This would be the hope, but I can’t help feel that we are underestimating the greed of those in charge both of banks and countries. I don’t have that much faith in people.

Part of me things we should kick in with new regulations, and those who leave are not companies and people we want here anyway. Financially makes little sense, but I’d feel better about the country.

The stockmarket prices of the shares of the big banks rose on publication of the interim report of the Independent Commission on Banking chaired by Sir John Vickers. Nuff said?

“Nuff said?”

Not really. The market movement simply shows that the report was not as damaging to the banks as was expected by significant parts of the market, there is no other information to gain from that bit of data.

I don’t really understand this argument that banks want to locate somewhere willing and able to bail them out.

What kinds of banks? Foreign banks like Merrill, JP Morgan, Commerzbank, Deutsche, UBS, Soc Gen etc. employ a lot of people in London and contribute a lot of tax revenue, but the UK government never showed any inclination to bail them out (at least, I think not). So their location decision is not explained by the implicit offer of a bailout.

The question of where banks are headquartered is different to where they locate operations. Which is Anderson talking about?

I thought the whole aim of reform was that we wouldn’t bail out investment banks (the ‘marked more at risk’ point is really the bailout point, restated), so how can we use the promise of a bailout to keep banks where they are? Seems a bit inconsistent to say ‘oh they won’t move abroad if we reform aggressively” when reforming aggressively might involve removing the reason you say is keeping them where they are.

If we go ahead and “ring fence”, for example, Barclays high street banking from its investment banking, then we’d hopefully not be bailing out its investment banking operations. Barclays high street banking business cannot relocate overseas.

on the theme of the problem of coordinating regulations, the FT says as things stand foreign owned banks will gain advantage in UK high street if we try to impose higher capital requirements on UK domiciled banks:

http://www.ft.com/cms/s/0/cba871c8-6924-11e0-9040-00144feab49a.html#axzz1Jsw6bXj3

[would there be scope under EU law to impose an offsetting levy on overseas domiciled banks? I don't know, but my guess is not]

I attended a seminar by a senior director at Bank of America Merrill Lynch a couple months ago, and he suggested that the real issue was not whether banks would ‘relocate’ – which is highly unlikely – but really where they would direct new investment. In other words, when the bank is deciding where they should develop their business, where they should open new divisions, hire new people, acquire subsidiaries etc., they look at the business environment. If, in relative terms, the attractiveness of that environment has declined vis-a-vis other areas (e.g. Hong Kong), they’re more likely to expand in Hong Kong. So the issue may be the gradual shift in relative importance towards other centres, not some wholesale uprooting to new locations.

I agree with Suitpossum that it is the loss of new investment that is more relevant than wholesale relocation. The UK tax system is more pertinent than the regulatory regime. The relocation thing is a bit of an empty threat. Our big five are five times the size of the British economy and that leaves the UK exposed. If Standard Chartered and HSBC were based in Hong Kong, they would be ten times the size of the economy. Switzerland are massively exposed with just their two large universal banks and are trying to reduce their exposure. It is far from clear whether anybody would want additional large universal banks relocating to their territory. I don’t see how there would be much advantage in Barclays relocating to New York. They would still be forced to ring-fence all their UK retail operations.