John Thanassoulis, Professor of Financial Economics at Warwick Business School and an expert on the UK's banking sector reacts to the appointment of John McDonnell as the new Shadow Chancellor:
"The New Shadow Chancellor is on record as being 'a fierce critic of bankers’ bonuses … for the nationalisation of the banks … [and wishes to place] nationalised and subsidised banks under direct control to force them to lend and invest their resources to modernise our economy and put people back to work'
"Our research suggests that it is essential for the Shadow Chancellor to draw a distinction between national retail banking (including lending to SMEs) and international finance and merchant banking.
"The Shadow Chancellor has a point that lending to SMEs creates many large positive externalities for the economy and so is likely to be underprovided by a completely laissez faire system.
"However what is needed is a system which encourages bankers to judge risk and make well-founded lending decisions; not the politicisation of finance.
"Bonuses are an important part of cutting costs, and aligning the interests of bankers with other stakeholders. It would be a tragedy if excessive risk-taking was replaced by excessive deference to Whitehall’s view of what and who merited support."