One Sole Aim: “Steal Away” Global Finance from London

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Just How Low Can European Governments Go?

By Don Quijones, Spain & Mexico, editor at WOLF STREET.

City of London-based financial institutions are intensifying their search for plan-B locations as concerns continue to rise about Brexit’s potential threat to their unfettered access to EU markets and workers. With an estimated 35% of London’s wholesale market activities forecast (by Brussels-based think-tank Breugel) to migrate across the English Channel in the coming years, the race is on to displace London.

However, as the competition for Brexit spoils intensifies, relations between euro nations are showing signs of strain. Tax-haven par excellence Luxembourg, equipped with a multi-lingual specialized workforce, is likely to be hot property in a post-Brexit world. The country’s competitive tax rates have already caught the eye of AIG, private equity giant Blackstone, and Lloyd’s of London, the world’s largest specialty insurance market, all of whom have expressed an interest in relocating part of their London operations there.

Luxembourg’s success has drawn the wrath of fellow Eurozone members like Ireland, which recently complained to the European Commission about “dangerous competition” from rival centers competing to host financial firms.

“Other cities in Europe are being very aggressive in trying to win business,” Eoghan Murphy, the minister in charge of promoting Dublin’s financial center, told Reuters. Murphy raised concerns about “creeping regulatory arbitrage,” a reference to undercutting rivals with lax rules, something about which the Irish republic knows a thing or two.

But it’s not just Europe’s tax havens that are vying to woo the world’s biggest financial institutions; also at it are some of the continent’s largest capitals.

Paris has promised to unfurl the red carpet for the City of London’s highest paid bankers by offering low tax rates and bank-friendly legislation while also seeking to grow as a clearing center. It’s in stark contrast to the combative stance France’s President Francois Hollande took against “the world of finance” – “my true opponent,” he called it – before winning national elections in 2012.




Since being in office, Hollande’s feelings have mellowed. In October last year, he even dispatched his Finance Minister Michel Sapin to New York to try to lure Wall Street banks like Goldman Sachs, Bank of America, and JP Morgan Chase to a newly liberalized Paris. But Sapin seemingly failed to impress, perhaps because he needed an interpreter to get his message across in English.

English-language facility is considered a key factor in banks’ post-Brexit relocation plans. It’s essential for attracting a global workforce. To that end, the financial market regulator in Madrid is strongly urging the 35 companies listed on Spain’s benchmark index to publish company reports and other information in both Spanish and English, with a view to making it mandatory in the future.

Madrid is also keen to flaunt its abundant stock of commercial and residential real estate, something Dublin sorely lacks. Madrid currently has 250,000 square meters of office space but that could rise to as much as a million in two years’ time, when Brexit negotiations are expected to have terminated, said Ricardo Martí Fluxá, the president of Spain’s Association of Real Estate Consultants. That’s a four-fold expansion in just two years — proof, if ever needed, that Spain’s real estate industry is back on its feet.

The newly built flats and offices will need occupants. In an attempt to find them, Marí Fluxá will participate in an event at Spain’s London embassy in early April with Spanish diplomats, civil servants and senior figures representing City-based firms. As Spanish daily El Economista bluntly puts it, the meeting has one sole aim: to “steal away” firms from the City.

Madrid also hopes to bag an important financial institution, such as, say, the European Banking Authority (EBA), in the knowledge that proximity to major seats of political, judiciary and regulatory power is an essential source of competitive advantage for major financial institutions. It’s one of the main reasons why London, once the center of the world’ biggest empire, has served as one of the world’s top-three financial capitals for the last 200 years. It is also the main reason why, if the City of London does fall from grace, the biggest beneficiary is likely to be Frankfurt, which is already home to Europe’s most powerful financial institution, the ECB.

The fact that Germany also enjoys more influence over European economic policy-making than any other EU Member State would certainly be an added enticement for the world’s biggest financial institutions. Over 70% of respondents to an Ernst & Young survey said they expect Frankfurt to come out on top in the race to displace London.

But such a move is unlikely to be welcomed by many other European countries, especially those in the South where resentment over Germany’s influence over their economies is already running high. Nowhere is that more so than in Italy whose government is also trying to entice City-based firms to Milan, despite the fact that its own financial sector is hanging by a thread.

As for the City of London, the semi-autonomous square mile within London where the shady threads of global finance meet, it continues to operate as it always has. As The Guardian reported today, UK banks, including serial offender HSBC and state-owned RBS, played a major role in the global laundromat operation run by Russian mafia outfits, just as they played a frontline role in every major global financial scam and scandal of the last decade, including Libor, Forex, MF Global, the London Whale, and rampant gold and oil-price rigging.

And so, rather than seizing this opportunity to stifle the malign role that the City of London plays in the global economy, most European capitals are now determined to emulate it. By Don Quijones.

Tax planning for a post-Brexit world. Read… Brexit Drains Swamp in London, Creatures Head to Luxembourg




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  21 comments for “One Sole Aim: “Steal Away” Global Finance from London

  1. Al Tinfoil
    Mar 22, 2017 at 1:54 am

    Hilarity ensues.

    Main Street EU is stagnating, wages not growing, unemployment high, consumer spending is stagnant since consumers have maxed out their credit cards, Russia will not cooperate by playing along with starting World War 3, sanctions against Russia and Russia’s counter-sanctions have hurt EU producers, the PIIGS nations have not recovered.

    Greece needs ever-more “bail-outs” to keep German and French banks from incurring losses, Italy’s banks are gasping for air, and now Germany is demanding that Draghi be dragged into Berlin and told in no uncertain terms that Schaeuble wants more control over his money-printing and that Germany will not look kindly upon any bail-out of Italy’s failing banks.

    Theresa May has received the approval of the UK Parliament to send a billet-doux to Brussels saying (very politely) “This is notice that the UK is triggering Article 50 and is taking back its sovereignty.” Brussels is having the vapours and various EU Heads of State are making threats of dastardly consequences to be heaped upon the UK for daring to leave the EU to its dismal fate. And the polls in France say that Marine Le Pen is ahead in the election race for President, and she is making noises about leaving the EU and ditching the Euro (Quel Horreure!!!!!). At least some citizens are too busy demonstrating and rioting to pay attention.

    Fee-Fee LaGarde at the IMF is expressing reluctance to help with further bail-outs of Greece, can Italy be far behind? And the USA has elected Donald Trump as President and he is saying some very distressing things about NATO funding and was most unkind to Angles Miracles when she flew into Washington in an attempt to make nice and to get political support.

    Oh, and Target 2 imbalances are already beyond levels that can ever be paid.

    Non-Performing Loans (NPLs), fancy frauds in the form of derivatives, and money laundering are the only sectors of banking showing growth. Hence the rush to attract bank head offices, with offers of even lower penalties for money laundering and fraud, lower income taxes for corporations and bank employees, free travel vouchers to Majorca, cheap wine, subsidized lap-dances for the men and free gigolos for the ladies.

    At least the nice Mr. J.C. Juncker has experience in setting up tax avoidance schemes in Luxembourg, and with his current elevated status in the EU (rumour has it that he is high by noon each day), Luxembourg looks like a good candidate for my next banking headquarters.

    • cdr
      Mar 22, 2017 at 8:54 am

      There’s only one solution … we need another financial crisis and we need one soon. Creating massive financial fraud on a national and continental level requires a big crisis that requires a big plan to fix all the big problems.

      England did it’s part in the last one and the Eurozone contributed mightily. Price fixing … including the mega-innovation of the past few centuries – negative rates – from this cycle has run its course. A new crisis is needed to bring in new players who will play similar games but dressed up differently and in new places.

      Will we see a plunge in indices caused by a lack of bids and magnified by margin calls? Will one or two sacrificial lamb major houses of finance go kablooie afterward for emphasis and as a call to action for important people to do something or anything to fix it … just as long as a blank check signed by the largest nations is included with the fix? Will the lack of liquidity cause working capital loans to go away and create job layoffs? Will the media scream bloody murder every day until government does something to fix it?

      Of course not. That’s just crazy talk.

      • Petunia
        Mar 22, 2017 at 10:47 am

        Are you nuts? The last crisis didn’t help fix any of the problems. Banks are bigger, the derivative positions are bigger, the bubbles are bigger, and the country is more divided than ever. Plus there is nothing left at the bottom to steal.

        • cdr
          Mar 22, 2017 at 11:00 am

          Petunia,

          You miss the point. Never waste a crisis. Create one if you need one and you can. The Demo is the solutions you promise to deliver. The reality looks nothing like the Demo, and you rake in lots of $$ creating another new normal. The result you describe for today is perfection from a certain point of view. “Nothing left to steal” is not true. If you control banks, central banks, and law makers, you can always get the masses to bundle up their assets and send them to you under one pretense or another. Negative rates are one such premise.

    • Nicko2
      Mar 22, 2017 at 9:13 am

      Russia is a side show, they’re going bankrupt (in more ways than one). Provided the French elections turn out as expected and stop the populist surge in its tracks – this is also assuming Merkels wins her reelection bid, Italy could be a wildcard- EU growth forecasts are accelerating. With cheap energy and lower taxes, the next few years should be better than the last.

      • Petunia
        Mar 22, 2017 at 10:51 am

        When the Russian govt willingly supports hacking as a means of gaining foreign exchange, you don’t need more proof.

  2. michael Engel
    Mar 22, 2017 at 9:18 am

    London under blockade. If the $EURUSD will rise the German industrial
    engine will sputter. German DB, no nuke, small army & air force and
    Qatar navy shipyard to build submarines.
    Germany will be in an aging, sorrow Werther, state.
    France has x4 notional banks, nuke since the 50’s, a huge army, navy
    and air force. A very develop military industrial complex. Many political
    allies. Pay attention to France. It will become the most dominant
    power in Europe.
    If GB on the side line, there is nothing standing between :
    US>>>France>>>Putin.
    That’s the new balance of power.

    • Frederick
      Mar 24, 2017 at 3:48 am

      You’re comment made my morning Funny how anyone could imagine modern day France being a powerhouse I’d bet that Eastern Europe ( New Europe) will lead the way in the future but definitely NOT France

  3. TJ Martin
    Mar 22, 2017 at 9:30 am

    A couple of thoughts ;

    1) In light of London having become so over gentrified and excessively pricey not to mention having the housing bubble of the century to the point of pushing out even the wealthy [ millionaires ] never mind the working – middle and upper middle classes : Is all these somewhat shady financial ‘ institutions ‘ ..using that word loosely .. leaving really such a bad thing ? Sure there’ll be a period of price corrections and pain.. but overall might not London become a better place once the initial dust and damages settle ?

    2) In light of Le-Pen potentially winning in France with a no doubt FRAXIT to follow if she dos why would any financial institution consider relocating to Paris ?

    3) Spain raises similar question due to their ongoing political and financial instability

    4) And with Germany (pardon me Merkel ) is pretty much a non-starter in light of all their regs and taxes

    So other than Luxembourg and further expansion into a very overcrowded Switzerland .. whats left ? Nothing in my opinion

    • cdr
      Mar 22, 2017 at 9:52 am

      You’re not approaching the problem correctly.

      Long ago when text books accurately described the world of finance, the financial centers followed business. They formed a symbiotic relationship.

      Today, finance is more about getting other people’s money and using it for profit than for promoting commerce and liquidity. The next European financial center will permit loose regulation and an anything goes attitude … much like Port Arthur in the pirate days.

      Anyone who approaches the question of where the next money center using ordinary business logic is taking the wrong approach. It’s not that kind of business anymore.

      At a minimum, the next place will require a blind eye towards regulation yet access to unlimited capital; such as that which comes from central bank QE. It will be an ‘island paradise’ during the next financial crisis, which may possibly be here in a couple of years after the opportunities have been properly scoped out. The next place may even be a ‘dark horse’ or new wine in old bottles – new reasons to go back to the old standards … after all the Russian are coming and McCarthyism still appears to work.

      • Petunia
        Mar 22, 2017 at 10:55 am

        Thank God, you’ve come to your senses.

      • TJ Martin
        Mar 22, 2017 at 12:45 pm

        Ahhh … methinks you’re stating the obvious as well as completely misinterpreting my comment towards the goal of what I do not know . Suffice it to say yer preaching to the choir cdr with your comment overall verging on irrelevancy to the question and opinions I’ve posted . e.g .You’re doing that Alt Right Neocon RNC thing of responding with pre-programed condescending platitudes while completely ignoring the questions and opinions being given in the quest to present your agenda . e.g Bad form !

        As for island paradises . Despite your opinion to the contrary one of if not the most important element nesaissary for these ‘ institutions ‘ to set up shop ( 2nd only to a touch of ‘ Blind Eye ‘ syndrome ) is Political Stability . Political Stability is not to be found on any Island Paradise all of which inevitably become future nightmares in the making . Leaving the only logical choices despite the ‘ virtual ‘ paradigms verging on conspiracy you’ve presented being : Luxembourg first .. with a few heading CH way under the cover of night … with a couple more delving into the little known yet rather desirable depths of Lichtenstein .

        As far as Russia and McCarthysim are concerned .. i wouldn’t go betting the bank on either if I were you . Though the HUAC has never gone away any attempts on behalf of this ‘ administration ‘ to bring it back to its glory days will be met with a firestorm from depths of hell beyond yours or their comprehension . As far as Russia .. they’ve been ‘burned’ [ spyspeak ] and they know it . So don’t be surprised if and when Vlad throws the 350 lb orangutan under the bus in the quest to maintain power and his 21st century ‘ Pravda ‘

    • d
      Mar 23, 2017 at 3:16 am

      “So other than Luxembourg and further expansion into a very overcrowded Switzerland .. whats left ? Nothing in my opinion”

      Some Eur clearing will move from London to the mainland.

      Some London operations will need to have mainland Eu branch offices due to Brexit.

      What make’s the city, the city, will not be changed by Brexit. Just as it was not changed by the conversion of empire into commonwealth, or the rise of NY, and the recovery of Shanghai, as Global financial center’s.

      Junkers Luxembourg has short term Potential. When junkers power wanes (he is not Immortal) Brussels will kick Luxembourg into line. Brussels and Berlin have had it in their sight for some time.

      Brussels and Berlin broke Cyprus, they will do the same to lux, be warned.

      Once out of the Eu, the only think that can really harm the City. Is the English parliament.

      In the long-term being out of the Eu, and all those pesky Eu regulation’s, will benefit the real business of the city, which, is not bank’s.

      so “So other than Luxembourg and further expansion into a very overcrowded Switzerland .. whats left ? Nothing in my opinion”

      should really read

      “So other than further expansion into a very overcrowded Switzerland .. whats left ? Nothing in my opinion”

  4. mvojy
    Mar 22, 2017 at 11:52 am

    The EU was a nice marriage while it lasted. Who gets the kids (debt) in the divorce? Guessing they will all fight custody.

  5. mean chicken
    Mar 22, 2017 at 2:27 pm

    Why not encourage these criminals to relocate, I think Luxembourg is a great idea. Hopefully they all go there.

    Don’t call us, we’ll call you.

  6. Heinrich Leopold
    Mar 22, 2017 at 8:10 pm

    There is one reason why Europe will fail to become a financial centre to the world: it is the whitch hunt against rich people. Europe is strictly anticapitalist to the tune of a fanatic hunt on any asset owned by individuals.The goal is to have economies based on state capitalism represented by large companies partly owned by the government (Volkswagen is one example). Individuals should be just employed and should not own any assets. One way to control this is wealth tax, which explains why capital is flooding out of France.It is not necessarily the tax,yet state control over any assets of citizens, which can be frozen or confiscated quite easily, if the individual is not on the right side of the political lever. There has been a reason we had a banking secrecy in Europe. Now that it is gone, capital is fleeing Europe at a breakneck pace. Some countries have experienced threefold decreases in private investments and turnover at stock exchanges is at all time lows. The ECB is one of the last investors remaining on the marketplace.London do not fear. The European strategy to chase wealth and wanting to benefit from it at the same time will not work.

  7. Steve Phillips
    Mar 22, 2017 at 8:15 pm

    Relocate to the EU? The land of bureaucrats, regulation, no growth, no massive and unified bond market to support the currency, unlimited Third World “immigration” to destabilize polite society, and the eternal struggle continuing between the Germans and French to prove just who is the Master Race? Stranger things have happened, but I doubt that this move in size will.

    • Heinrich Leopold
      Mar 23, 2017 at 5:09 am

      Steve Phillips,

      You have made the point. Yes, bankers could relocate to Europe, yet if the money does not follow, what should bankers do then in Europe? Millions of investment accounts have been closed in Europe and there is no end in sight of this trend. The banks in Europe are running out of clients and money they can work with. This is the deeper reason of the banking crisis in Europe. It is simply a lack of private funds flowing into banks. The ECB cannot save the day forever. This is state capitalism of its finest, which has been proven historically always as a failure on the long run.

      One example is Deutsche Bank. They have a British CEO, yet the money shuns Deutsche Bank. So the bank is sinking ever deeper into the swamp of underperforming assets.

  8. d
    Mar 23, 2017 at 3:37 am

    The french and the eurotrash eurocrats have been try to steal Londons business, and stab England in the back for so long now, it seems they are willing to impale themselves in the stomach, with the shaft of Britannias trident, for ever-time they stab the English in the back.

    This Brexit if it is ever happens will hurt the Eu, Germany in particular, much more than it will England.

    The city will loose a little to the Eu/Switzerland but gain much more by being free of Eu regulation’s.

    England has may willing trade partners, locked out by france from the Eu.

    Those partners, dont particularly like the germans, and defiantly don’t like france, or the rest of club med, either.

    In the west and south Pacific there has been resistance to french product since the 1970’s that is now morphing into all Eu product’s. We mock and kick the British mercilessly, they are however our friend’s. If the Eu (which has never been nice to us) is not going to be nice to them ,the Eu will, be made to pay, in so may ways.

  9. michael Engel
    Mar 23, 2017 at 12:49 pm

    After the British Sentimental decision ” I am getting out”, there will be an automatic response. Reality will settle in.
    The British & EU are going to miss each other.
    They need each other market. The French powerful army, is at best e
    regional power. Not enough to provide a protective umbrella.
    NATO obligation will not encourage the British to protect a hostile EU.
    The British will not be kind to see further disintegration and becoming
    a fat little 350×350 km island.
    And of course to witness the French rising dominance.
    After article 50, the talks will languish for a very long time, it will drag on
    and on to satisfy their supporters & media. In long Trading Range
    But not a quick divorce.

    • JC
      Apr 6, 2017 at 9:24 am

      Michael – “British Sentimental decision”? (Why have you capitalised ‘sentimental’?) This sounds like the Remainer-biased BBC and left-wing press who overgeneralised the Leave vote as being due to stupid, knuckle-dragging poor people who voted Leave solely because they are racist. I am working class and I am sick of a Labour party dominated by middle class people who despise the poor and have no knowledge of their lives and the challenges that they face.

      Immigration does drive down wages, not only is that a most basic economic principle of supply and demand but the Bank of England confirmed this in a report issued the day before the referendum. Of course, the poor knew this all along, but you cannot have a sensible and balanced discussion on immigration in present-day Britain without SJWs screaming “Racist!!!” at you.

      It also isn’t all about immigration, as the left-leaning press would have you believe. We are well aware of the staggering level of corruption in Brussels where millions go missing every year, corruption that makes our MPs’ expenses scandal look like stealing a few of the office paper clips. We don’t see why our sovereignty should be din the hands of an organisation that is a dumping ground for politicians who have failed at politics in their own countries – this is why it was known as ‘the gravy train’ even back in the 70s.

      Trade? European countries across the Channel export far more into Britain than Britain exports to Europe. No trade deal, and the resulting imposition of WTO tariffs, will hit the rest of Europe far harder than Britain. Germany’s car manufacturers are well aware of this as a third of the cars on Britain’s roads are German – and they also need the trade in car parts too.

      It is widely acknowledged that only the French security services are anywhere near as good as the British. I don’t see what the NATO obligations of European countries have to do with your argument, as NATO is a separate organisation from the EU.

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