Cadwalader Corner Q&A: Pete Hahn, Emeritus Professor, The London Institute Of Banking And Finance

• Published date: 26 July 2022
• Subject Matter: Finance and Banking, Technology, Financial Services, Fin Tech
• Law Firm: Cadwalader, Wickersham & Taft LLP
• Author: Mr Cadwalader, Wickersham & Taft LLP

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

Prof. Hahn holds non-executive director roles on the boards of the Isle of Man Financial Services Authority, the Association of Corporate Treasurers, and Kalgera Limited - a fintech business working to protect the vulnerable. He retired as Dean and Henry Grunfeld Professor at The London Institute of Banking & Finance in early 2020.

Over a long career in banking and finance, Prof. Hahn has served as Senior Adviser to the Bank of England Prudential Regulatory Authority - and its predecessor, the UK Financial Services Authority - and worked in banking roles in New York and London for more than two decades.

What do you envision will be the toughest challenge facing bank regulators in the next five years?

Throughout the world, bank consolidation has often resulted in 3-5 dominant national providers. Some may think resolution is the answer to both market failures and the ultimate regulatory tool if supervision or the market has not worked out. Yet I see the toughest challenge for regulators is that these large dominant banks have become public-private partnerships. That may sound simple or you might say "so what?". But the public (politicians and regulators) and private sectors can have very different priorities at different times in the economic cycle − indeed, no more so than politicians and regulators. Imagine entering a recession where regulators would traditionally encourage prudence while their political masters want to encourage risk augmentation 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 sector succeed in the long term without equivalence to EU regulations?

The UK has parallel banking systems, domestic clearing that is overwhelmingly mortgage-focused, and the true City of London, a vast wholesale market. Wouldn't the City love the deal that Northern Ireland has (i.e., inside the UK but also inside the EU for economics)? Hard to see in the current political climate, but perhaps more realistic governments on both sides of the Channel could see the advantages in a short time. The City needs to identify the correct counterparts. Despite the public image, I think the Commission can be practical. No EU "City" has emerged since Brexit, fragmentation has resulted in higher costs, some businesses have evolved to stay in London, and...