Banks May Need $50B New Capital After Brexit
bloomberg.com
bloomberg.com
Oh dear. 3% of their first-half 2017 profit [0]. What ever will they do?
ANy finance jobs that move will be ones involved with EU related business and frankly as it stands I feel financial transactions in a EU members country should be taxed in that country and not cherry picked into one single members coffers. But that alas is the case in so many area's of the EU and a real contentious issue. ANother bigger issue is the single market that allows any EU company to route and pay TAX in a EU members country of choice and in the UK's case we see time and time again large corporations avoiding UK corporation TAX via the use of Ireland and Luxemburg who have special TAX rates. More sad is the latter (Luxemburg) was wholly setup as such by one Mr Junker who went on to become the overall leader of the EU (presidency) and even with his knowledge and expertise this issue has dragged on and still gone unaddressed. This creates unfairness amongst members. Then you have the EURO (UK not part of that) which shifts all QE centrally and as such pegs all members of it into whatever position they joined and if one member needs QE (say Greece) then all other members equaly gain as that single member can no use QE to fix there problem. This means it is extreemly hard, if not impossible for memebrs to climb up the charts, so to speak.
But alas many issues and calls for reforms get overlooked and ignored over the years...decades. So you start to see why many wanted to leave the EU and the perception that its all because people are racist is not only narrow minded, but racist in itself. Sadly many parrot on that false perception upon all people who voted to leave and that frankly is vile and wrong.
But as to your main point, you are totally right, the effect upon HSBC is negligible at best as they are a global bank.
This is a great opportunity for right-wing politicians to put their money where their mouth is. They claim to support free markets, so this is what they should do: allow banks to reduce or end business in the UK, and then allow the willingness to pay for banking in the UK to rise to the point where it comes profitable again to operate there. Banks are run by, well, bankers. Surely they can figure out the accounting on their own without government assistance.
(Of course governments are quite right to impose requirements on those organizations they're providing backstop funding for. But you can't talk about a "free market" in one aspect of banking in isolation; it isn't and can't be a free market unless you change myriad other aspects of how the banking system works)
There is plenty of regulation in computer monitor design and construction by way of FCC requirements, emissions standards, and e-waste recycling rules. Would you argue that the computer monitor market is not free as a result?
Without regulation on fractional-reserve banking, you would have a serious principal-agent problem that, if anything, would make the market for banking less free if left uncontrolled. I see no analogous argument for the government using taxpayer money to buffer major banks' operating expenses.
The computer monitor market is notoriously unfree for various reasons, but I suspect that's an accidentally bad example and will assume we were talking about something else.
I'd say it's a matter of degree. A simple, objective regulation doesn't interfere with a free market; a government directly instructing a business to make particular decisions distorts it greatly. Banking isn't quite at the latter level but it comes close.
> Without regulation on fractional-reserve banking, you would have a serious principal-agent problem that, if anything, would make the market for banking less free if left uncontrolled. The risk of economic collapse is an enormous externality. I see no analogous argument for the government using taxpayer money to buffer major banks' operating expenses.
It's never as simple as that. Obviously the government should not be handing bags of cash to banks or any other businesses. But we generally regard doing regulation as something the government should bear its own costs for rather than passing on to the regulatee.
How so? If the government regulates that you shouldn't dispose your chemical waste into the river because that's bad for everybody, then it's still your problem to figure out what to do with that chemical waste, after all, it's your waste and not theirs.
The government has no responsibility for bearing any costs which result from you merely following the rule of law.
It's your problem to figure out how to dispose it safely, sure. But if they want to e.g. audit where the waste is going, that would be widely seen as something the government should do/pay for themselves. And that's how it is with a lot of banking regulation: complying isn't the expensive part, measuring and demonstrating that you're complying is.
The government has a reason for wanting to audit that waste because it's dangerous and if it's not properly stored in can cause untold damage to whole generations.
If we could trust private interests to do the same, we would, for the longest time that's exactly what we did.
But experience has shown that private interests usually outweigh public interests. Meaning: If we let people just do whatever they want, they tend to do quite a bit of public damage in the pursuit of their private profits, that's why we started to regulate.
So, if your business involves handling dangerous substances you better make sure you have the facilities and capabilities to properly dispose of them, the government will, rightfully, hold you accountable to that because if they don't then no one else will.
Let's also keep in mind that it's usually the public, aka the government, who has to pay the clean-up costs when some big private venture turned out to be quite destructive, they are usually the ones left holding the bill while all the private profits already went outside the country.
This is simply inaccurate.
As just one obvious example: the cost of environmental assessments are borne by developers, which is all about measuring compliance.
Similarly, common accounting regulations, which require both specific practices as well as specific records retention rules, to support audit activities, also impose costs on businesses.
Heck, at the more individual level, if I want to put a building on a piece of land, bylaws state I'm responsible for producing site plans, construction details, etc, to allow the municipality to assess and approve the work to ensure I'm complying with zoning requirements, and I also bear the cost of safety inspections and so forth during and after construction to ensure I'm complying with the building code.
There's still almost two years of negotiations ahead, but right now the rhetoric of the British government seems to be geared towards a hard brexit (e.g. "There will be no freedom of movement after 2019, even if we lose access to the single market").
The rhetoric on this side of the channel seems to be a bit more nuanced - but not much. Both sides have drawn some red lines, and they do not seem to overlap.
So, I fear we'll have a mostly hard Brexit in two years, and it will cost, the UK, Europe and many companies billions.
And they also said they would fast-track an application of the UK, if they applied for membership after leaving.
But I guess, from the EU's perspective, you would need approval of all member states for both, which is incredibly hard to get these days.
And the current UK government probably does not see any of these 2 as an option...
http://www.bbc.co.uk/news/uk-politics-39291512 seems to give a good spread of opinions, including:
> "They might try to extract a political price," Lord Kerr said, "but legally they couldn't insist that you leave."
But I could be wrong ;)
I thought it could be stopped at anytime with agreement of all member states. According to Lord Kerr (who devised Article 50):
"It is not irrevocable. You can change your mind while the process is going on.
During that period, if a country were to decide actually we don't want to leave after all, everybody would be very cross about it being a waste of time.
They might try to extract a political price but legally they couldn't insist that you leave."
ANYTHING can be done with agreement of all member states. Including completely rewriting the Treaty of Rome, Maastricht Treaty, and Treaty of Lisbon along with every other agreement that makes up the EU.
Among intangible benefits was your ability to live in Alicante for a period of time, without having to apply for a work/study visa or whatever other hoops someone non-EU would have had to jump through.
Yes, it might have been doable. But you must also remember that such an ability is a privilege, not a right- if you lost your job, quit school, or whatever granted you your hypothetical residence permit ceased to be a thing, you'd have to leave and uproot your life. As a UK citizen EU member, you had a right to live and work anywhere in the EU. Post-Brexit, not so much.
Erasmus allows good students from poorer countries to get used to living in richer foreign countries like the UK, increasing the chances they'll emigrate. Unlike during the 60s, when the migrants from Southern countries like mine were mostly the poor and uneducated, nowadays the opposite happens.
Lots of qualified English-speaking people leave, looking for more than an unpaid internship and a meal ticket, while the others know there's no longer great demand for unskilled workers in France and Germany, and at least here they have their parents' home and their grandparents' pension to live off.
So by removing itself, the UK makes it more likely that the "brain drain" will go to Germany, Finland, Sweden, etc.
I pay a certain amount of council tax, of which £X is spent emptying my rubbish bins at the curbside and in the street. I could look at it as buying £X of services from Veolia. If I bought the same services myself, how much would I pay. Am I getting good value for money?
Or I could look at the overall benefit of living in a society where there isn't rubbish lining the street wherever I walk. I feel like the people who say "we make a net contribution to the EU" look at the arrangement as a cash transaction without taking a holistic view of the resulting environment.
Of course, I'm sure some economist could come along and put a price on living in a society without rubbish lining the street, but to most people that's not a monetarily quantifiable thing. So I'm sure someone could put a price on all of the below points, to varying extents. But I'm fairly certain when people talk about "net contribution" they are not doing this.
So, that acknowledged, intangible benefits of being in the EU I feel, off the top of my head:
- common standards and lack of trade barriers that let companies in the UK make things and sell them abroad, paying tax in the process
- common standards and lack of trade barriers that let me buy something made anywhere in the EU
- ease of international travel for leisure and cultural exchange, including immigration, aeroplane safety and standards
- living in a country where I can eat cheaper summer fruit because migrant work can flow
- (very specific) I'm friends with instrument makers who do business in the UK and the continent. The import/export tariff situation (as things are currently looking) means that they won't be able to do business
- living in a country where researchers and academics can travel in the EU to do whatever they need to do
- not having to think about travelling to meet with colleagues and vice versa
- contributing to a bloc which enforces environmental standards that align with what I consider to be Good Things (although the CAP is arguable)
- ditto animal welfare
- ditto human rights
- ERASMUS
You can't eat money. My life would be incalculably less rich for having grown up in an insular country without many of the above. Maybe I'd be a few pounds better off. How much happiness could I buy with that?
I'm not saying that the EU is perfect by any means. It could do with a bit of reform, which the UK could have helped with.
http://www.cbi.org.uk/insight-and-analysis/our-global-future...
The fact that capital movement is not regulated is one that benefits the banks far more than the UK spends, for example. That's why the banks are moving. Next party to be hurt hard is the import-export industry, followed by research institutions. Tariffs will hurt import-export alot and since about a quarter of UK researchers are non-British they might lose them to the continent or Ireland unless they do something.
That does NOT mean that the UK is putting in more than it is getting out. Even when only considering the financial impact of EU membership, I dare guess that all member states get out more than they contribute.
How does that work? It generates money out of knowhere?
Now that the pound is out expect the EU to have a unified monetary and budget policy. Brexit only strengthens the EU.
CFP and particularly CAP have become rather controversial.
The UK hasn't done the majority of its international trade with the EU for a while. Both EU and non-EU trade have been growing, but the gap has also been widening.
The European Parliament has been strengthened to a degree, particularly since the Lisbon Treaty. However, if you look at for example the secretive TTIP negotiations, transparency remains a concern for the EU administration as a whole. Likewise, the real power still mostly rests with the Commission, which in practice remains mostly unaccountable.
EU regulations in growing fields like technology and creative industries are excessive and do cause real problems, particularly for smaller businesses.
In short, the answer to your video's question "Dear UK, Why Are You Leaving the EU?" is probably "Because the situation changed and the case for remaining wasn't enough to convince our voters any more".
(My standard disclaimer applies to this and all my comments in today's discussion: I'm just pointing out counter-arguments from the other side in the interests of interesting and informed debate. This should not be taken as a personal position on Brexit or the EU as a whole, nor as a claim that there aren't also valid points on the other side.)
Yes it is, let's hope it works.
The question voted upon was should the UK remain a member of the EU or not.
There was no vote or understanding on how exactly that should be accomplished.
It's worth noting straight away that, as with much commentary about Brexit, this is based on hypothetical analysis of one possible result, in this case, a "hard Brexit" where there is no UK-EU deal on financial services at the point of the UK leaving. There are other plausible outcomes, and no-one really knows how likely each of these possibilities is yet.
A hard Brexit, where banks lose privileges access to the European Union’s single market, would “fragment European wholesale banking,” Oliver Wyman partners including Matt Austen and Lindsey Naylor said in the report. “It will also make it significantly less profitable. Banks could see two percentage points knocked off their returns on equity.”
It would also most likely cause serious harm to European businesses that currently rely on City-based financial services. Even senior figures like the German finance minister seem to be very wary of allowing this to happen. Both the UK and the EU do therefore have a very good incentive not to screw up that aspect of any successor arrangements.
No explanation given for those absurd figures, no evidence, no calculations, nothing. And that's 50B without relocation cost, which the article suggests it's gonna cost another billion. And who publishes "estimations" with such level of uncertainty (30 to 50) without blushing?
This article is how the banks suffer, most of them are probably not from the UK. Not as a punishment, but as a direct consequence of Brexit.
And the EU will suffer too. So, Schadenfreude is maybe a bit short-sighted here...
Edited to emphasize that I do not think this discussion should be about punishment. And the linked article is definitely not about punishment.
Well, the EU is not in any great shape itself, and has been going from bad to worse before Brexit was even a thing.
Edit: I'm open to the idea that some (edit: some portion of..I have no idea what the split is) supporters aren't xenophobic either. The "racism" tag just bugs me in this context.
However, you keep saying "racist". My point was racism is less likely than xenophobia. Country of origin and religion aren't race.
Actually you do. It's all in the power relations.
And Europe is plenty racist in itself anyway.
I'm still curious if this will work exactly like the optimists think it will.
Only time will tell, but it will depend a lot on the final agreement between the EU and the UK. Because if there is no deal (esp. no free trade agreement), the UK will, at first, NOT be able to trade more widely...
Since when do we allow glib false accusations of "racist" to be tolerated without supporting evidence based upon actual facts.
At least since Trump's campaign. Thinking about it, I do not remember to see any accusation of "racist", "bigot" or "sexist" to be substantiated with any evidence.