More on financial transparency
From a conversation with Richard Thinks yesterday:
Thanks for the link today...looking back through the emails I notice we had another conversation about transparency a few months ago. I think the idea of publishing standardised information about financial products is one of the strongest part of Osborne's proposals - but the way it's sold as enabling "price comparison websites" is a bit misleading.One of the oddities about the price comparison market (and I wrote, with a colleague, the first version of confused.com so I have a bit of inside knowledge) is that they make their profits precisely because the providers do not offer their products in a standardised way. Instead, everyone (deliberately) distinguishes their products in many different dimensions so that they cannot be directly compared. Ever tried to figure out which mobile phone deal is the cheapest? This is why those sites are so popular.If everyone did publish their terms and conditions in a common machine-readable format, it's likely that open-source alternatives would spring up and take away the main advantage that the comparison websites have. This would probably be good for consumers as it would allow the comparison sites' commissions to be competed away in favour of cheaper products.I have argued for a variant of this idea in the financial markets, enabling bond investors to more accurately gauge the risk profile of the companies (especially banks) that they lend money to - essentially so they can do the work themselves, using their own models, instead of relying on the rating agencies, which are very much the bond market equivalents of price comparison sites. I think that between me, George Osborne and Thaler & Sunstein, the concept is gaining momentum - so I expect we'll find out soon enough whether it helps or not.