“Think Small First” is the rallying cry for the European Small Business Act agreed by member states in December 2008.
But could this be the message for every sector except financial services? If so, an opportunity to build a resilient financial services sector will be lost.
In the same way that SMEs are central to innovation in other sectors, we need small and innovative financial services providers as part of the mix to deliver resilient and effective allocation of capital for sustainable development. So financial services regulation must be appropriate for SMEs delivering sustainable financial services as well as for large and systemically important players.
Ethical banks have been one of the success stories of the current recession. In the last few years, new financial intermediaries that channel venture capital to social businesses have started to grow in number.
And Zopa, Kiva and similar innovators are harnessing the power of the internet to enable people to bypass the banking sector altogether.
Of course, large financial institutions need to be well regulated and how this is done is key to the efficient allocation of capital for tomorrow’s economy. And large businesses in other sectors are likely to move into financial services over the coming years and regulation must enable this too. After all, mobile phone companies already provide payment services in parts of Africa.
But some of the innovation and creativity in financial services for sustainable development will come from new and small providers. Civil society organisations are already debating the opportunities for new financial services mutuals – identified as a “burning issue” by the Carnegie UK Trust’s Inquiry into the future of civil society or see Rosamund McCarthy’s article in Third Sector magazine this week. We may see a new wave of innovation replacing the consolidation of recent years if regulation permits this.
At first glance, the Turner report seems to recognise this – distinguishing between measures for systemically important firms and for others. But the devil may be in the detail.
“Think Small First” may be too much of a challenge for the emerging debate on the regulation of financial services. But “Think Small Too” is not – it is essential.
But could this be the message for every sector except financial services? If so, an opportunity to build a resilient financial services sector will be lost.
In the same way that SMEs are central to innovation in other sectors, we need small and innovative financial services providers as part of the mix to deliver resilient and effective allocation of capital for sustainable development. So financial services regulation must be appropriate for SMEs delivering sustainable financial services as well as for large and systemically important players.
Ethical banks have been one of the success stories of the current recession. In the last few years, new financial intermediaries that channel venture capital to social businesses have started to grow in number.
And Zopa, Kiva and similar innovators are harnessing the power of the internet to enable people to bypass the banking sector altogether.
Of course, large financial institutions need to be well regulated and how this is done is key to the efficient allocation of capital for tomorrow’s economy. And large businesses in other sectors are likely to move into financial services over the coming years and regulation must enable this too. After all, mobile phone companies already provide payment services in parts of Africa.
But some of the innovation and creativity in financial services for sustainable development will come from new and small providers. Civil society organisations are already debating the opportunities for new financial services mutuals – identified as a “burning issue” by the Carnegie UK Trust’s Inquiry into the future of civil society or see Rosamund McCarthy’s article in Third Sector magazine this week. We may see a new wave of innovation replacing the consolidation of recent years if regulation permits this.
At first glance, the Turner report seems to recognise this – distinguishing between measures for systemically important firms and for others. But the devil may be in the detail.
“Think Small First” may be too much of a challenge for the emerging debate on the regulation of financial services. But “Think Small Too” is not – it is essential.
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