How to Build a Patient Investment Bank
If they are well structured and governed, public investment banks can be powerful catalysts for investment-led growth. But governments that establish such institutions should adhere to four guidelines.
LONDON – The global financial crisis showed that plentiful finance can generate growth that is not necessarily sustainable or socially useful. Since then, the assets of the global banking sector have increased by some $40 trillion, and yet there is still not enough sustainable growth. Why?
The short answer is that finance is not “neutral.” There is a big difference between financing investment in the real economy and speculative finance that prioritizes short-term capital gains from trading existing assets. We need more of the former, and less of the latter.
With countries around the world facing major challenges, from climate change to aging populations, we urgently need new ways to finance smart, inclusive, and sustainable investment. Well-designed public investment banks are one such solution.