It is not. The 2006 Companies Act stresses the supremacy of the board of directors, in this case The Court, and their role in balancing their challenge of both driving the Bank forward in turbulent times and of ensuring the prudent control of its own organisation.

This is what the Governor's proposals seem designed to negate. He diminishes the role of the Court by proposing that the Court should oversee only the Bank's pay and internal management; and that the proposed Oversight Sub-Committee (note the "sub") should monitor only the Monetary Policy Committee's "processes not policy". What chutzpah! It is the similar to being put in the dock for murdering one's parents and then entering a plea for mercy because you are now an orphan.

The Bank has failed in its present governance and now, as it receives even more powers, seems keen to do the same again. It has had two main committees neither of which has worked well due to bad design and execution and because neither were controlled by the Board. The one that has had massive publicity, The Monetary Policy Committee, has been the ground for warring macro-economists yet it does not even report to the Court but to the Treasury and will remain so. The other, now the Financial Policy Committee, suffered neglect and lack of oversight by the Court and the Governor until 2008 and the Western Financial Crisis. This is why we had no suitable financial stability instruments available as the crisis hit and had to invent Quantitative Easing rapidly.

The alternative proposal by the Treasury Select Committee is somewhat better as it is designed to ensure that there will be at least a Supervisory Board which reviews the work of the Court and its committees. However, there is no need to set up a more complex two-tier structure if the Bank followed the company law and the regulatory codes by acting as a unitary board of which the UK has some four hundred years of experience.

13 January

Commenting on Tesco's sales figures and how the board may look to shake things up at the supermarket chain, Ajay Bhalla, Professor of Global Innovation Management at Cass Business School said:

Pursuing the allure of growth is tightly knitted to Tesco's existence. Such is this pursuit that when it revised it Vision document mid 2011, it made growth as central plank of its strategy. Growth has its costs and may not necessarily generate returns. No longer does the mantra- Bigger is better- holds true. Results from Tesco's competitors- Sainsburys to Waitrose and Morrisons- have demonstrated that 'Big Price Drop' had little impact. Reversing the growth track is what Tesco executives may do next and this will require revisiting the vision. I am sure some serious introspection is already underway in Tesco's boardroom and this time the board may opt to decode the growth DNA in favour of better health and longevity.

12 January

Commenting on the 'unhealthy correlation' between the building of skyscrapers and subsequent financial crashes, Tony Key, Professor of Real Estate Economics at Cass Business School said:

On an anecdotal basis, it's easy to make a list of many of the tallest and most famous office towers that were completed in economic and property market slumps: in New York the Chrysler Building and Empire State Building (known at the time as the Empty State Building) in 1930-31, the Twin Towers in 1970-71; in Chicago, the Sears (now Willis) Tower, Aon Building and John Hancock Tower were all completed in the early 1970s. In London, the Natwest (now 42) Tower was finished in 1980, Canary Wharf in the early 1990s, the most recent set of big towers (Bishopsgate, Ropemaker Place) in the late 2010s. Of course, it would be easy of find quite a lot of counter examples of big buildings completed into booms: the Heron Tower, for example, completed in 2011 did catch an upturn in the London office rental cycle.

"The coincidence of large volumes of building with economic downturns is a natural tendency of the property cycle. It takes a lot of finance and confidence to put up mega-projects, both of which are most abundant in economic booms. It takes several years - say 2 to 4 - to put them up. If the economic cycle tends to run 2-3 years from peaks to troughs, too often building started at peaks will be finished in troughs. The phenomenon is not confined to big towers - at applies to the total volume of construction.

"So while it makes an eye-catching story to focus on the towers, if I were worried about (say) India I'd be looking at the total volume of buildings not just skyscrapers. If I wanted to worry, I'd note that the next set of office towers likely to be built in London will be completed 2013-2014. But on the other hand, they've also been started at a fairly low point in the economic cycle. You might argue that developers have learned from the history, and this time are trying to second-guess it. If the economic cycle doesn't turn out to be quite like history - for instance we just don't get much of a pick up in London financial services - they'll be wrong again, but for a different reason.

11 January

Commenting on whether plans for the high speed rail network is the best use of government funds, Professor of Operations and Supply Chain Management, ManMohan Sodhi said:

In every slump, in every recession, governments seek to invest in mega projects. This serves two purposes: One is simply money being pumped into the economy along with jobs to (hopefully) revive the economy and get it going. The second, more important, is to let loose the Keynesian animal spirits to lift the sagging consumer confidence and thus revive the economy. Of course, the projects may or may not make sense economically, but, what price would one put to revising animal spirits?

Yes, this investment will create jobs but are there alternatives that can create jobs? Some might make the case for giving loans to small businesses, and indeed the government has pondered such an idea given the major banks' reluctance to funding small businesses. What about improving the badly rundown infrastructure whether in the north or in the south? Also, given austerity measures, can we really train people being let go into construction workers for high speed rail?

Perhaps we could consider required investments now and worry about optional ones later?

10 January

Commenting on the proposal for a European Tobin Tax, Professor Gulnur Muradoglu, said:

"The weakness of a Tobin Tax is that it assumes the high volume of transactions in the financial markets are partly to blame for the economic crisis, and that a tax will help to reduce the number of transactions. Neither of these presumptions are true. What is really needed is the introduction of regulation to ensure complex financial instruments are represented transparently in balance sheets. If liabilities embedded in complex instruments that are classified as assets are not transparent, there is no hope for a reduction in the probability of another crisis."

9 January

Commenting on David Cameron's 'promises of powers to limit executives pay' Dr Pete Hahn, Cass Business School, said:

Outrage at out-sized remuneration is much more about the lack of discipline for those approving absurd awards than those getting the awards. What is the downside for corporate remuneration committees that overpay? In a world of distant and fragmented shareholders with large governments attempting to offer autonomy, the reality is that no-one oversees the overseers. It is the incentives or lack thereof at corporate and public sector boards that have created these problems and an industry of highly paid and equally vested interest consultants that is sure to keep it going.

19 December

Commenting on George Osbourne's response to the Vicker's report, Philip Booth, Professor of Insurance and Risk Management said:

"There is a clear lack of decisiveness about how to approach the problem of banking regulation from the government. On the one hand, welcome action has been taken to ensure that depositors are treated preferentially in the event of a bank failure and to ensure that banks can be wound up in an orderly fashion. On the other hand, the government wants banks to hold much more capital to ensure that they very, very rarely fail. Discouraging failure so strongly also militates against the government's other objective of promoting a dynamic market with healthy competition from new entrants because it prevents the established banks from failing and exiting the market.

"The ring fencing of EEA deposit business is a clumsy mechanism that would not have made any difference to the banking crash of 2008. A more imaginative approach would have been to give the Bank of England a primary legal responsibility to ensure that banks could be wound up safely in the event of failure and also to give the Bank of England the power to impose structural change if and only if it was necessary to do so."

12 December

Commenting on the Gates Foundation investment in the Aureos health fund, Professor of Charity Funding at Cass Business School, Cathy Pharoah, said:

"The Gates Foundation investment in the Aureos health fund is an excellent example of how commercial and philanthropic investment can be brought together to achieve sustainable social change in a developing country. This is a programme-related investment (PRI) of philanthropic assets in a developing country where growth areas can promise high social and economic returns. Health in Africa has attracted high levels of government aid in recent years. PRI are generally regarded as potentially generating greater benefits than more traditional grant-making, but they carry higher risks because they often involve innovative projects in organisations with little track record. Although this investment aims at an impact that goes well beyond what can be achieved with traditional philanthropic grant-making, with assets exceeding $34 billion, the Gates Foundation can afford to take some risks. With total combined assets of £26 billion in the UK, if the giant healthcare foundation the Wellcome Trust is excluded, only a few foundations in the UK have dipped their toe in the water of social investment. The Aureos fund has a strong track record of investing heavily in management to deal with the higher risks of social investment in developing countries."

12 December

Commenting on the FSA's report on RBS, Professor Bob Garratt, Visiting Professor in Corporate Governance at Cass Business School said:

The long overdue Report does fill in many of the gaps which have been rightly questioned by the public over the last four years. However, it does not deal in sufficient depth with the key issue of how do we better avoid this happening again? It fails to tackle the issue of director and senior executive liability.There are two significant issues:

First, neither the BIS under Vince Cable nor the FSA and its lawyers are inclined to take action. The BIS is responsible for the roll-out of the seemingly powerful 2006 Companies Act. Of "the Seven Non-Exhaustive Duties" for Directors cited in this Act, three are directly applicable to RBS. The odd thing is that according to the Report and the Government's lawyers no-one can be seen as accountable and liable. This is patent nonsense and leads to the question in relation to corporate governance and board effectiveness So what use are the FSA, BIS and FRC then?

Second, structurally the regulatory oversight mechanism for governance and director effectiveness in the UK is weak. They have no clout, no resources and no political backing. Hence they have no blood on their sword to make other directors take notice.

7 December

Commenting on the news that China will be switching its export focus to emerging markets Professor of International Finance, Kate Phylaktis, said:

For China to reduce its exports to the west and increase its imports from the west can be a good development as it will reduce the external imbalances with the west. However, trying to keep the same rate of growth of total exports by increasing exports to the other emerging markets might prove more of a challenge than it anticipates. The longer the global financial turmoil lasts with its negative impact on the developed countries, the higher the possibilities that emerging markets will also be affected. China should be trying instead to boost domestic consumption and maintain the high rate of economic growth that it has been based up to now on exports and investment.

1 December

Responding to the news that central banks have slashed borrowing rates, Manthos Delis, banking expert at Cass Business School said:

Rate cuts are welcome as they are likely to offer a short-term solution to liquidity problems. However, this effect is likely to be so "short-term" that it will soon vanish, perhaps in a week's time, if it is not associated with long-run commitment to enhancement of liquidity by the ECB, treaty changes to promote low public deficits and simultaneous introduction of a eurobond scheme for countries that accept and enforce treaty changes.

29 November

Commenting on George Osbourne's autumn statement Professor Philip Booth said:

The facts have changed but the policies have not. Despite the deterioration in the economic outlook, the government is not reducing its spending further, therefore putting more of a burden on the private sector of the economy through higher government borrowing and further delays to meaningful tax cuts. Furthermore, the uprating of benefits whilst real wages are falling further sharpens the disincentive effects of our dysfunctional benefits system. This, together with other unnecessary spending announcements, suggests that the government wishes to "coast" rather than address the difficult challenges that the world economy is throwing at it.

29 November

Commenting on the news that Toyota may consider moving away from Japan for some parts of its production and speculating where they may go, Professor of Supply Chain Management at Cass Business School, Mohan Sodhi says:

Japanese manufacturers, while loyal to their suppliers, were essentially goaded into making their supplier base more global after the earthquake and its economic aftermath. The same applied, although to a much lesser extent, this year with the floods in many regions in Thailand. Currencies can move up and down but Japan also has a demographic issue, more acute than any other part in the world, of an ageing population. The demand is also slowly but inevitably moving to developing countries, be they in South America or in Asia.

Still, it is hard to imagine that business will come to the Eurozone, especially in the near future - the demographic population problem is here as well, and the problems with the euro and the Eurozone also appear to be long-term. Nor is there any attraction of growing demand. As regards North America, there are also Japanese auto plants and production can move in and out depending on currency movements.

28 November

Responding to the news that George Osbourne is expected to announce the government's plans to underwrite £20bn in loans to small businesses - Professor Mohan Sodhi, Cass Business School said:

The Chancellor's move is welcome in all quarters: by not only the small businesses it supports directly but also the larger companies these businesses supply as well as by the banks.

However, a better and long-term solution lies in supply-chain finance, which UK banks took global lead and are now turning out to be too timid. The idea is simple in concept: rather than give loans to a company - whether small or large - the bank essentially gives credit to the supply chain. In practical terms, the bank gives loans to a small company against the supplies it has made to a larger company with a much better credit rating.

The interest rate for the small business against the invoices (and there are many variants) can then be much lower, essentially that of the larger company, plus some extra points to cover costs and increase the profit.

In preliminary research conducted by Cass Business School, it appears the hurdles against doing this are logistical and technical rather than fundamental. The Chancellor can push the banks, the accounting firms and large corporates to remove or lower these hurdles - this would be a long-term win not only for UK companies but also for UK banks without using any of the taxpayers' money.

25 November

Responding to the news that India is to open its $450bn retail sector to foreign supermarkets, granting access for the first time to companies including Walmart, Carrefour and Tesco, Ajay Bhalla, Professor of Global Innovation Management at Cass comments:

"The real question is not if welcoming supermarket giants with open arms will transform the Indian retail sector, but in what form the transformation will take place. Undoubtedly it will release capital in the sector but more than that it will inject both managerial expertise and cutting edge processes in various parts of the value chain, specifically the supply chain. India's growing middle class will welcome innovation in the customer experience. At another level, however, it will throw the many home grown operators into disarray. Individual retail operators will be priced out and unable to match the discounts offered by large retailers. The micro-credit schemes these retailers offer to the bottom of pyramid customers may bring in some respite but not for long."

21 November

Responding to reports directors in the Cayman Islands are sitting on multiple boards, Professor Meziane Lasfer of Cass Business School, said:

"Reports that some non-executive hedge fund directors in the Cayman Islands are sitting on more than 100 boards each is a concerning revelation for investors. By holding so many jobs, it is a fantasy for any director to think they can perform their fundamental duty of protecting investor interests.

"Firstly, the directors are unable to accomplish the crucial monitoring role they should play in ensuring funds are performing well and generating good returns for investors. Secondly, the directors cannot properly fulfil the duty they have to advise managers on the fund's investment decisions.

"These activities can only be accomplished by being present and active at the board meetings. Empirical evidence shows that companies hold, on average, 11 meetings per year. If each of the meetings lasts one day, non-executive directors can attend only about 33 meetings a year, assuming that these board meetings do not clash. If they sit on 100 boards, they will have to miss 67 meetings, begging the question why these directors are being paid for doing nothing.

"All of this results in a weak and inefficient board, in which managers have a free-ride in decision-making and risk-taking, and investors are left worryingly exposed."

15 November

Commenting on the Financial Services Authority (FSA)'s introduction of compulsory recordings of staff mobile 'phone conversations, Professor Meziane Lasfer said:

The FSA's implementation of new rules introducing the compulsory recording of trading staff mobile 'phone conversations will have little effect on the practise of insider trading. People are not so stupid as to discuss insider information on work telephones, mobile or fixed line, nor are they likely to have these conversations on personal telephones. Most information is swapped in direct conversation.

The loophole in monitoring insider trading lies in the patterns of trade prior to new announcements in the market. If the FSA truly wants to regulate insider trading it needs to concentrate its efforts on identifying irregular trade patterns leaning toward a net buy in a company prior to a news announcement.

15 November

Responding to the news that yields on Spanish government bonds has risen to over 6%, Visiting Lecturer Guy Fraser Sampson said:

Spain faces an election in the next few days in which a conservative government is felt likely to be elected. This may make it more likely that the government will be able to persuade the electorate to implement the proposed austerity measures.

The Spanish economy seems to be flat-lining according to some recent estimates, perhaps with no further growth this year. Unemployment of 21.5% and youth unemployment of 46% are hardly signs of health.

Spain has over $640B of debt, which equates to 67% of GDP. Hardly in Italy's territory of 120% of GDP, but Spanish bond yields rose above the magic 6% figure today, and Spain needs to get another, larger, bond issue away in the coming weeks. One leading European bank has now said that Spain "is on the radar screen" of default alongside Italy. Should Spain default then this could have serious knock-on effects. They owe over $235B to French and German banks, and the former are already heavily exposed to Italy.

A further problem, not publicly acknowledged is that the "Fondo", Spain's national reserve pension fund, has well over 90% of its assets invested in Spanish government bonds. Thus, its risks and assets are pointing in the same direction, rather than hedging each other. Sovereign default could trigger a major collapse in the value of pension and/or social security funds just when they are most needed.

15 November

Responding to Bank of England figures which show the UK's big five high street lenders are almost £1bn short on their commitment to make £76bn of loans available to SMEs this year under Project Merlin, Ajay Bhalla, Professor of Global Innovation Management at Cass, said:

"Intermittent messages from policy makers promising support and a half-hearted approach by banks to lending to SMEs is doing little to help the UK's declining population of SMEs. Successive governments failed to provide adequate support to UK manufacturing and now we see SMEs under attack. Today's news that banks are falling short of targets to lend under the Project Merlin agreement is symptomatic of the uphill task Britain faces in injecting and sustaining entrepreneurship. Britain has already sleep-walked into an economy with two types of businesses: Tesco and financial services. CEOs of large firms not only have access to alternative financing options when faced with a liquidity crunch, but also a hotline to ministers. British SMEs have little in the way of such luxuries. If Britain is serious about injecting competitiveness into its economy, it has to get serious about implementing policies which will help create thriving Mittelstand in every region of Britain."

10 November

Commenting on the eurozone debt crisis, Professor Philip Booth from Cass Business School, said:

"It was always likely that the Italian debt situation would make recent negotiations regarding the eurozone bailout irrelevant. Italian government debt will just about be manageable if the government rapidly deregulates its economy so that economic growth increases. This solution is well within the reach of the government in theory, but the practice of Italian politics makes it more difficult to achieve. The alternative has to be an orderly right-down of debt in both the public and private sectors. The attempt to repackage debt and have already indebted states provide guarantees will fail."

10 November

Responding to HSBC's predictions of 'severe headwinds' as a result of the Eurozone crisis, Manthos Delis, senior lecturer in Banking at Cass said:

"I feel that the Eurozone economic crisis with escalating spreads of weaker countries will not see a quick resolution, as the associated political crisis exacerbates uncertainty and increases risk premia.

Today, a second recession within five years seems highly likely and further threatens the already weakened financial sector. Having said that, however, I feel it is unlikely that groups like the HSBC will leave a market like the UK one. In contrast, as losses emerge, it is likely to see a separation of commercial and investment banking, which comes with well-known benefits and shortcomings."

9 November

Commenting on the news that Vodaphone's Chief Executive has stated that Vodafone is changing from a 'European company' to 'an emerging markets' company, Ajay Bhalla, Professor of Global Innovation Management at Cass said:

"Most CEOs know the reality that the future of their firm rests in Emerging Markets. A cursory look at the financial statements will tell you that while many European firms have substantial asset bases in the developed world, the return on these asset bases is shrinking. On the contrary, be that Tesco or VW, the returns from Emerging Markets and forecasts are so tempting that CEO's are beginning to question the logic of maintaining the HQ function in Europe. Over the past two years, top management of many British firms, such as HSBC or Barclays have debated the question: What does it mean to be a British firm? Some like HSBC decided to re-locate the top management in Hong Kong. Others like Cisco have taken the decision to balance their board composition. At some point soon, when institutional regimes in Emerging economies gain parity with developed world, the balance will tilt. Questions will be asked as to why should a firm operating in global market retain a European HQ? It is very likely that we may soon see emergence of dual structures, where firms maintain handful of functions in Europe while shifting the core functions to locations where they earn their living."

8 November

Commenting on the news that China is for the first time to give formal backing to moves by British banks to turn the City into an offshore trading centre for the renminbi, Professor Kate Phylaktis Professor of International Finance and Director, Emerging Markets Group (EMG) at Cass said:

 Bearing in mind the increasing importance of China in the world Economy and world trade, UK should not miss the opportunity to facilitate renminbi transactions and maintain its key role in FX transactions. The use of the renminbi, or Chinese yuan in international trade is projected to increase in the future for the following reasons. First, the Chinese economy has been growing fast and will match the US GDP by 2020 as predicted by Goldman Sachs in 2010. This is due to a combination of China continuing to have a healthy 9-10% rate of economic growth, while the US and the developed countries have been growing below trend. Secondly, recent developments of the U.S. and the euro-zone, the quantitative easing monetary policies and the level of indebtedness all had an adverse impact against investors' long- term confidence over the two currencies. It has shown that the international monetary system cannot continue to be based on the dollar and the Euro. The renminbi, as a sovereign currency, has the greatest potential to become the third international currency.

China's central bank indicated the country was pushing forward with the internationalization of the renminbi step by step. On June 19, the central bank decided to proceed further with the reform of the renminbi exchange rate to add flexibility to the renminbi exchange rate. Days later, it decided to expand a trial program for settling trade deals in the renminbi to most of the country. For the renminbi to become an international currency, China will need to continue implementing effective macroeconomic policies in the next several decades to promote and strengthen international confidence in its currency. Finally, the renminbi should become fully convertible and China needs eventually to remove all capital controls.

2 November

Commenting on the Eurozone and the deepening crisis in Greece, visiting lecturer Guy Fraser-Sampson said:

The Greek cabinet has voted to back the PM's move, but a referendum will apparently require a two thirds vote in the Greek Parliament. This seems actually to have been a very astute move by Papandreou, since anybody opposing the idea of a referendum can be accused of obstructing the democratic process. Rather than analysing the possible outcomes, however, other Eurozone governments would do better to analyse his reasons.

If the Greek government had been confident of pushing through even some of the proposed austerity measures, then surely they would have done so. Calling for a referendum is a tacit admission that the Greek electorate will not accept them. In this case it seems strange that the Eurozone should be intensifying their efforts to bail Greece out rather than pulling back and reviewing the situation afresh. It is a classic example of how politics will always trump economics in the short run.

2 November

Today's pension deal is unfair for the next generation of taxpayers, says Professor Philip Booth from Cass Business School.

"Danny Alexander has suggested that the public sector pensions deal announced today was a "deal for a generation". It may be a good deal for the current generation of public sector workers - especially those near retirement - but it is certainly not a good deal for the next generation of taxpayers."

"The government has improved its offer to trades unions in such a way that all the increase in costs are deferred until after the coalition has left office. The government should not be adding to implicit public sector debt, it should be trying to deal with the problem.

"Unfortunately, the government has put itself in a position where it can be held to ransom by the trades unions because it has decided to centralise these negotiations. A better outcome could have been obtained by ensuring that public sector employers and employees paid the full cost of their sector pension arrangements out of overall budgets set by the Treasury. Different parts of the public sector could then have chosen different pensions arrangements to suit local conditions."

2 November

Responding to the Archbishop of Canterbury's call for a 'Robin Hood tax', Professor Ian Marsh from Cass Business School, said:

"Tobin taxes were originally proposed as a way of slowing the pace of financial transactions with the aim of reducing volatility. The tax is more costly for frequent traders looking to profit from small price movements but is small enough to be immaterial for long-term investors. The more contentious element of the logic is that these high frequency traders were responsible for excessive volatility in markets and by driving them out, financial asset prices would be less likely to make unjustified movements.

"All the evidence, however, suggests that Tobin taxes are either avoided (and so are useless) or where unavoidable are actually detrimental to volatility. Short-term traders who are by definition hardest hit by Tobin taxes do contribute to the efficient working of financial markets. Removing them will make shares, bonds and currencies more volatile.

"So a Robin Hood tax on financial transactions is not likely to be costless - it will have detrimental effects on how well our financial markets operate.

"There has been a public outcry over whole of society paying for the errors and irresponsibility of bankers. The funds raised by a Tobin tax might go to more deserving causes than bailing out banks, but a Tobin tax will also mean the whole of society (or at least that large proportion of society that has investments through savings or pensions) will again be paying.

"The Archbishop's statement calls for a change in banking practices. This crisis was not brought about by traders or speculators, be they long-terms or short-term. It was brought about by bad lending and poor risk management, coupled with poor incentive structures in banks. A Tobin Tax will not change those at all."

31 October

Commenting on the German Finance minister's backing of a financial transaction tax, Professor Philip Booth from Cass Business School said:

"In the midst of a eurozone sovereign debt crisis - caused largely by government profligacy - it is not surprising, but it is regrettable, that the German Finance Minister should call for more financial regulation and a transaction tax. There is no evidence that a transaction tax would achieve its desired objectives but much evidence that it would be highly damaging to liquidity, raise costs for end consumers in financial markets and damage economic growth. Indeed, even the EU's own estimates suggest this. 

There is no case for regulating hedge funds as the German Finance Minister suggests. The banking crisis arose in the regulated sector. Those banks and other financial institutions that operated outside the regulated sector did not cause problems. All the hedge funds that have got into trouble have been dealt with in an orderly fashion. The EU should focus on ensuring that banks that can get into trouble can fail in an orderly fashion."

28 October

Commenting on a report which shows that directors of the largest British companies saw their earnings jump by 49 percent in the last financial year, Dr Peter Hahn from Cass Business School, said:

"We've been complaining about senior executive pay at large public companies for almost two decades. The solutions are always the same, more power to the remuneration committee, more complex reward plans, and, most of all, more pay consultants. Isn't it time to say, formulaic complexity designed by possibly conflicted consultants is the problem? Is the answer much simpler? How about going back to discretion, trusting the board at year end to evaluate whether management hit the plan or not and then determine the reward sans all the consultants. It could make boards more accountable, CEOs less focused on gaming short term results, and might reward longer term shareholders with really increasing value. Of course, board directors would have to understand the businesses they oversee and that might be asking too much."

27 October

The agreement reached by the EU leaders today does not get close to resolving the eurozone's difficulties, says Professor Philip Booth from Cass Business School.

"Though an agreement has been made to recapitalise the banks in case default spreads beyond Greece, it is likely that some of that capital will be provided by the already heavily-indebted governments that are the cause of the problem.

"Furthermore, the agreement to expand the bailout mechanism is still vague. It is possible that huge upfront guarantees by EU governments have been avoided but only at the expense of loading even bigger burdens onto EU governments should there be a default in the future.

"This is a high-risk strategy for the EU members states. If Italy undergoes radical reform to raise its growth rate, the eurozone might just contain this crisis to Greece. However, if Italy does not undertake reform, the crisis will simply get worse."

24 October

Commenting on plans by Ryanair's chief executive, Michael O'Leary, to buy up to 300 new aircraft and boost passenger numbers to 130m in the next decade, Professor Joseph Lampel of Cass Business School, said:

"One of history's enduring mysteries is why Napoleon invaded Russia. He had an empire, all the pomp and circumstance of an imperial court, and the all round title of military genius. And yet he could not resist the lure of complete domination of the European continent. He had plenty of victories, but what he wanted was total victory. 

"One gets the same feeling reading the news release about Michael O'Leary's ambition to acquire 300 aircraft from Russian or Chinese manufacturers if he cannot get them from Boeing and Airbus. The goal is to grow Ryanair to 130 million passengers, which would make the airline the largest in Europe, and one of the largest in Europe

"What is the rationale for this audacious expansion? It seems that Michael O'Leary is convinced that the economic recession will lead to mass defection from other airlines to Ryanair. What this assumption seemingly ignores is that the cost of air travel is a smaller proportion of the total cost of travel. The cost of being there is usually much greater of the cost of getting there. The recession is therefore likely to reduce air travel primarily because fewer people can afford to spend their hard earned cash on hotels, restaurants, and other travel pleasures.

"Is O'Leary unaware of this basic economic reality? This is hard to say. What is clear is that he sees the current economic crisis as an opportunity to push aggressively forward where other airlines fear to tread. The risk he runs is that an extraordinary success story will come apart. It is not only that this expansion will stress Ryanair's organizational capacity and constrained terminal availability to the limit, but there are also other forces lurking in the background ready to take on O'Leary if he stumbles. There are shareholders who are told that they can expect much lower dividends during the expansion, and there are also O'Leary's many critics who have always felt that he cuts too many corners.

"Perhaps he should take a lesson from Napoleon. When told by his advisers that the winters in Russia were exceptionally long and cold he insisted that they were misinformed. The winters in Moscow, he told them, were no colder than Paris, just a bit longer. He lived to find out that reality can bite."

21 October

Commenting on EU internal market commissioner Michel Barnier's indication that credit rating agencies could be banned from downgrading countries in the eurozone's bailout scheme, Cass Business School's Professor of Insurance and Risk Management Dr Philip Booth comments:

"EU Commissioner Michel Barnier has suggested that, in certain circumstances, ratings agencies may be prevented from downgrading the debt of EU countries. Although ratings agencies have been raised upon a pedestal by the use of their ratings for regulatory purposes, thus grossly distorting the market, the EU should remember what the basic function of a ratings agency is.

Ratings agencies simply give opinions on the creditworthiness of borrowers. This suggestion would lead to the EU effectively banning the publication of such opinions if they are negative. This will have undesirable consequences for the liquidity of EU government debt and, ultimately, for the cost of borrowing. However, perhaps the most pernicious aspect of this proposal is the suggestion that a negative opinion on the creditworthiness of a government that has imposed huge debt obligations on its citizens will be prohibited.

This would make governments less accountable to the people and is an inhibition on freedom of speech. A ratings agency simply brings bad news - or expresses a negative opinion - on an underlying reality. This would be a classic case of shooting the messenger."

21 October

Commenting on EU internal market commissioner Michel Barnier's indication that credit rating agencies could be banned from downgrading countries in the eurozone's bailout scheme, Cass Business School's Dr Pete Hahn comments:

"It is hard to say whether banning Chicken Little from saying "The sky is falling" would have given her more credibility, but it would've certainly suggested to the other hens that someone was interested in hiding something. Banning the rating agencies from expressing their opinion will undoubtedly force them to withdraw their ratings; it is hard to imagine that such an event would have any other effect than inciting a sell-off. Have we forgotten that many investors are prohibited from owning un-rated securities?"

20 October

Commenting on the introduction of new EU rules on insider trading introduced today, Meziane Lasfer, Professor of Finance at Cass Business school said:

The new EU measures - MIFID II (Markets in Financial Instruments Directive) and Market Abuse and Criminal Sanctions - are to be welcome as they are likely to increase market cleanness and to make investing attractive to small shareholders who are unlikely to get any private information. The directives are also timely given the high volatility in market prices and the likely mispricing of companies that might results. Although some trading on insider information might increase the level of efficiency in the financial markets, it is likely to benefit only some traders and there is no strong evidence that other investors will benefit from such transactions.

However, the directives need to explicitly give power and responsibility to the regulators. There is also a need to encourage these regulators to empower themselves with strong human capital to allow them to analyse fully the trades and to detect any trading on private information. In particular, the fines suggested should be reinvested by the regulators in modern technology and expertise that will allow them to do their job much more efficiently.

19 October

Commenting on the EU decision to ban naked sovereign credit default swaps, Professor of Finance at Cass Business School, Ian Marsh, said:

"This ban is based on the accusation that speculating a country will default through trading in credit default swaps actually raises the likelihood of default by increasing the cost of borrowing for the targeted country. There is probably some truth in this accusation, although regulators are taking a risk as there is not much hard evidence to back up their view.

"Banning speculators from buying insurance while allowing hedgers to do so actually favours the people who made the initial mistake - the banks who lent the money - while harming the speculators who pointed out the problem.

"There are parallels with the short sales bans briefly introduced in 2008/09. Then, bank share prices were falling and regulators banned the selling of shares that the seller didn't actually own. These bans were rapidly reversed in most countries as they did not help to stabilise bank share prices. Instead, the short sales bans simply made trading shares by those who did own them less easy and more expensive.

"I expect the same will apply to credit derivatives markets. Banning the speculators will not be costless. Excluding by law a whole bunch of buyers of credit insurance will very likely also reduce the supply of insurance. Legitimate hedgers will then find it harder to get insurance or to reduce their cover should they judge that the situation has improved sufficiently. And I expect that like the short sales bans, this ban on naked buying of credit insurance will also be quickly reversed.

"EU politicians are talking to two audiences as they impose reforms and regulations. The first is their electorate where they want to be seen to be doing something about the crisis. Banning naked CDS writing will seem like a good thing to most of the population. Their other audience is the financial markets who will, I suspect, see this as another instance of the authorities blaming the wrong people and imposing the wrong policies."

17 October

Commenting on the possible downgrading of France by the ratings agencies, Professor Philip Booth, said:

"The possible downgrading of France by the ratings agencies shows how unsustainable the consensus approach to dealing with the EU debt problem is. The guaranteeing of the debts of Greece, Italy, Ireland, Spain and Portugal by the European Financial Stability Facility and the ECB would effectively mean that the EU as a whole is underwriting the borrowing of a number of its members. It is staggering that 30% of the guarantees are being underwritten by the very countries that may have to be bailed out. A further 14% would be underwritten by France. If the EU governments bail out the weaker members or recapitalise their banking systems if there is default, this will lead the debt burden to mount further. This approach will then bring more countries into danger - who will be left to bail those countries out?

"A different approach entirely must be taken that recognises bad debts for what they are and ensures an orderly restructuring with losses being taken by those who have invested in government debt. In the short term that would lead to huge instability but the EU looks likely to take a gamble that, if it goes wrong, will lead the debt crisis to spread further and drag on longer. "

17 October

André Spicer, Professor of Organisational Behaviour at Cass Business School, argues that the City of London should engage with Occupy London protestors:

This morning thousands of city workers will stream by the hundreds of protestors who are camped out on the steps of St Paul's Cathedral. The bankers will probably not give these protestors a second thought. But they are making a grave mistake. If the banks are to find a way out of the current mire they find themselves in, they must listen to dissenting voices - no matter how challenging they might seem.

Engaging with protestors is an important way that banks could begin to bridge the global governance gap in the financial sector. Currently there is a major gap between the reach and impact of the global financial sector and our ability to govern it. Existing institutions like the IMF and the Banks of England are certainly important. But the missing part of the puzzle is the voice of civil society. Engaging with the protestors is an important first step in giving civil society groups a role in governing the financial system.

Engaging with protestors will help the City and financial institutions to address the serious crisis of legitimacy they face today. Public trust in the financial sector is at an all time low. Public dismay might seem to be irrelevant to the global financial elite, but it is not. The central asset of any bank is not the assets on its balance sheet, but people's trust in the bank. Maintaining trust is not just about prudent investments and clever marketing. It also requires banks to show that they can really listen and respond to the demands of the wider public.

The final reason that the banks should take the protestors seriously is that they are missing out on a vital opportunity for innovation. We all know that innovation is the crucial motor of economic development but often innovation comes from the margins. Some of the demands of the protestors include ecological sustainability, equality, and an increasingly democratic financial system. These demands could provide financiers with some serious food for thought. Green money? Feminised finance? Open source equities?

If the City shows some willingness to engage with the protestors, then the protestors also have to be willing to repay the favour. The protestors do not seem to be clear about exactly how they would like the financial sector to be reformed. Nor do they understand many of the technical and pragmatic issues associated with reforming the financial sector. It is unlikely this dialogue would be easy. But it could be a step towards addressing some of the dangers that currently menace the global economic system.

13 October

Commenting on Fitch downgrading RBS and Lloyds, Manthos Delis from Cass Business School, said:

"With the turmoil in the eurozone and increasing concerns of an economic slowdown, systemic risk today is higher than it was a few months ago. Thus, clearly, the banking business has become more risky itself and the actions taken by Moody's and Fitch seem well-justified. Let us remember that we all judged rating agencies for not delivering in 2007-2008.

"There is always a possibility that a forecast becomes self-fulfilling and spreads to the economy. We must understand that a downgrade by one basis point should not imply grave danger for British banks, but it should be taken as a wake up call for action."

11 October

Responding to the Health and Social Care Bill's second reading in the House of Lords, Dr Robert Warwick and Prof David Welbourn, Associate Director and Visiting Professor respectively at Cass Business School's Centre for Better Managed Health and Social Care, comment:

The health and social care bill has gained considerable attention, most sitting at one or other end of a polarised debate, often showing limited understanding of either the NHS or this entire sector of our economy.

One thing is for certain, going back is not an option. Too much has already changed for that to happen. The debate must focus on securing a sustainable future for health services:
• Better at adopting innovation
• All elements of the system drive together towards best possible outcomes for available resources
• Ensuring that we continue to drive up the health of the nation, whilst also reducing the unacceptable inequity - both in terms of health (mortality /morbidity), but also in access to quality care when needed.

Many improvements have been made, but uncertainty remains. The bill continues to focus heavily on structural issues, leaving questions unanswered about roles, responsibilities and effective governance. Such ambiguities include:
• Detail of how Clinical Commissioning Groups (CCG) will be held to account
• How Monitor will promote the integration of services whilst deterring anti-competitive behaviours
• How the NHS Commissioning Board (NCB) process will work to evaluate and strengthen CCG Boards.

Current indications are that the NCB will continue conflating its important role to determine what needs to be done, with interference in how things should be done. If CCGs are to drive innovation, improvement and best possible outcomes, then they must feel a real sense of ownership.

Much commentary focuses on these individual issues, but the real risk lies in the unknown cumulative effect of how these interact. Current debates tend towards passionate defence of the ingrained vested interests and silo working which have proven time and again to prevent progress. What we need is an open-minded focus on how to achieve successful transition to a new shape. The health system is too big and complex, to be susceptible to management by central diktat. We need more emphasis on applying the best management science to understand how such a complex beast can be steered to achieve the desired outcomes, by using the right incentives.

We welcome the increased attention on integration, but success in tackling quality and efficiency, requires incentives to be aligned with outcomes throughout the whole system. GPs manage 90% of patient encounters, and need to retain identity as primary care providers, properly integrated with all other aspects of community and hospital care. There is a real danger that concentrating on developing their role as commissioners will prevent opportunity for better integration of provision. That GPs will be subject to conflicts is clear in recent stories, and the solution to place commissioning responsibility for primary care in the NCB makes a mockery of localism - surely primary care most needs a local commissioning flavour.

Achieving the right balance here demands that Health and Wellbeing boards are strong enough to direct the NCB and robust enough to hold them to account. Health and Wellbeing Boards bring the different cultures of NHS and local authorities directly together. Success of these boards is pivotal to the future. It is essential that they are rapidly gain maturity to deal with difficult issues robustly, demanding significant organisational development to face up to and overcome these often ingrained cultural differences and tensions. We see no attempts being made to nurture the new relationships on which success can be assured.

The Lord's second reading has much to discuss and shape, but its biggest challenge will be to avoid the polarisation and misunderstanding which has shaped debate to date. There are important matters to be understood, which will make a real and important difference.

5 October

Commenting on the struggling Franco-Belgian bank Dexia, Senior Lecturer at Cass Business School, Manthos Delis, said:

"Fears about the debt crisis re-feeding similar problems into the banking sector, as the original subprime crisis did, are not far from reality. Evidently, the holdings by Dexia of sovereign debt in Greek, Italian, Portuguese, Spanish and Irish government total 21 billion euro. This compares unfavourably with regulatory Tier 1 capital of 14.4 billion euro and is leading to severe problems for the bank's holding company in accessing market funding.

"There are a number of potential solutions to the situation Dexia finds itself in. The most likely option involves taking all the toxic bonds, creating another institution and trying to sell them off in pieces. Another move could be to inject capital in Dexia by partial nationalisation. The advantage of this is that it solves the market problem, but the disadvantage is that it transfers the problem to national deficit which is already high. Other measures could involve breaking up the bank to minimise the systemic effects, although guarantees might still be needed to cover losses of the really problematic parts of the business. Less likely solutions include selling Dexia to another bank - but no one wants toxic bonds - and bankruptcy, which the government will avoid over fear of a new systemic crisis."

30 September

Commenting on UBS's decision to hire a headhunting firm in their search for a new CEO, Dr Peter Hahn from Cass Business School, said:

"Today's news that UBS's board has hired Egon Zehnder for a CEO search offers, or perhaps demands, a new turn in bank corporate governance. Ordinarily, most troubled institutions searching for a new CEO would want the to-be-hired to get his or her feet under the desk for some time and recommend a strategy. For the sake of UBS's employees, customers, clients, regulators and a good deal of market certainty, perhaps UBS's board should first come up with a clear strategy and then hire a CEO to make it work. Just imagine how much easier it would be to identify the right candidate, stem short-term conflicts on strategy between management and board and determine how the new CEO could be measured and paid. Need I go on? If the board isn't up to the task, perhaps it should be replaced before hiring the new CEO."

September 29

Commenting on the latest report from Ernst & Young suggesting that Greek default is inevitable, Professor Philip Booth of Cass Business School says:

"Greek default has been inevitable for some time. However, the important point about this report is that it suggests that there is a high chance of the eurozone slipping back into recession. If this happens there is a real likelihood of further sovereign defaults and the European Financial Stability Fund may then be in danger of being unable to meet its obligations. According to the proposals currently being discussed within the EU, the burden will then fall to the ECB.

A recession and further sovereign defaults would lay bare the inadequacies of this mechanism of parceling up EU sovereign debts into packages that are ultimately partially guaranteed by the very countries in danger of defaulting! The consequences for the ECB could be disastrous."

September 28

Commenting ahead of the anticipated release of Amazon's tablet computer, Professor Ajay Bhalla from Cass Business School, said:

"At this stage, it is incorrect to assume that Amazon tablet will be a true rival to Apple iPad. Apple's rapid ascent to solidify its ecosystem and complementary applications is likely to soften the competition for a long-time. Consider Apps such as FaceTime, which enable users to call between Mac powered devices while at the same time locking-in users, are hard to imitate for rivals - be they Samsung or Amazon. Recall BBM which rapidly boosted RIM's growth in the smartphone market. While RIM failed to cross pollinate the success of BBM by upgrading its user experience and launching multiple devices, Apple has moved fast to replicate the same user experience across Mac and iOS devices. Can Amazon do what Apple has done? Has it got the focus Apple has?"

September 27

Responding to EU proposals to overhaul the business model of the Big Four accounting firms, Professor Ajay Bhalla from Cass Business School, said:

"On one level, the idea that break-up of audit and consultancy services would cultivate better financial reporting and at the same time encourage competition is appealing. Look a little deeper, you begin to wonder if the EU is ten years late post the Enron crisis in coming up with this bill.

Furthermore, you also need to consider the hidden costs of enforcing this at multiple levels. First, the idea that smaller firms coming onboard would encourage better transparency is ill conceived. Aiming to feed their growth appetite, they are more likely to act as dance partners with their clients than the Big Four. Second, how can EU regulators monitor that the forced spin-off of audit and advisory units will not result in conflict of interests.

Finally, during difficult economic times, EU regulators need to reflect more on sending signals which demonstrate their will to boost competitiveness of the European economy than creating Chinese walls that reinforce managerial inertia towards boosting investment in EU or the benefits of locating HQs in EU countries."

September 26

Commenting on the latest rumoured solutions being drawn up to deal with the debt crisis in the eurozone, Professor Philip Booth, said:

"The IMF and the EU still has not woken up to the realities of the sovereign debt situation. Simply developing new means for pan-European institutions to borrow more money or parcelling up the debts into packages that are ultimately passed round to other countries or to the ECB is not a solution.

"It is to be welcomed that the EU and the IMF have eventually understood the realities of the Greek situation, but they are a long way from appreciating that the sovereign debt crisis more generally cannot be solved by printing more money or inventing clever financial instruments in ever-more opaque institutions. Ultimately, investors will have to bear real losses because countries have borrowed money that they cannot repay. The IMF and the EU should be considering how to manage this problem in an orderly fashion. "

September 16

Dr Peter Hahn says the UBS incident raises worrying questions over the reliability of financial information across the board.

"UBS' sad news about its loss and apparent control failure has been a godsend for re-igniting attention on banking reform. However, this misfortune's greater and largely overlooked message is about the challenge of understanding risk information today and particularly bank balance sheets.

"It wasn't that long ago that triple-A rated sub-prime mortgage securities were 'rock-solid', sovereign debt was not only loss-proof but provided liquidity and commercial real estate loans were 'secured' or backed by 'real assets'.

"Much of today's debate about splitting this and that and applying more rules misses the point that the information we are using may be becoming ever more unreliable. Think this is all about investment banking? How about all those US mortgage loans on homes which had grossly overstated professional valuations just before the bust? How feasible is it that 'new retail' banks won't own government securities?

"Faster communications, faster perceptions of changing risks, faster money movements, increased global interconnectivity, political weakness and volatile markets all add up to big questions on the reliability of financial information across the board. Not very encouraging for investing in banks."

September 16

The fog is starting to clear about what really happened at UBS, but that still doesn't make the story any better for UBS or other investment banks, says Visiting Professor Chris Roebuck.

"It very much looks like the trader was getting into deeper and deep trouble over a number of days, the facebook message "Need a miracle" suggests a relatively junior individual trapped in a vain attempt to recover something that had gone badly wrong. He was effectively following in the path of Nick Leeson and others who have tried to trade themselves out of a hole, by the "double or quits" tactic and ended up making bigger and bigger holes for themselves. 

"The check systems in banks are much tighter since Leeson and the financial crisis, including computer enforced trading limits, real time overview of trading activity by risk managers and other systems. The other problem is that yet again this was trading in complex financial products not good old simple shares. These ETFs are flavour of the month, well until yesterday, but they are not as tightly controlled as other areas, they are difficult to understand and can have very significant positive or negative results quickly. Effectively easy to win large amounts but equally easy to lose them.
So this case poses some major questions: 

1. Why did he not come clean early on and speak to his boss ? Probably due to the macho "I must be perfect" culture of the trading floor which, in itself, creates risk.
2. Why did the systems not spot this before it got totally out of control ? This is a key question the risk systems managers must answer - but he must have found a way round the systems to get this far into debt.
3. Should these complex products be banned ? This is a view expressed by even some in the City. They may a lot of money for banks if they work well, but many ask if they actually add any value to the market other than to make more money for those banks, given the risk they obviously pose.
4. How can we make these parts of banks less risky ? The events at UBS show that even with tight control systems and computers watching everyone it is still possible for an individdual, even for motives that aren't essentially criminal, to do things they shouldn't. 

"The answer to all of the above is about having the right culture where people don't even think of doing things wrong so the systems don't have to stop it before it gets serious. That's a much cheaper and safer way to work. Lets hope the banks find the "moral compass" they appear to have lost and shareholders, and indeed Chief Risk Officers, may sleep sounder in their beds."

15 September

The UBS incident will speed up the implementation of the Vickers report but the reforms won't prevent further episodes of rogue trading, according to Dr Sonia Falconieri.

"The timing of yet another episode of rogue trading is fortunate in a sense as it will hopefully accelerate the implementation of the Vickers regulation because it leaves the banking lobby with very poor arguments against the need for ringfencing and separation of activities. While the separation of investment and commercial banking will prevent this kind of episode from impacting on depositors, it will not prevent further incidents from happening. Compensation packages with excessive bonuses and unrealistic targets are the reasons for excessive risk taking among traders ,particularly at a moment of high financial instability that makes difficult to achieve the required targets. This together with a loose internal control system makes investment banks vulnerable to rogue trading."

15 September

Commenting on UBS uncovering unauthorised trading in its investment bank which has led to an estimated loss of $2bn, Visiting Professor, Chris Roebuck, said:

"The news that a trader at UBS has been able to blow £1.3bn is a staggering demonstration that all the clever systems that the banks now have, especially after the financial crisis, still cannot stop a determined individual getting round them if they want to. This is a frightening level of wrongdoing in a bank that was held up as the world class example of good risk management before the crisis. It will yet again confirm to the majority of shareholders who are Swiss that investment banking is not "proper" banking as private banking is and that it is, just as Vince Cables says, "casino" banking. After the investment bank brought low the conservative Swiss bank in the crisis and now this disaster the Swiss shareholders will be fuming, the blue touch paper will already be burning this morning in Zurich and Geneva. 

"What it also emphasises is that stopping this sort of event is not about only the control systems, its about the leaders of the bank setting out a moral compass to staff about what is right and what is wrong so that everyone knows which is which. This ensures that bad behaviour is stopped before it starts, not just caught by control systems when it is happening. This requires a change of culture and a clear example from the top. It also prevents those embarrassing moments when someone does something that isn't illegal but which doesn't look good on the front page of the FT, which regulation wont prevent."

14 September

Responding to the news regarding the M&B offer from Joe Lewis, Sonia Falconieri, Lecturer in Finance at Cass Business School has the following comments:

This is a textbook case of a takeover battle with the bidder already having a large stake in the target firm. Toeholds are common practice in takeovers and with Lewis' large stake in the company he clearly exerts a strong influence on the board, but this is what large shareholders do. All parties involved are doing what they are expected to do: Lewis is trying to close the deal at the cheapest possible price while M&B board has correctly advised shareholders to reject the current offer because there is certainly room for further negotiations and for a better offer. The market seems to value positively the takeover which suggests again that there is a good chance that Lewis will succeed. I believe the only uncertainty really is the position of Elpida in all this. If they sell the whole process might end quite quickly, but somehow I do not see this coming, not now at the current offer.

14 September

Responding to the news that private company Circle has bid for Epsom hospital, Dr Robert Warwick, Associate Director, the Centre for Better Managed Health and Social Care at Cass Business School and City University has the following comments:

To some extent the argument about privatization is a distraction as long as the aims are achieved that the health service is free at the point of delivery. If we pay less attention to the privatization debate it allows us to become more focused on how services are to be run and how for the benefit of the patient.

If Circle were to sustainably achieve their claim of delivering "productivity improvements to the NHS of 13% a year" in a complex environment this would be an impressive win for patients and the taxpayers alike. If this were to move forward we must all be confident on how the success or otherwise is to be measured and how lessons are to be learnt. This must include quantitative evaluations such as use of resources, activity carried out and finance; but must also include patient experience, the views of staff, safety and long term outcomes.

In this important debate we must also avoid sound bites of a single percentage figures to describe the care we give patients. There is a lot to be learned from new innovative ways of things and it is learning that we must be open to.

12 September

Commenting on the reforms set out in the Vickers commission final report, Professor Philip Booth from Cass Business School, said:

"The ICB report smacks of an elegantly worked-out solution to problems that other bodies are addressing much more effectively.

"The IBC is right to seek ways to ensure that taxpayers do not bear the cost of banks' failures. However, recent parliamentary legislation, together with developments at EU level and arising from the FSA, will deal with these problems in a way that will be much more effective than that proposed by the IBC. The key to banking reform must be resolution procedures to ensure that failed banks can be wound up. The IBC proposals for the general ring-fencing of retail and investment banking operations do not contribute to achieving this objective though it would be reasonable to give the Bank of England powers to require ring-fencing in a particular bank that did not have a credible resolution plan.

"During the US Glass-Steagall regime, there were huge failures in the separated investment and retail banking sectors that led to government rescues and the development of the "too-big-to-fail" mentality. Indeed, the events of the recent crash were precipitated by separate failures in the retail and investment banking sectors. Artificial separation will not make either the retail or the investment banking sectors safer and we do not want a retail banking sector that is so heavily capitalised that no bank ever fails.

"The IBC report was disappointing in other respects. It discusses at length the adverse affects of tax discrimination against equity finance but makes no recommendations other than for more regulation of banks' equity capital.

"The government appears to welcome this report. It should also respond by immediately abolishing the bank levy, the explicit justification for which is the costs that bank failure can impose on taxpayers. If the government really has confidence that the IBC's proposals will address that problem then the bank levy should have no future."

12 September

Responding to the final report from the ICB on banking reforms, Dr Pete Hahn, Lecturer in Finance, said:

Imagine the government appointed five good and laudable citizens to provide an independent review of the healthcare system. All achievers, a retired top brain surgeon, a long ago manager of the largest hospital, a well-known critic of the system, an advocate for patients, and lastly they were lead by a well-known academic that had prior connections to government. Even those with the highest of expectations would hope for them to provide 'Blue Sky' thinking like 1) if we started from scratch, this would be the health system we want to have, 2) or we've searched the globe and these are the best healthcare systems we found and that we can learn from, or something like that with suggestions about what laws might have to be changed, what costs and benefits might be achieved, etc. Their report could be debated publicly, doctors, nurses, patients, and those responsible for costs could scrutinise and decisions be made after risks were clearly determined.

But imagine if they came up with a detailed plan to change the system, these five good people without extraordinary current insight and experience into the workings of the vast healthcare system. Would anyone take them seriously? What if they insisted that their plan be acted on immediately? Would that aid or hurt credibility?

Coming back to the banking system, since 2007 the regulatory world has changed dramatically, stalwart sovereign credits have become new risks, the old risks haven't gone away, the market has changed its long-term view of providing equity to banks, and technology on the way could substantial hit bank profits - I just wonder if we're still trying to fix yesterday's problem?

8 September

Commenting ahead of the Independent Commission on Banking's report, Visiting Professor of Transformational Leadership, Chris Roebuck, said:

"The current drama over the Independent Commission on Banking's (ICB) report seems to have created selective amnesia on the part of politicians and some media. The ICB's interim report said clearly that investment banks were no more likely to fail than retail ones and that the ring fencing would not make individual banks any safer, just reduce the risk of one collapse leading to another. However, many people are repeating the same inaccurate mantra that these proposals will stop retail banks being damaged by the risky casino investment banks that caused all the problems. Strange, I seem to recall that the only British bank that actually collapsed, Northern Rock, was a retail bank and those that needed bailing out were primarily retail banks both of which had recently indulged in ill-advised acquisitions.

"It seems the ICB will recommend the ring-fencing of retail banks. This was not unexpected however it is likely that they will also recommend that legislation is initiated at once to layout how this is to work to remove uncertainty. The ICB will suggest that the changes come in over time as there will be some element of increased cost, primarily due to increased capital requirements, and getting back to some level of sanity on these from the mad level of 2% tolerated pre-crisis makes sense. However, if the markets view the legislation rather than the implementation as making those banks a riskier investment then the cost of capital to these banks would increase and, therefore, the cost at which they lend to us and small businesses would increase. Big companies are okay, they get special rates, which the CBI doesn't mention much.

"The banks are being made safer by the Basel III proposals but the degree to which the ICB recommendations are an unnecessary response to a political more than an economic issue is still open to debate.  But then again like bankers' bonuses, even if it's more about politicians being seen to do something, and even if what they do has little or no effect on the main problem, they still have to do it to keep up their image. Rearranging deckchairs on the Titanic comes to mind."

8 September

Responding to the news that Transport Secretary Philip Hammond has admitted the government has the legal right to launch a new bidding contest for the ThamesLink contract, Professor ManMohan Sodhi, Professor of Operation and Supply Chain Management has the following comments:

The government is handling this rather badly and look incoherent. Unravelling the tendering process already completed is possible but highly unlikely, and not just because of the EU context, Siemens being from Germany. Moreover, the results might still be the same, given the objectives, unless Siemens were to pull out of the tendering process, which is also unlikely.Changing the objectives will also be difficult.

The only solution out of this would be to have Siemens take over the Derby plant from Bombardier and do part or all of the production there. After all, Bombardier wants to close the plant so they should be willing to sell it for £1.

5 September

Responding to the news that bosses of Britain's top 100 companies saw their pay increase by an average of £1.3m last year, the biggest increase for nine years, Anh Tran, Lecturer in Finance at Cass Business School said:

The top executive pay-for-performance puzzle has been identified for two decades. Although there is definitely room to improve how we construct an appropriate pay package for our executives or the role of remuneration committees, overall the current scheme seems to work effectively. Even in the financial industry, compensation is already structured rationally and provides rewards only for creating long term shareholder value. Normally, share-based incentives cannot be liquidated for a few years from the award date due to vesting restrictions and other reasons. As a result, we should not focus on short term events that are not representative of the big picture in an attempt to reform our policies. Empirical research so far has not found any evidence that excessive executive compensation resulted in the recent crisis, or that its cutback would effectively prevent one in the future. Boardroom pay should not be among the list of today's economic challenges.

1 September

Responding to the news that Tesco are to withdraw their business from Japan, Professor Ajay Bhalla, Professor of Global Innovation Management at Cass Business School, said:

Firms pursuing replication of standardized global business models often get a thrashing when it comes to getting a foothold in Japan. Tesco has been fairly successful in emerging economies, particularly in China, where not only it was a first mover in super-market space; it also established scale rapidly to meet the super charged appetite for consumer goods amongst the fast growing middle class. Transferring that success to Japan and US in particular has been an uphill battle for Tesco. In particular, Tesco has had little innovative offerings to woo consumers in these markets which are not only highly mature with established innovative retail giants such as 7-11, but also incredibly complex to do business. Business in Japan is driven by tightly knitted keiretsu's and it is about time Tesco realized that not all developed or emerging economies can fit to its 'Tesco in a Box' approach.

31 August

Responding to Manchester United's decision to use a two-tier share structure, Meziane Lasfer, Professor of Finance at Cass Business School, said:

"Manchester United's plans to use a two-tier share structure to minimise the influence of outside shareholders should send a warning to any serious investors. Studies have shown that companies whose managers own more than 30 per cent of shares significantly underperform in the market. With so much power, managers act in their own self-interest, making investments that generate wealth for their own pockets, rather than maximising value for shareholders. The share structure will also allow the owners to keep control of the company, preventing the market from correcting poor performance by thwarting any takeover attempt. Given the club's huge amount of debt, and the cash already being bled from it by the Glazers, this deal would never normally come to market. But with the club's global status and huge fan base, particularly in Asia, the Glazers are banking on attracting investors who are more interested in the brand than the balance sheet."

26 August

Responding to the decision by European countries to extend the ban on short-selling, Dr Richard Payne, a finance academic at Cass Business School, said:

"The rationale for extending the ban on short-selling is far from clear. Prices of financial stocks have continued to drop and have underperformed broad market indices. This is true for countries which have introduced bans and for countries which have not.

"Bans on short sales are harmful for liquidity, they increase volatility and impede the flow of information, especially negative information, into prices. In short, all the evidence suggests that banning short sales in a stock makes trading more risky and more costly for everyone, buyers and sellers alike.

"We can only conclude that the real motivations for the bans are political. They convince the public that steps are being taken to rid markets of manipulative speculators (who may not actually exist) and deflect attention away from the failures of European politicians to come up with convincing plans to solve macroeconomic problems. It is this uncertainty about fundamental economic issues that is behind recent volatility in the financial markets."

25 August

Commenting on the resignation of Steve Jobs as CEO of Apple, Visiting Professor in Transformational Leadership at Cass Business School, Chris Roebuck, said:

"The move of Steve Jobs from CEO to Chairman within Apple demonstrates the leadership challenges that organisations face when the original entrepreneur and corporate inspiration has to leave or take a back seat.

"In many organisations this happens much sooner than it has at Apple, as with Sir Stelios Haji-Ioannou the entrepreneur behind the budget airline, EasyJet. But it is always a highly challenging time for the organisation which must maintain the inspiration, innovation and entrepreneurial attitude of the originator. This special element is often what sets the organisation apart from the competition and keeps it ahead of them.

"The departure of these individuals is a shock to the system. In the case of Apple, having Steve Jobs still present as Chairman is helpful, provided that the Chairman and CEO relationship is effective and that he does not start to take executive decisions as a quasi "senior CEO". This is often the problem when a strong CEO, especially one who established the business, moves into the Chairman's seat.

"What Jobs has demonstrated though is that an entrepreneur can become a great corporate leader if they can use their entrepreneurial skills in the corporate context as well as in creating and growing the organisation. Sadly such talent is rare but Job has shown how powerful it can be when it is present. He should be an example to both entrepreneurs and corporate leaders alike."

10 August

Responding to the announcement that the US Federal reserve has pledged to keep interest rates low for two years to boost growth, Giovanni Cespa, Reader in Finance at Cass Business School said:

The issue here seems really whether monetary policy has any grip left on the economy. Even before the FED's decision, the US curve at the 7-10 years horizon signalled that yields were close to zero if not negative, meaning that the time value of money at these maturities is nil.

If real interest rates were the only driver of investment decisions, this should have encouraged entrepreneurs to jump onto profitable investment opportunities. However, if you looked at stock market indicators they did not signal this, as stocks were sinking. This suggests that expectations (driven by a number of concerns - e.g., the situation in the EU) are probably the driving force behind investment decisions.

The idea here is that you should be unwilling to invest if you anticipate a prolonged recession, since this means that demand in the future will be low. Expectations, however, are really hard to manage, and possibly fiscal policy (public intervention) could have a role here. However, budget concerns impede this (there is an ongoing debate over whether these concerns are mostly ideology driven or based on hard evidence).

So, the FED seems to be trying to pursue a policy whereby it reassures investors that it will stick to a low interest rate, hoping this will move their expectations. In this sense, if we look at yesterday's market reaction, this announcement seems to have obtained some impact. The question is whether, with the high volatility we have experienced in this period, yesterday's reaction is just an episode or rather the signal of a turning point.

2 August

Responding to reports more than 2000 charities across England could see their funding cut or completely withdrawn by local councils, Professor Cathy Pharoah, said:

"This information provides early warning that voluntary organisations are not immune from spending cuts, in spite of the importance of building Big Society capacity to meet social needs. Research shows that welfare provision in needs amongst young people, families and domestic violence, and disability is particularly dependent on statutory support. Finding alternative support from philanthropy and giving will be very challenging, and hardest in deprived areas which lack the wealthy populations who tend to give the most. Government must find out what local strategies are in place to help voluntary organisations find alternative support, and we need to know how decisions about cuts are being made at the local level. Local authorities need to monitor the impact of cuts on the people most in need."

2 August

Responding to electronics manufacturer Foxconn's plans to have 1 million robots in its China factories by 2013, Professor ManMohan Sodhi, Professor of Operations and Supply Chain Management at Cass Business School said:

There are three reasons underlying this. First, Foxconn has been in a tight spot since the suicides of workers, and not only because of the threefold increase in salary that followed within a few months of the suicides becoming a public issue. These are pressures on the supply side. Second, on the demand side, manufacturing requirements of customers like Apple, whether it is iPad 2 or iPhone 5, are becoming much more stringent. Arguably, at some point, only a robot could consistently manufacture the kind of tolerances and the high quality needed. As such, simply moving to a cheaper location in mainland China or even Vietnam may not be possible and going to further automation may be the only way out for the company. (I am touring different plants in India, and despite the supposed availability of cheap labour, in sophisticated plants, there is much use of robots for this reason.) Third, there is a trend of major Chinese contract manufacturers seeking to move up the value chain to be able to add more value to the final product and to extract more profits from their original equipment manufacturers (OEM) and their own facilities. The use of robots can help Foxconn achieve both goals.

27 July

Responding to UK banking job cuts, Peter Hahn, lecturer in bank strategy and management at Cass Business School, said:

"UBS's plan to narrow its focus is more about changes in the equity market than any other factor, including regulation. Investors long underestimated banking risks and underpriced the cost of capital for banks, encouraging a grossly oversized banking industry taking too many risks. Today, the pendulum has swung the other way encouraging banks to hunker down to what they do best. For the largest banks, this is new territory. Until now, only the biggest risk takers saw the big rewards. Undoubtedly, most managers who grew up in the pre-crisis era lack the skills for the new world; some will learn quickly that focus on productivity and competitive advantage are the new watchwords in banking while others try to hang on for a market comeback. Watch for equity investors to start demanding better explanations at the all-things-for-all banks in the near future - even those banks that came out somewhat unscathed from the crisis are likely to come under the spotlight."

25 July

Responding to the US debt crisis, Professor Philip Booth from Cass Business School, said:

"It is easy to swipe at the Republicans in the US Congress whom Vince Cable has described as "nutters". However, he should surely be aware from the events in the eurozone that countries cannot continually pile up more and more debt. Like the UK, the US is also on a slow growth trajectory after enormous increases in government spending in the early twenty-first century. Responding to the deficit, as the UK has, by raising taxes would simply lower growth further. It is quite reasonable for the recently elected Congress to want to reduce both spending and taxation in the long term. It is grossly irresponsible to ignore the effects of tax increases on economic growth."

14 July

Reacting to press articles on News Corp, Professor Ajay Bhalla of Cass Business School discusses whether the structures of family business governance fail stakeholders:

"News Corp is in the news and so are family businesses. It has been suggested that News Corp is all about family and that it has failed to create value for its stakeholders. This also raises questions about the ownership structure of family firms.

The evidence points to the contrary. First, research has shown that family ownership creates long term value. Consider research by Belén Villalonga of Harvard who studied Fortune 500 family controlled firms during 1994-2000, and found that family ownership creates value, especially when the founder serves as CEO of the family firm or as Chairman with a hired CEO.

Andersen and Reeb look at family firms listed on S&P 500 and find that family firms outperform non-family firms. Likewise Benjamin Maury from Swedish School of Economics examined how family-controlled firms perform in relation to firms with nonfamily controlling shareholders in Western Europe. Drawing evidence from a sample of 1672 firms, he showed active family control is associated with higher profitability compared to nonfamily firms, whereas passive family control does not affect profitability.

Second, the ownership structure, which creates a wedge between owners and minority shareholders, is not an exception in the west. Similar ownership structures are found across the world. These structures serve well in an investor environment, which increasingly looks towards short-term gains, and managers strive to secure yearly performance bonuses. Dow Jones would still be a family controlled firm if Bancroft's had paid attention to the ownership structure. Consider Washington Post, which has survived as it experienced temporary dips in its performance. We just need to look at who is driving the growth in Asia and Latin America. You will see that family businesses are largely viewed not as parasites but paragons. When you have no worry about legacy you are going to leave, why as a CEO would you bother. After all, it is about this year's bonus ... isn't it?"

11 July

Responding to fears eurozone debt contagion may have spread to Italy, Professor Philip Booth from Cass Business School, said:

"It is not inevitable that the EU debt crisis spreads to Italy but the long-run economic fundamentals there are poor. Economic growth is very slow and will not improve unless there is radical economic reform - which looks unlikely. As such, the debt burden is unlikely to fall and, if the Italian government cannot service the debt, the EU will discover what has been clear all along: we cannot simply repackage bad debts in the hope that they will go away. Sovereign default in the eurozone will become a reality that cannot be ignored. Unlike with Greece, there are no pockets deep enough in which to hide Italian bad debt."

8 July

Commenting on Jean-Claude Trichet's pledge that the European Central Bank will continue to accept Portuguese bonds, Professor Philip Booth from Cass Business School, said:

"In calling for there to be no default at any costs, the ECB is burying its head in the sand. By continuing to purchase low-grade government bonds from the private sector, the ECB is implicitly bailing out the private sector and may bankrupt itself. Indeed, the issue of sovereign default has become an important eurozone issue precisely because of this very policy of ECB purchase of poorly-rated sovereign debt. If it were not for the behaviour of the ECB, the sovereign debt crisis would be a much simpler issue that could be resolved between the nations themselves and their creditors."

4 July

Directors of City University London's Centre for Better Managed Health and Social Care, based at Cass Business School, respond to the publication of Andrew Dilnot's independent Commission on the Funding of Care and Support:

Dr Robert Warwick, Associate Director of the Centre, comments: "The Publication of Andrew Dilnot's independent Commission on the Funding of Care and Support is to be welcomed. This has been a difficult task with few short term political benefits and raises issues that have, to date, been put into the "too difficult" pile. This may well colour the agenda and how the coalition will handle the debate. However, we hope that won't be the case - Dilnot raised too many important issues and does so in a way that offers pragmatic solutions not to be ignored.

Dilnot's report rightly points to a playing field that is both uneven and difficult to understand with the myth that the NHS will pick up the pieces if things go wrong.
So the agenda is clear:

• It provides clarity as to what is expected, from both the individual and state
• With clarity will come confidence that will be needed for people to make appropriate provision for their old age
• The call to both the individual and Government that the total spend will need to increase (over the next 20 years the percentage of GDP on this will rise from 1.2 - 1.9).

If achieved this should give us a care and support system that England can be proud of. However, to deliver, this equal attention must be placed on the providers. The clarity and confidence felt by the taxpayer and individual must be equally shared with the providers. Achieving this will be critical for long term funds and planning and to attract the best people to innovate for the future. This can best be achieved with an appropriate balance of safeguards and the freedom to develop new ways of providing care - a balance that we have yet to see."

The Centre's Associate Director Dr David Welbourn states: "The Government should be bold and seize the opportunity presented by this report to begin repositioning the relationship between each individual and the State, creating a better balance between rights and responsibilities in a transformed Big Society.

In the months to come it will be the debate on detail that will become important, for example:

• How the burden can be appropriately shared amongst the richest and poorest members of society and if a more graduated approach is needed, whether the form of means test will stifle incentives to save for old age.
• The practicalities of "metering" the different spells of care the individual will require throughout their life, and
• The impact dementia and other illnesses will have on lengthening spells in care. 

Decisions on the future will not be easy, for example the apparent contradiction between Dilnot and the current debate on the future of housing benefit raised by Iain Duncan Smith highlights the difficulties ahead. That said, appreciating this and accepting that pragmatism may be required will be a preferable alternative to ignoring the issue until it is too late."

1 July

In response to the news today regarding Lloyd's decision to cut 15,000 jobs, Veronica Hope-Hailey, Professor of Strategic Human Resource Management at Cass Business School has the following comments:

The news today that Lloyd's is to cut 15,000 jobs is a situation that most people will find regretful. There are many different stakeholders impacted by such an event and this decision will impact both those staying and those going. We have to ask ourselves what the impact of this decision will be on those made redundant and their levels of engagement and trust with future employers.

One thing we do know is that those who are staying in the bank, the survivors of the downsizing, will watch very carefully to see how Lloyds TSB handle the downsizing process. They will watch to see how just and fair the procedures are that determine who is going, how much redundancy payment they will receive and how much help they are given in terms of finding another job.

They will also watch whether the senior and middle managers dealing with this redundancy process treat people with dignity and honour their contribution to the bank. This perception of the justice and fairness of the employer will determine, in part, the level of engagement and trust going forwards and their subsequent performance.

For those leaving the bank, their experience of this process will go forward with them to their new employment and will affect their willingness to trust again, to fully engage. So it is crucially important for the bank to handle this well.

Lastly, senior managers in banks have taken a huge bashing in terms of the public's perceptions of their integrity, their benevolence and their ability to manage well. This announcement means that these senior people have a chance to redeem themselves in the eyes of their employees and the general public in the way they choose to handle these severe job cuts.

27 June

In response to the news today regarding The Bank for International Settlements criticism of the Bank of England regarding its position on interest rates, Professor Philip Booth of Cass Business School has the following comments:

"The Bank for International Settlements is right to point to the dangers of continuing to hold interest rates low in the face of continued high inflation. The Bank of England cannot resolve the problems of slow growth by taking its eye off the ball of inflation. There is also a danger, as it points out, that asset markets have been artificially inflated by low interest rates and quantitative easing and that this may create an action replay of some of the problems that led to the crash.

"However, it has to be said that, despite high inflation, monetary growth remains sluggish in the UK so whether to raise rates now is a difficult call. But, if rates are not raised and inflation remains high, there is a danger of very high interest rates in the medium term."

20 June

Responding to Greece's debt crisis, Dr Pete Hahn, from Cass Business School, says a solution might be found in the 1980s 'Brady Bond' structures:

"Everyone new to bank risk learns the old adage 'lend 1000 and you have an investment, lend 1000,000,000 and you have a partner', but Greece is starting to demonstrate that if you lend a 100 billion and you have a family member (at least for the EU). Indeed, the resolution of Greece's problems are so little about Greece and so much about how a Greek default might affect other EU periphery states and the EU's banks. Solving Greece's debt problem ultimately requires EU leaders to confess that 'we have found the problem and it is us'. Sovereign defaults aren't new, they're always messy, and the common currency adds a new dimension. However, those trying to come up with solutions could do worse than to study the 'Brady Bond' structures used for defaulting countries in the 1980s to get the current situation towards resolution. At this point, the critical issue is to avoid more stagnation or a freeze in the financial sector and particularly amongst banks. The old Bradys were designed to maintain liquidity in the banking sector for such intractable situations as we have today."

10 June

Cass Business School Professor of Global Innovation Management Ajay Bhalla comments on Prada's listing on the Hong Kong market and the booming Chinese appetite for luxury goods:

Professor Bhalla says: The unusual combination of Prada's high-profile private fashion show attended by the who's who of Greater China and its listing on the Hong Kong's market this week is no co-incidence. Recently, firms such as L'Occitane - a French cosmetics and perfumery retailer - have also followed the same route. It explains the answer to the question many firms overlook: How strategically intimate are you to the vital stakeholders in your business?

Visit a Prada, Burberry or Hermès store in London and you will find the answer. Many customers loosening their purse strings will be visitors from emerging markets. Contrast this with China where double-digit growth in the luxury goods market has long been fuelled by locals rather than visitors. This in turn has spurred the investment activity in the luxury goods market.

The rise of Burberry and the Chinese consumer goes hand in hand with the decision by luxury firms, such as Prada or L'Occitane to list on the Hong Kong market rather than NYSE or LSE. Investors are likely to be more attuned to the growth potential, not just of the retailers, but also the value potential for trading partners and infrastructure providers. The shift in strategic ecosystem is natural and Prada's listing will not only confirm this but may also pave the path for many other retailers to follow. However, the followers should exercise caution. Prada calls Asia its growth epicenter and has been carefully making strategic investments. For firms which haven't exercised strategic intimacy in the local markets, the expectation that the investors will embrace them with similar affection is futile.

07 June

Professor Joseph Lampel has the following comments to make on the launch of Apple's iCloud service:

"The introduction of iCloud works towards creating a total Apple environment for devices that are now operated separately. To the extent that consumers purchase Apple products, they will be induced to enter this environment. This in turn will give Apple a shot at creating dominance in the industry, or at least dominance in the upper end of the market.

"The security issue will deter some people from migrating to this environment, especially in the light of the problems Sony and Nintendo have had. From Apple's point of view, however, what matters most are lead users such as business people who feel that the convenience of iCloud may compensate for the security risks. Apple will have undoubtedly invested in protective measures, given the potential damage that a security breach would do to the reputation of the firm."

27 May

Responding to reports the IMF may not release the next payment in Greece's bail-out package, Professor Philip Booth of Cass Business School, said:

"The IMF is absolutely right to refuse a payment to Greece if conditions have not been met and it is crucial that the EU should not step in and lend to Greece instead. The more the EU rescues member governments, the closer we get to a centralised transfer union. The EU should allow Greece and the IMF to deal with their problems bilaterally. If this means Greek default, so be it. There will be consequences of that because of the foolish way in which the ECB has managed its operations but we cannot avoid those consequences by shuffling money between failing debtors."

Professor Booth also responded to the details emerging from the leak of the Basel III legislation:

"We are falling into the same trap as before the crash by developing complex overlapping banking regulation which will simply distort economic behaviour in ways people do not understand. The Dodd-Frank Act in the US was 2,319 pages long, the EU interpretation of the Basel Rules will be over 500 pages long and we probably have about 1,000,000 paragraphs of home-grown regulation in the UK. This is not the way to deal with the regulation of the banking sector and it is not surprising that conflicts between different interpretations of regulation happen."

With banks and the Treasury facing calls to give details of how bosses' pay is to be linked to small business lending Visiting Professor at Cass Business School, Chris Roebuck, comments:

"The questions posed about what exactly are the requirements of Project Merlin in relation to SME lending and bank executives pay are important for a number for reasons. Are we entering a period when Government is allowed to intervene in the private sector and determine directors' objectives on the basis of public good or macro economic policy, rather than the directors' legal obligation to act in the best interests of the company? That poses significant questions about the duties and obligations of company directors. The whole point of employing directors is that they act in the best interests of the company, that's what shareholders want. Would you like to invest your life savings in an organisation where the directors might well reduce your monthly investment income in retirement to meet various current Government targets?

"So if, as some propose, bank directors have bonuses linked to taking action that could potentially harm the profitability of the bank, eg by lending to higher risk SMEs to meet targets, is that the best route for SME funding? And what of the banks that have taken no money from the Government and have no Government shareholders? Why should they wish to take on this? Asking for clarity around what the Project Merlin requirements are is perfectly sensible, but if the required transparency reveals that directors do not have to make SME lending their top priority and can still be paid bonuses if the targets aren't met, no one should be surprised. In the real world we can't expect commercial organisations to operate on the principle of delivering a social benefit or deliver macro economic policy, that's why they are called "commercial", if they did so they would be called "public sector". We need to think more carefully about who and how entrepreneurs and SMEs can be nurtured and supported as the current system is clearly not working."

26 May

In the wake of the news that Christine Lagarde has emerged as the front-runner to be head of the IMF, Cass academic Philip Booth has the following comment:

"It is not at all unreasonable for rapidly growing middle-income countries to object to an EU head of the IMF. Most of the problems that the IMF has to deal with right now originate from the profligate behaviour of EU governments - although Christine Legarde is probably amongst the least tarnished of potential EU candidates. Furthermore non-EU countries could well feel that there is a conflict of interest when the IMF is negotiating bail-outs with the EU when the IMF has a European at its head."

16 May

Responding to a report from the High Pay Commission which found the gap between top executive pay in the private sector and that of the general public is widening rapidly, Visiting Professor at Cass Business School, Chris Roebuck, said:

"It is nice to see that the hype that has been constantly peddled out by senior executives to justify their pay has yet again been exposed for what it is. The current senior executive pay levels are not an indicator of either value or performance in many cases but more an indicator or weak and ineffective remuneration committees or NEDs. Either that or it's as a result of exceptionally easy objectives that present no real challenge and thus are unlikely to drive good corporate performance.

"It is quite clear that for a number for years the gap between the pay of staff and some executives has been growing, logically if this was a reflection of the performance of the organisation in relation to its peers it might be justified but often it doesnt reflect performance, in fact in some cases pay has gone up whilst performance has gone down. With a multiple of 145 times average top executive pay to staff pay in the FTSE 100, significantly more in financial services but only a multiple of about 15 in the public sector are we really saying that a private sector Chief Executive is at least a 7 times better leader and has 7 times more responsibility than a major hospital Chief Executive?

"In the end the overpayment is bad for the companies concerned as it sets up a presumption on the part of the executive team that they will get big rewards for little effort.That is the opposite of what is needed, top level rewards for top level delivery makes sense but what we have now does not. The rule should be clear, unless you exceed the performance of peer organisations no bonus gets paid, if you perform less well than they do you get a pay cut. That's the real world that top executives expect staff to live in inside their organisations so why shouldn't they live in it as well?"

4 May

Responding to the release of Glencore's IPO prospectus, Michael Tamvakis, Professor of Commodity Economics and Finance at Cass Business School, said:

"Today saw the publication of the IPO prospectus for Glencore, one of the world's top two commodity trading houses. The event is significant for a number of reasons. For Glencore, it's an opportunity to raise capital directly from the stock markets to invest in further expansion projects, which will consolidate its position not just as an intermediary trader, but an industrial concern taking more control of the commodity supply chain between raw materials producers and final consumers. For the commodities industry, it's significant because it's only the second such attempt from one of its companies to be publicly listed, but also because such a big company decided to do so. For the broader business sector, it gives a rare glimpse in the workings of a commodity house and it is evident that Glencore, despite its considerable size is relatively little known to the general public. It will be interesting to see how high Glencore's shares will trade post-IPO, given that a number of very big investors have sought allocation of large share blocks and are committed not to sell them for at least six months. Such companies include sovereign investment funds, financial institutions, hedge and private equity funds and several more institutional investors."

27 April

The price of gold, which has doubled since 2008, is a sign that the financial tsunami which emanated from the US in 2008 is on its way back, according to Professor Gulnur Muradoglu from Cass Business School, an expert on Behavioural Finance:

"Countries in the world economy were hit by the crisis according to the strength of their relationship with the US. Thus, the sequence was, the UK first, Europe next and the rest of the world after that. Now the wave is coming back from the world back to the US. Greece, Ireland, the riots in North African countries are a consequence of the second wave form the world heading back to the US. In this context the increase in gold prices must be interpreted as a sign that the crisis of 2008 is far from over.

"The rise in the price of gold, and silver, is a consequence of an ever devaluing US dollar. With the initial shock of the crisis the pound and euro devalued relative to dollar as they were hit by the crisis. Now that the crisis is coming back to the US from the rest of the world the true value of USD is finally reflected via devaluation. "Gold is in limited supply and thus a good hedge against all sorts of uncertainty and inflation. The expectation for the US is now high inflation. Liquidity was injected at the time of the first shock and it was helpful in controlling the crisis then but with increased money supply and slow economic activity inflation is inevitable."

26 April

Responding to reports that a fall in City bonuses has been negated by a pay rise for workers in the Square Mile, Visiting Professor Chris Roebuck from Cass Business School, said:

"The banks are doing exactly what the Government told them to do, reduce bonuses. But the banks won't reduce total remuneration as any bank that did so would be out of line with the market and loose its top performers to competitors in London. We keep forgetting that there are about 21 major overseas banks in London who have no obligation at all to do what the British Government says. They will set pay levels at what they think is appropriate for the global banking market not just the City of London. Thus the UK banks have to follow suit or their people just walk across the road to an overseas bank.

"The politicians have painted themselves into a corner by constantly saying that bonuses are the cause of all the problems in the banking sector, they are not, it's just an easy sound bite that they have used for years and its coming back to haunt them. Bonuses are inherently safer than base pay for everyone, the former is pay for performance delivered, the latter pay in the hope of delivery. Total compensation is the real issue for organisations, regulators and shareholders - do senior executives get too much of the corporate cake for the benefits they deliver? Why should senior banking leaders get, pro rata compared to the average pay in their sector, nearly twice as much as those in other sectors and up to 10 times as much as those in the public sector? Are they really that much better as leaders ? Or are they just in an industry where pay has got out of control over a number of years?"

11 April

Commenting on the ICB report released today, Dr Pete Hahn from Cass Business School, said:

"Perhaps the fact banks are leading the FTSE 100 today is the best interpretation of the ICB report - the market believes nothing is likely to happen soon, if at all.

"Ultimately, reviewing banking is about two factors. Firstly, as a modest size country, how much of the banking system can we back? We have to choose which parts we like and value most. Framing the question as commercial verses investment banking is more about choosing which parts we think we benefit from, rather than the risk side of each. "Secondly, in the low growth highly consolidated retail SME market competition appears managed. On this point, lack of clarity can often be an industry strategy."

7 April

In response to Portugal's government seeking a 70 billion Euro bailout, Professor Philip Booth of Cass Business School said Portugal should be allowed to default.

"The EU should stop parcelling up the debt of member states and sending it round and round in circles through complex bailout mechanisms. The central institutions of the EU should not interfere in the debt markets of individual member states and Portugal should be allowed to default. Following that, the Portuguese economy needs urgent reform to ensure long-term economic growth, lower government spending and lower taxation."

6 April

In response to the government's decision to use tax increases to achieve more than 20% of its planned reduction in borrowing, Professor Philip Booth of Cass Business School said:

"Today, some of those tax increases take effect. Given the already high levels of tax in the UK, the government should have avoided tax increases altogether as they will damage economic growth.

"Whilst the raising of the basic tax threshold is of course welcome, it is only being achieved by partially drawing more and more people into higher rates of tax. Higher rate tax is no longer targeted at the rich. This, combined with the VAT increases and national insurance changes, will damage incentives and growth.

"The UK needs radically lower public spending at less than 30% of national income (instead currently around half) so that we can have very much lower tax rates. The economic growth that would result would ensure that we were all better off."

1 April

With the salary and bonus packages of Antonio Horta-Osario and Tidjane Thiam receiving prominent attention in the past few days, Chris Roebuck, Honorary Visiting Professor in Transformational Leadership at Cass Business School, questions whether the targets being set for these leaders are too easy:

"As we continue to see remuneration packages in the millions whilst doctors and nurses are being made redundant the public is becoming more annoyed about what they see as excess in corporate pay. Why should a CEO, banker or footballer earn more in one year than a nurse or soldier fighting in Afghanistan earns in a lifetime is their question; but the response that "it's the market rate" doesn't cut any ice with the public. That maybe an economic and commercial justification but in the eyes of the public it isn't a moral one and that's what counts. These packages are viewed as immoral at a time when the public are being told that everyone has to share the pain of the recession.

"Yes at the moment the global market for corporate leaders, bankers or other scarce talent demands these packages but that doesn't make it right. The assumption an unfettered market is always right often leads to a crisis due to market excess. Further the market doesn't determine the outputs required of these leaders to earn the rewards, that's set by the organisation.

"Given the size and frequency of these significant payouts both shareholders and regulators could well be asking if the targets set for these leaders to get big bonuses aren't too easy to achieve. Achieving a significant bonus should be the exception not the rule. Also some in the corporate world their view of the balance between rewarding shareholders and themselves seems to have moved a little too far to the latter. Some corporate leaders need to start thinking up some good reasons why their pay is both moral and a fair distribution compared to shareholders pretty quickly."

24 March

Following yesterday's Budget announcement, Cathy Pharoah, Professor of Charity Funding and Co-Director of the Research Centre for Charitable Giving and Philanthropy Research at Cass Business School, said:

"The Budget's provisions for charities were welcome, sensible and elegant. They will not change the level of giving overnight, but they send important signals in the right direction. In allowing a tax break for small gifts up to a total of £5000 without the administrative hassle of accurate records on donors' identity and tax status, government has redressed the long-standing inequality in Gift Aid which resulted in community giving amongst the least well-off missing out on tax relief. It underlines government's commitment to the Big Society.

"The 10% discount on inheritance tax for those who leave 10% of their estates to charity is a very neat measure. Government is right to see wealth and estates as a rich source for new giving at a time when people may be reluctant to give away more of their current income. A 10% level has the potential to raise the level of charitable bequests which currently are worth about 6% of estate value. And the establishment of a norm has the added value of making it easier for financial advisers and families to discuss the delicate matter of charitable bequeathing.

"Making the most of the tax-break might encourage more estate planning. Where charitable bequests are residual, donors do not always know what their value will be; to make use of the 10% donors will have to be clearer about their intended donation. The measure even has the potential to release some extra money in the short-term if donors revise their wills to take advantage of it, and help redress the 3.5% fall in legacy income to charities which resulted from the recession."

23 March

In light of the Italian government's move to provide takeover protection for companies it considers to be strategic assets Professor Scott Moeller, Director of the M&A Research at Cass, said:

"This move continues a recent trend in Europe to provide greater protections for target companies. We saw a similar consternation in the UK in the wake of Kraft's takeover of Cadbury and which has resulted in the proposed revisions to the Takeover Code, announced in greater detail earlier this week.

"It is unfortunate that the Italians are following the French rather than the French (and the Italians) providing greater openness. Some of the sectors identified as 'strategic' are anything but that, in today's linked economies of Continental Europe. Protecting strategic assets can have its place but within the eurozone there's also a need for greater efficiency which is often the result of mergers and acquisitions."

10 March

Criticising the Bank of England's decision to hold interest rates, Professor Philip Booth from Cass Business School, said:

"The decision to hold rates is a mistake. The Bank of England's mandate is to target CPI inflation. Inflation has been persistently above target and the Bank of England has always blamed temporary factors - this is becoming untenable. Furthermore, the Bank of England's forecasts have persistently under-estimated inflation. With interest rates 3.5% below the rate of inflation, there is a real danger that the Bank of England will lose credibility. If this happens, it will become very difficult to reduce inflation again as wage settlements and the interest rates at which the government has to borrow creep up.

"Slow growth is not an excuse for holding interest rates. The causes of slow growth are complex but are likely to include the various supply shocks the economy has suffered from the financial crisis, the huge growth in government spending and regulation and the rise in oil prices. We cannot deal with these problems by holding interest rates low."

Directors of City University London's Centre for Better Managed Health and Social Care, based at Cass Business School, respond to the publication of Andrew Dilnot's independent Commission on the Funding of Care and Support:

"The ICB report smacks of an elegantly worked-out solution to problems that other bodies are addressing much more effectively.

"The IBC is right to seek ways to ensure that taxpayers do not bear the cost of banks' failures. However, recent parliamentary legislation, together with developments at EU level and arising from the FSA, will deal with these problems in a way that will be much more effective than that proposed by the IBC. The key to banking reform must be resolution procedures to ensure that failed banks can be wound up. The IBC proposals for the general ring-fencing of retail and investment banking operations do not contribute to achieving this objective though it would be reasonable to give the Bank of England powers to require ring-fencing in a particular bank that did not have a credible resolution plan.

"During the US Glass-Steagall regime, there were huge failures in the separated investment and retail banking sectors that led to government rescues and the development of the "too-big-to-fail" mentality. Indeed, the events of the recent crash were precipitated by separate failures in the retail and investment banking sectors. Artificial separation will not make either the retail or the investment banking sectors safer and we do not want a retail banking sector that is so heavily capitalised that no bank ever fails.

"The IBC report was disappointing in other respects. It discusses at length the adverse affects of tax discrimination against equity finance but makes no recommendations other than for more regulation of banks' equity capital.

"The government appears to welcome this report. It should also respond by immediately abolishing the bank levy, the explicit justification for which is the costs that bank failure can impose on taxpayers. If the government really has confidence that the IBC's proposals will address that problem then the bank levy should have no future."

The UBS rogue trader will speed up the implementation of the Vickers report, but the reforms won't prevent further episodes of rogue trading, according to Dr Sonia Falconieri from the Faculty of Finance at Cass Business School.

"The timing of yet another episode of rogue trading is fortunate in a sense as it will hopefully accelerate the implementation of the Vickers regulation because it leaves the banking lobby with very poor arguments against the need for ringfencing and separation of activities. While the separation of investment and commercial banking will prevent this kind of episode from impacting on depositors, it will not prevent further incidents from happening. Compensation packages with excessive bonuses and unrealistic targets are the reasons for excessive risk taking among traders ,particularly at a moment of high financial instability that makes difficult to achieve the required targets. This together with a loose internal control system makes investment banks vulnerable to rogue trading."

Dr Pete Hahn says the UBS incident raises worrying questions over the reliability of financial information across the board.

"UBS' sad news about its loss and apparent control failure has been a godsend for re-igniting attention on banking reform. However, this misfortune's greater and largely overlooked message is about the challenge of understanding risk information today and particularly bank balance sheets.

"It wasn't that long ago that triple-A rated sub-prime mortgage securities were 'rock-solid', sovereign debt was not only loss-proof but provided liquidity and commercial real estate loans were 'secured' or backed by 'real assets'.

"Much of today's debate about splitting this and that and applying more rules misses the point that the information we are using may be becoming ever more unreliable. Think this is all about investment banking? How about all those US mortgage loans on homes which had grossly overstated professional valuations just before the bust? How feasible is it that 'new retail' banks won't own government securities?

"Faster communications, faster perceptions of changing risks, faster money movements, increased global interconnectivity, political weakness and volatile markets all add up to big questions on the reliability of financial information across the board. Not very encouraging for investing in banks."

Commenting ahead of the anticipated release of Amazon's tablet computer, Professor Ajay Bhalla from Cass Business School, said:

Commenting on the news that Vodaphone's Chief Executive has stated that Vodafone is changing from a 'European company' to 'an emerging markets' company, Ajay Bhalla, Professor of Global Innovation Management at Cass Business School said:

Spain faces an election in the next few days in which a conservative government is felt likely to be elected. This may make it more likely that the government will be able to persuade the electorate to implement the proposed austerity measures.

The Spanish economy seems to be flat-lining according to some recent estimates, perhaps with no further growth this year. Unemployment of 21.5% and youth unemployment of 46% are hardly signs of health.

Spain has over $640B of debt, which equates to 67% of GDP. Hardly in Italy's territory of 120% of GDP, but Spanish bond yields rose above the magic 6% figure today, and Spain needs to get another, larger, bond issue away in the coming weeks. One leading European bank has now said that Spain "is on the radar screen" of default alongside Italy. Should Spain default then this could have serious knock-on effects. They owe over $235B to French and German banks, and the former are already heavily exposed to Italy.

A further problem, not publicly acknowledged is that the "Fondo", Spain's national reserve pension fund, has well over 90% of its assets invested in Spanish government bonds. Thus, its risks and assets are pointing in the same direction, rather than hedging each other. Sovereign default could trigger a major collapse in the value of pension and/or social security funds just when they are most needed.

Spain faces an election in the next few days in which a conservative government is felt likely to be elected. This may make it more likely that the government will be able to persuade the electorate to implement the proposed austerity measures.

The Spanish economy seems to be flat-lining according to some recent estimates, perhaps with no further growth this year. Unemployment of 21.5% and youth unemployment of 46% are hardly signs of health.

Spain has over $640B of debt, which equates to 67% of GDP. Hardly in Italy's territory of 120% of GDP, but Spanish bond yields rose above the magic 6% figure today, and Spain needs to get another, larger, bond issue away in the coming weeks. One leading European bank has now said that Spain "is on the radar screen" of default alongside Italy. Should Spain default then this could have serious knock-on effects. They owe over $235B to French and German banks, and the former are already heavily exposed to Italy.

A further problem, not publicly acknowledged is that the "Fondo", Spain's national reserve pension fund, has well over 90% of its assets invested in Spanish government bonds. Thus, its risks and assets are pointing in the same direction, rather than hedging each other. Sovereign default could trigger a major collapse in the value of pension and/or social security funds just when they are most needed.

Commenting on the news that Toyota may consider moving away from Japan for some parts of its production and speculating where they may go, Professor of Supply Chain Management at Cass Business School, Mohan Sodhi says:

Pursuing the allure of growth is tightly knitted to Tesco's existence. Such is this pursuit that when it revised it Vision document mid 2011, it made growth as central plank of its strategy. Growth has its costs and may not necessarily generate returns. No longer does the mantra- Bigger is better- holds true. Results from Tesco's competitors- Sainsburys to Waitrose and Morrisons- have demonstrated that 'Big Price Drop' had little impact. Reversing the growth track is what Tesco executives may do next and this will require revisiting the vision. I am sure some serious introspection is already underway in Tesco's boardroom and this time the board may opt to decode the growth DNA in favour of better health and longevity.

Responding to comments by Martin Wheatley, Head of the Financial Conduct Authority (FCA), who said regulators should ban potentially dangerous products to protect consumers from themselves, Professor Gulnur Muradoglu of Cass Business School's Behavioural Finance Working Group, said:

"The emphasis on an active rather than a passive role in consumer protection in financial markets is extremely progressive. This takes the UK one step ahead of the US and Europe.

"Many of the triggers of the 2008 financial crisis were behavioural. The underestimation of risk by almost everyone in the economy was behavioural, as was the optimism, greed and herding of investors. These are all part of human nature, and will not change. Therefore a new regulatory stance is needed that will help to make investors, especially those on low income and the elderly, less vulnerable not only to others' biases but also to their own."