Delivering the keynote speech at PDI’s Capital Structure Forum in London, Sir Michael Rake reflected on the financial crisis, the aftermath of which still persists. “I thought it would take 10 years to fully unravel from it and we have two years to go,” he said.
The chairman of telecoms giant BT Group and online payment specialist Worldpay said the fuel for the fire pre-2008 had been too much complexity and not enough transparency, referring to “an alphabet soup of products and complexity almost to the point of concealment”.
The consequences have included huge political intervention in the financial sector and enormous regulatory requirements because “there is no trust in the system”.
He noted the irony of the constraints being placed on banks which were, at the same time, being criticised for not lending enough to SMEs. This, he observed, had led to the emergence of a plethora of non-bank lenders in the UK.
He said the likes of P2P lenders and crowdfunding platforms “served a real need” but also entailed risks. “You can see the concerns around P2P lending,” he said. “How much protection is there for the consumer? Do people really understand what they’re doing?”
Transparency, he added, was vital in a world where “there is a feeling of being left behind by globalisation, trade treaties, and capitalism in general”.
While acknowledging that the approach of private debt fund managers represented a “sophisticated approach”, he pleaded with everyone present to “remember the lessons of the past, keep things as simple as possible and confusion to a minimum, so that we don’t end up with another crisis”.
Rake’s speech also included a reference to the passporting issue, which he said “needs to be dealt with in a sensible way or London will move from being THE financial centre in Europe to being A financial centre”.