I haven’t had time to read the Vickers report properly yet but it expresses some scepticism about the bankers’ threats to leave London. There are a number of practical obstacles and it might do the banks more harm than good, was the gist of Sir John’s assessment.
Just as individuals have no unilateral right to move to the U.S. or Singapore, neither do banks.
Does the Federal Reserve want to take on responsibility for Barclays, whose balance sheet of $2.4 trillion is bigger than that of Citigroup and JP Morgan, and only a shade smaller than Bank of America’s?
Will the US authorities welcome with open arms a bank that makes 75% of its revenues overseas? Does Singapore want to take on the whole of Standard Chartered, whose $517billion balance sheet is almost as big as the combined $577bn of the three largest Singaporean banks (DBS, OCBC and United Overseas Bank)?
And would Hong Kong really be comfortable looking after HSBC, whose balance sheet of $2.5 trillion is more than seven times Hong Kong’s GDP?
Furthermore, bank regulation may end up being just as tight, albeit in different ways, in some of these other jurisdictions. Guess what? American bankers are complaining about regulation and threatening to move abroad too:
[T]hese banks should not assume that the grass is always greener. If the U.S. is such a benign climate for banking and capital markets, why are its banking chieftains—most notably Jamie Dimon at JP Morgan Chase—complaining about the threat of American banks, bankers and business migrating overseas?
Are banks sure they want to be exposed to the fiscal and regulatory isolationism of US policy? Do they want to be branded as “American” in some of the countries in which they operate?
Then there are the eye-wateringly complex legal processes involved in bank relocation and the heat and humidity of Hong Kong and Singapore to contend with.
A report by Reuters draws similar conclusions, concluding that, even if British banks moved their headquarters abroad, most of their operations would stay in London and would, therefore, continue to contribute to the public coffers. It also notes that some foreign banks are considering a move to London.
As I said a couple of weeks ago, banking activity in the City is increasing and, despite all the rhetoric, when bankers talk among themselves they seem to have a lot of faith in London.
No doubt, over the next few days, we will hear more dire warnings about a bankers’ exodus in reaction to the fairly mild proposals in the ICB report. We are still a long way from anything that would make them quit the country though. When the UK regulation gets so tough that it is worth dealing with the legal relocation nightmare, negotiating with foreign regulators, learning about new tax regimes, moving to boring or extremely hot and crowded places, leaving the family and taking the kids out of school, then the banks just might move abroad. But we are nowhere near that yet.