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Comment by GreaterFool | Hacker News Reader

> have shifted at least £800 billion ($1 trillion) worth of assets out of the country

And what's the significance of that? Suppose I had $100 in a bank in UK and I moved it to a bank in Germany. Neither country is better or worse because of that. The article doesn't bother to explain the ramifications.

Deals are made in UK because English law is really, really good. Having to maintain offices in EU will surely increase the capital requirements of the banks but it's not a straightforward "Britain is XYZ poorer because banks shuffled some stuff around" situation.

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Your seriously misunderstand the banking sector's very real impacts on everyday lives.

Having more assets under management is very impactful because money doesn't just sit in a bank -- it is used again for other things. Thus, there would be less money for loans and other investments.

If you're trying to get a mortgage or start a business, that's very impactful.

If you are a construction worker and financing for new commercial real estate is down, that's impactful.

If you're a factory worker and the factory can't get access to capital to launch a new product line.

All very real impacts.

What is moving to the EU is EU-based activities, i.e. loans/deposits to/from EU customers, derivatives or repos with EU customers, etc.

For loans and deposits, there were likely to be already booked in EU branches already rather than London. These branches are merely being moved to a EU subsidiary. For derivatives, repos and other, these are not really typically funding any activity in the UK.

In any case it is unlikely to have any impact on lending in the UK. What it will have an impact on is where the banks are making their money, i.e. more EU business will be taxed in the EU (keeping in mind that EU business already done out of a EU branch of a London bank was already taxed in the EU).

This is just such complete and utter nonsense it's hard to know where to start. Are you honestly suggesting that good opportunities to make money by lending to British businesses/consumers are not going to be taken advantage of due to this money going to the EU?! Last time I checked banking was global.

Yes, but you have nothing to suggest that this would be the case.

The connection to lending and borrowing is tenuous. There are many things on the books that can't be used to borrow against!

The article just says "assets". What if those were $1T worth of toxic derivatives? Still bad (for UK)?

I simply wish this article was better written and provided some useful and insightful information. $1T makes a nice headline and I guess that's all they needed.

Investors will send money to Saudi Arabia if they smell a good return, while sitting in Bermuda/Alaska/Sri Lanka.

It doesn't really matter where an investor/banker sits, except in fairly narrow circumstances (e.g. depending on who's regulating him/her, s/he might or might not be able to invest in Iran, and have different rules on insider trading, etc.).

It is significant because shifting the money entails the eventual shifting of the revenue associated with the money. A large portion of revenue for capital is through traditional means such as interest rate arbitrage (difference between lending and borrowing rates) and services. It's only a matter of time before the services start moving to the continent.

When it comes to financial legislation applying to banking, to securities trade etc., English law is largely whatever EU law says it is (it's regulated by the EU). It still remains to be seen what English law will be after Brexit.

As for rule of law in general, it's debatable whether its better in the UK than in the other Western or Northern European nations.

A lot of the what the "EU says it is" was significantly influenced by what the UK wanted it to be, especially when it comes to finance.

"English law is largely whatever EU law says it is (it's regulated by the EU)."

Aha, but as the major financial services industry player, we actually had a seat at the table, and could actually influence those laws.

Now we may have to follow rules we have no say in, or something.... Only 3 months away, no rush.

Yes, that’s how (some of) you have chosen it should be.

Nobodies chosen that it should anything yet, thus the rant.

> Deals are made in UK because English law is really, really good.

Can you elaborate?

We have reliable courts which are known for their independence.

We also have alternatives to courts - called Alternative Dispute Resolution mechanisms - which operate out of London mostly, and are known to be free of political interference etc.

See http://www.lcia.org/ for an example. You'd write an ADR into a contract and use these people if you didn't want to use our courts. And our courts respect this arrangement if it is agreed upon and treated properly. It's often used between parties even where nobody involved is a British company or person.

So this is like Arbitration in the US?

In the UK, how are they "known to be free of political interference etc."?

Is it easy for people to contest a decision that looks unfair and bring it to the regular courts ?

Yes since the Magna Carta of 1215

Is it a popular folklore or there is actual, comparable to others advantage in regard to laws?

Britain lately became known for lack of law enforcements towards dirty money. I also not sure how one can manage to claim strong laws and be a surveillance capital of, say, Europe. I'd assume that's because the situation is even worse in other places.

I think so, we don't have state ids. The people are not generally against cctv as far as i can tell, and thats why we have the most survelance. The people more or less trust the state structures. You can see this in the police force, its not combatative unlike, say, the US. The state and the people work together, and thats a cultural norm spanning thousands of years. There are lots of superficially democratically questionable things in uk society, like monarchy. But it all works out becuase i think people do feel empowered with a say in the state apparatus. British people are extremely honest https://www.google.com/amp/s/www.independent.co.uk/news/uk/h... . I think this has been enabled by a long history of rule following, from the rulers and the people.

On your actual point i doubt there is noticable difference in laws. I think culture is more important than laws and our laws are just codifying our culture

So do virtually all other Northern and Western European countries.

What you have that they don't have is the English language as the native language. Non UK lawyers (as me) chose to UK arbitration etc. because of the language, not because we trust your courts more than the German, French or Dutch courts.

Yes, arbitration and other alternative dispute resolution mechanisms in most other countries could be conducted in English, but with UK arbitration we know that we would be able to read the statutes, court rulings etc that the arbitrators read and refer to, in the same language as them.

You might find this of interest:

https://www.qlts.com/blog/why-english-law-governs-most-inter...

> QLTS is the official fast-track route that enables foreign lawyers to qualify as solicitors in England and Wales.

Not really an independent opinion so it seems. It would surprise me if they suggested something else, considering their business.

Everyone can find someone to agree with on the internet :)

International people have been judged in "Den Haag" a lot more than anywhere else.

Here are my "opinionated" sources:

> The International Court of Justice (abbreviated ICJ)[1] is the principal judicial organ of the United Nations (UN). It settles legal disputes between member states and gives advisory opinions to authorized UN organs and specialized agencies. ( https://en.m.wikipedia.org/wiki/International_Court_of_Justi... )

> Theresa May has failed to get the EU to agree that Britain will retain a voice at the European court of justice in return for her concession that the Luxembourg court will retain a role in protecting citizens’ rights in the UK after Brexit. ( https://www.theguardian.com/politics/2017/dec/07/brexit-uk-f... )

Personal: haven't ever heard a UK court settle for international affairs. Hague is the only one I remember from events ( eg. Khadaffi, Bemba, ... )

Ad hominem.

You have 0 objective references. I have at least 1 ( Wikipedia) and 1 that should be pro UK ( UK news paper)

You edited your post later to add those references, then made this comment!

The examples you have given are interesting because they are recent and the province of international agreements. I wonder if English law is used widely in other places and for different agreements as part of a legacy of empire?

In so far as the empire spread the English language. Otherwise, I am not so sure. I have never heard in a negotiation that a party wanted English venue with reference to the British Empire, respect of English courts or similar. It's simply more convenient due to the language.

Usually it's a matter of negotiation. In a contract between a French and a German company, the French lawyer will suggest French law and venue, the German lawyer will suggest German law and venue. If either of them have sufficient bargaining power, it may very well prevail. Among equal parties, a compromise would usually involve selecting a "neutral" legal system and venue. English is the language everyone knows, so usually English is chosen. It's not always UK. Sometimes it Hong Kong or Singapore (typically if a party is Asian). Sometimes it's New York. Generally, European lawyers are wary of American courts and American law with its exotic remedies such as punitive damages. Also, between Europeans it seems unnecessary to go to another continent for arbitration.

Good point, but then why not the US, Canada, etc?

I suggested in another comment a historical component to this, namely the legacy of the British empire. It seems logical that having exported our governance for a long time our legal system would be well known through the world too.

>Why not the US, Canada, etc?

English law tends to be incorporated into contracts that are made among countries in Europe, Africa, Asia and parts of the Caribbean. However, contracts made between US entities and other entities frequently incorporate the law of the State of New York and even refer all disputes to courts in the City and County of New York so venue is locked down. There's also an increasing tendency for contracts (other than those for services) to incorporate as a legal framework the "United Nations Convention on Contracts for the International Sale of Goods" [0].

[0]: https://en.wikipedia.org/wiki/United_Nations_Convention_on_C...

TIL, thank you!

English law (technically the laws of England and Wales) are not "really, really good". English law is incorporated in contracts because of ubiquity. Over the years, and for historical reasons, English contract law has become a lingua franca (mirroring the English language) in international commerce - just as likely to be understood by a company in France as by a company in China. There's nothing inherently superior to English contract law versus that of other jurisdictions. In the US a similar phenomenon exists relative to corporate law - among the reasons Delaware is such a popular incorporation jurisdiction is that nationwide in each state the corporate law of Delaware is understood. In fact, in certain "national" law schools it's the only corporate law taught.

English law is also a common law system, relying heavily on previous precedents that have been set down in similar decisions. Civil law juristictions (for example France) give less weight to precedence, so courts have narrower scope to interpret areas the current law does not cover exactly.

See here for an explanation (EDIT: more relevant secion from same wikipedia page) https://en.wikipedia.org/wiki/Common_law#Common_law_as_a_fou...

English civil law therefore has gained popularity, as it is reliable (precedents can be consulted), and because judges can easily adapt previous rulings to new circumstances.

That's a bit off... Common law has a slightly bigger emphasis on precedents. Mostly because precedents can expand laws and establish conventions as laws. In civil legal system, precedents are clarifying and very specific.

Common legal system is simpler at local levels(because it doesn't have to consult a central authority), and along with British empire - it is widely applied.

No, it isn't. While I have a lot of sympathies for common low (e.g. jury etc.), it is very inefficient. Codified law is much more efficient.

Do you know why finance contracts in baking, M&A etc. in common low are so extraordinary complex? You have to consider fuer every eventuality and every former case.

>>And what's the significance of that? Suppose I had $100 in a bank in UK and I moved it to a bank in Germany. Neither country is better or worse because of that. The article doesn't bother to explain the ramifications.

Ummm...the German bank can loan or invest about $85-$90 of that. The British bank has to loan about the same amount less. When you talking trillions it ads up. Generally you want banks with a lot of deposits.

Banks don't lend out deposits, they lend based on the expectation of getting repaid. Lending is just an adjustment in the borrower's assets and the creation of an equivalent debt, which is why banks are said to "create money".

Suppose you have 50 million in your UK bank, then move it to Germany. Now that UK bank has less money to work with (lend, invest, credit, etc). That's how I see it.

Assuming this money was actively managed then you can use a ballpark measure of 1% that asset managers collected in management fees per year (ie. ~$10 billion) . That income is now earned outside the UK.

So what happens (post-Brexit) if the GBP weakens and the EUR strengthens?

Does the location matter now?

Nitpick: GBP*.

D’oh! Fixed, thanks.

Ever heard of overnight loans? The more cash you hold, the more you can finance.

Presumably that means less jobs in the UK and more jobs in the EU to manage that wealth for one. I'm not sure what that means for future growth of the UK financial services industry.

$1T not being managed by uk paid (and taxed) employees. I assume the UK gains soft power, and probably financially gains from money kept in the UK (think bonds, overnight lending etc).

>Neither country is better or worse because of that. The article doesn't bother to explain the ramifications.

This is not entirely true [0]. The money-multiplier effect would mean the bank in Germany then has something like ~$900 more dollars (converted to Euro's of course) that it could loan out. I'm not sure on their exact Reserve Requirement, but it appears to be less than 10%. Apparently the UK doesn't have much of a Reserve Requirement though, so perhaps they would not necessarily lose out as much as Germany would gain in this scenario.

[0]https://en.wikipedia.org/wiki/Fractional-reserve_banking#Mon...

The UK has significant liquidity requirement.

Reserve requirements don't really control lending in the West anymore. The main determinant of whether a bank will issue a loan is whether it thinks the loan will be profitable. The main constraint on bank lending is capital reqirements - i.e. the ratio of the bank's liabilities to its assets.

The 'money multiplier' might have been a decent description of the banking system 100 years ago, but it's basically a myth these days.

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