Cadwalader Corner Q&A: Pete Hahn, Emeritus Professor, The London Institute of Banking and Finance | Cadwalader, Wickersham & Taft LLP

Pete Hahn is Emeritus Professor of Banking and Finance at the London Institute of Banking and Finance.

Professor Hahn holds non-executive director positions on the boards of the Isle of Man Financial Services Authority, the Association of Corporate Treasurers and Kalgera Limited, a fintech company working for the protection of vulnerable people. He retired as Dean and Henry Grunfeld Professor at the London Institute of Banking & Finance in early 2020.

During a long career in banking and finance, Professor Hahn was a senior adviser to the Bank of England Prudential Regulatory Authority – and its predecessor, the UK Financial Services Authority – and held banking positions in New York and London for over two years. decades.

What do you think will be the most difficult challenge facing banking regulators over the next five years?

Around the world, bank consolidation has often resulted in 3-5 dominant national providers. Some may think that resolution is the answer to market failures and the ultimate regulatory tool if supervision or the market has not worked. Yet I see that the most difficult challenge for regulators is that these large dominant banks have become public-private partnerships. It may sound simple or you could say “so what?”. But the public (politicians and regulators) and private sectors can have very different priorities at different points in the business cycle – in fact, neither do politicians and regulators. Can you imagine entering a recession where regulators traditionally encourage caution while their political masters want to encourage increased risk to support weakening businesses and consumers? Would UK banks be able to act prudently on mortgage arrears in the current political climate?

Can the UK financial services industry succeed in the long term without equivalence to EU regulations?

The UK has shadow banking systems, national clearing which is primarily mortgage-focused, and the real city of London, a large wholesale market. Wouldn’t the city like the deal that Northern Ireland made (that’s to say, inside the United Kingdom but also inside the EU for the economy)? Hard to see in the current political climate, but perhaps more down-to-earth governments on both sides of the Channel could see the benefits soon. The City must identify the right counterparts. Despite the public image, I think the Commission can be practical. No European ‘city’ has emerged since Brexit, fragmentation has led to increased costs, some businesses have moved to stay in London and, as the UK kickstarted the process, business has been lost to from New York. A solution is needed to boost support for businesses in the UK and EU. I am a long term optimist.

What do you think of the UK government’s plans to make the UK the “best place in the world to start and grow crypto companies”?

Maybe we should stick with SPACs – just kidding. But the point is to be careful not to get caught up in the trends. The UK was pushing SPACs after their weaknesses had already been exposed and the SPAC market had peaked across the Atlantic.

So, let’s separate the obvious from the big unknowns. Fintech is awesome. It is modernizing the financial sector everywhere, and the UK should want to be the most welcoming place to establish and grow fintechs – but not all parts of the digital financial sphere have the same outlook or add the same value. I think we’re at a good time now to look at the value added by many digital businesses that have emerged over the past decade. So far, it’s been more about excitement than financial success. I’ve long been amused by the term “unicorns” for super valuations. The market seems to think unicorns are rare beasts – but unicorns are imaginary. The UK government, like any other, does not know the future or should not think that it is in the same risk/reward position in the market, especially with taxpayers’ money. The UK should avoid picking winners here. Fintech, yes. Crypto, good luck to them.

What books are on your bedside table these days?

I am an active pre-bed reader and have partially completed Around the world in 80 plants (by Jonathan Drori) and Six days in September: Black Wednesday, Brexit and the making of Europe (by William Keegan, David Marsh and Richard Roberts) − the latter from the release of the ERM in 1992. I also have a French crime novel on my Kindle to read on the Tube once my five daily subscriptions are over. I just finished Carpet Ride to Khiva: Seven Years on the Silk Road (by Christopher Aslan Alexander), a non-fiction travel book, and A brief history of the movement (by Tom Standage), which examines the development and likely demise of the automobile and also provided an interesting perspective on financial services. A big advantage of being largely retired is that I can read a lot more that isn’t related to day-to-day work.

During my professional career, the great explosion of digital information has forced us to devote more time to concentration, but at the expense of perspective. It’s a great loss for society…we see it everywhere.

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