Bankers are resuming the risk- taking practices that led to the worst financial crisis in a century

By Jennifer Ryan

March 23 (Bloomberg) -- Bankers are resuming the risk- taking practices that led to the worst financial crisis in a century, threatening to create even worse turmoil, economist John Kay said.

For "so many people I talk to in the financial sector, it's kind of, 'Phew, we got away with it, now we can get on with making money in the same old way,'" Kay, a visiting professor at the London School of Economics, said in an interview yesterday. "If we do that we're going to end up, probably quite soon, with an even larger version of the kind of crisis we've just been through."

Kay, whose book "Obliquity" will be published on March 25 in the U.K., has argued that banks should be split between retail operations and investment banking. Bank of England Governor Mervyn King said in September that an essay by Kay on the structure of financial institutions was "the most important piece written on the subject in 10 years."

"We've had people talking more about regulation, but we haven't had people thinking about banking and finance in a different way," Kay said. "What we need to do is have much more structural reform of the financial-services industry. The biggest element of that is separating utility-type banking from casino banking."

Kay argues in his book that people achieve complex goals such as happiness or creating a profitable business by pursuing them indirectly rather than directly. New banking rules that sustain the pursuit of quick profit won't be enough to restore stability and trust in the financial system, he said.

Banking reforms should seek to exclude from basic banking services, such as payments and deposit-taking, people whose aim is just to maximize profit, Kay said.

rest at http://www.bloomberg.com/apps/news?pid=20601208&sid=aimgttz9Y20Y