On London as a financial centre

Standard Chartered chief executive Peter Sands said at its results recently that he was increasingly concerned about where to be domiciled: \”London is still the world\’s centre for international banking. It is our preferred solution to be here, unless we are hopelessly disadvantaged.\”

Well quite.

There\’s all sorts of reasons why the banks won\’t move, from opera and theatre through to simple inertia. But make it too bad for them and they will move….and that same inertia will make it very difficult indeed to get them back.

And what\’s the easiest part of the bank to move? The HQ, the domicile of the company. They might not do it for tax but they might for another reason:

Leading bankers are claiming to be so hamstrung by bonus restrictions that they are threatening to relocate overseas. Anger about the Financial Services Authority\’s (FSA) strict implementation of the G20 code on pay follows the Treasury\’s decision to impose a bank tax unilaterally, and has raised questions about whether the UK is the right place to be headquartered.

Bankers claim the FSA is the only regulator to be enforcing the bonus rules for domestic banks\’ international operations, making it difficult to compete in foreign territories. They also say the regulator\’s definition of who qualifies as having \”significant influence\” captures more than twice as many staff as in rival countries. \”Significant influence\” staff have to take proportionately less pay in cash and defer a larger element for three years.

And if the HQ goes then so does the corporation tax….and, BTW, it\’s illegal for us to either stop or try to charge any company on its way out if it\’s going to another EEA or EFTA country. Liechtenstein anyone?

3 thoughts on “On London as a financial centre”

  1. Genuine question: why do the Brits always “gold plate” the rules they take from G20 (in this case) or the EU (and local authorities do it with national rules, too)?

    Why would the FSA be the only regulator to enforce the rules abroad, or define a term like “significant influence” twice as broadly as anyone else?

    You can bet the FSA will enforce compliance with its definitions more vigorously than anyone else except maybe the Americans, also.

    There seems to be some national characteristic at work, a need to do a proper job of whatever it is, maybe, combined with a willingness to let someone else take responsibility for the decision, and just enforce the logical consequences, regardless. It’s not a behaviour you see in individuals, but it’s there when people organise in groups.

    whatever it is, it’s real, and a source of real pain.

    BTW, I don’t think you can stop people moving to Hong Kong, or anywhere else – not just EFTA.

    Tim adds: The old deal here was that while we’d not have all that many rules those that we did have would be important ones. Serious, ones that we should all obey and which really did deal with whatever problem was identified.

    Much of the rest of the world has always operated on the basis that there will always be idiots making rules which weren’t important and which could usefully be ignored or worked around.

    I generalise wildly, of course.

    But we’ve now got the worst of both worlds: we’ve got the nonsense rules being imposed upon us but with a legal and legislative system which insists that these really are very important and must really be made to work.

  2. am,

    If you are a bureaucrat what better way to ingratiate yourself with your political masters than to vigorously enforce the rules that they have negotiated? At the same demonstrating how important your own part of the bureaucracy is to their future success.

  3. OK, Tim, so maybe the question should be why the Brits are still doing this, 30 or 40 years later (you wouldn’t put the “old deal” more recent than that, i suppose), when IT HURTS?

    Actually, i agree with your point when it comes to the police and the courts – i think that is exactly what’s happening. But why would parliament act this way, or rule-making bodies like the FSA?

    very rum. And important, i think.

    Tim adds: Because they’re idiots….they are, after all, politicians.

Leave a Reply

Your email address will not be published. Required fields are marked *