Already in 2012 he reminded policy makers of the fact that stock markets exist to provide companies with equity capital and allow savers to participate in economic growth. Now in his new book, and with renewed urgency, he laments the fact that the finance sector is too preoccupied with dealing and trading in existing assets among themselves rather than paying attention to new investment opportunities and good stewardship of the economy.
At an event organised by Better Markets to launch his book, Mr Kay once more stressed that we have lost sight of finance’s raison d’être: "A lot of people who ask me these questions think that what banks do is they collect our saving and they lend them to business. But if I explain that as far as British banks are concerned, lending to other non-financial businesses amounts to about 3% of their assets and lending to other financial institutions amounts to about 70% of their assets they're quite surprised."
The book is a call for the finance sector to wake up to its primary purpose which is to manage other people’s money for the benefit of businesses and households. For Europe this serves as a powerful reminder that the proposed Capital Markets Union and the Banking Reform will be crucial in restoring confidence in financial markets.
Like John Kay, BETTER FINANCE believes that the financial system exists to serve the real economy by ensuring the optimal allocation of capital and coping with the risks that are part and parcel of economic life. In order to do so, the current dominance of finance over the real economy must be curbed and the primacy of a sustainable real economy promoted. This is not to understate the public interest of the role of finance in the economy, but rather to restore the balance between the real economy and the financial services that are provided to it.
- Better Markets: "Important new book on the role of finance in society"
- BETTER FINANCE: "An EU Capital Market Union for Growth, Jobs and Citizens"