Did Lack of Transparency Cause the Financial Crisis?

Ten years after the collapse of Northern Rock, Andy Agathangelou tells Emma Wall that greater transparency in financial services could ward off a second global financial crisis

Emma Wall 13 September, 2017 | 1:37PM
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Emma Wall: Hello and welcome to Morningstar. I am Emma Wall and joining me today is the Founding Chair of the Transparency Task Force, Andy Agathangelou to talk about the cause of the global financial crisis.

Hello, Andy.

Andy Agathangelou: Hello.

Wall: So, what role do you think transparency played in the cause of the global financial crisis?

Agathangelou: I think we would all agree that market crashes occur when people suddenly become aware of information that they previously didn't have sight off. When people suddenly realise that what they thought they owned isn't really what they own. For example, when the risks of the assets they have are far greater than they anticipated. So, therefore, it follows that if we have a market that's terribly opaque, where there is a lot of secrecy or misinformation or confusion about what's really happening in the financial ecosystems around the world, we significantly increase the chunks of the crash. So, our cause is to make the markets far more transparent, knowing that one of the values that will deliver to everybody is a more stable financial ecosystem and that, Emma, is why transparency is so important.

Wall: Is it as simple then as greater transparency means that we are warding off the potential of another global financial crisis?

Agathangelou: Well, it's been such an interesting meeting so far today at our symposium, because we've been talking about that very question, is there a chance that there will be another one, if so, when might it happen, what could the causes be. The general consensus says that there is a very high chance that similar crisis will occur in the future, but we can mitigate those risks by creating a more transparent financial ecosystem. That’s why this is all so important.

Wall: And whose responsibility is that? Whose responsibility is it to ensure that there is transparency in the financial world?

Agathangelou: Well, I guess, the blame has to be shared amongst many parties. Governments have a big part to play. The regulators have a big part to play. The bankers could do more to make sure that the financial systems around the world are far more transparent.

Frankly, everybody has a part to play in this. We all have an interest in creating a stable, rock solid, firm foundation that we can all build our wealth. This matter is a great deal to retail investors, ordinary people saving for their retirement funds, etcetera. We all want stability. We all have a share in making that happen, and that’s why those of us who have concerns about this should be talking to the regulators and the politicians, to each other about what we can do to make things better.

Wall: Andy, thank you very much.

Agathangelou: Thank you very much, Emma. Thank you.

Wall: This is Emma Wall for Morningstar. Thank you for watching.

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Emma Wall  is former Senior International Editor for Morningstar