The economic consequences of Brexit (Vol 2)
Discussion
walm said:
maffski said:
walm said:
That means that if London is shut off from passporting, Markit will be fine because he can shift everything London was doing under passporting to one of his other offices.
It isn't good news.
Or, it means there's no difference from your Amazon order being contracted to Amazon Sarl, or your Google Adwords contract being with Google Ireland.It isn't good news.
You need a legal entity in the EU to contract the business, that doesn't mean the people doing the work need to be in the EU.
Right now, there are people in London employed by Markit to do work that requires regulatory passport granted owing to our EU membership.
The Markit guy is saying that he doesn't care about passporting because he can happily do the current London work, elsewhere if London losses its passport.
At that point, those London employees are no longer required.
I have done plenty of regulated financial services business in Europe and elsewhere in in the world and, as Stongle explained above in some detail, businesses will be able to move the minimum amount of business to existing regulated entities in Europe, for example retail sales of investment products, whilst maintaining the vast majority of their operations in London.
Passporting is a complete red herring, as explained in the article. A friend of mine runs a multi-jurisdictional asset manager with several EU offices each regulated separately already because Passporting is an ineffective pain in the arse.
loafer123 said:
I have done plenty of regulated financial services business in Europe and elsewhere in in the world and, as Stongle explained above in some detail, businesses will be able to move the minimum amount of business to existing regulated entities in Europe, for example retail sales of investment products, whilst maintaining the vast majority of their operations in London.
OK, so you agree with me.stongle said:
walm said:
That means that if London is shut off from passporting, Markit will be fine because he can shift everything London was doing under passporting to one of his other offices.
It isn't good news.
Why oh why do people buy into this passporting stuff as wholesale destruction of City of London. IHSMarket is a fintech; aside from the actual IP its value is in its people. It also has sizable client base, still in London. It won’t up sticks as it needs to retain this marketing link. Nor will their people be queuing up to leave for lower pay conditions or worse tax in EU states.It isn't good news.
The passporting argument is like turning up to a gunfight with a peashooter. Its an overplayed banner wheeled out to explain otherwise less than savoury news (such as disruptive fintech / DLT etc – we’re doomed, doomed I tell thee).
Sure we may leak a little bit; but a wholesale exodus simply won’t happen. The offices going into the Eurozone will be wafer thin to the minimum of the local regulatory standard. The size required is going to be relative to the services offered. Operational processes are already off or near-shored for a lot of G-SIBs – and if anyone wins in Europe I suspect it won’t be the “obvious” candidates of Paris or Frankfurt (as workers council etc resource costs are far too high); but Eastern European locations with lower labour costs (or more easily influenced labour laws). In Germany France, headcount becomes a fixed cost; rather than a variable it's a dumb business strategy.
For summary, the following macro issues will “pwn” passporting as an argument to move business:
1. Listing in US/UK is more effective for companies – especially given repeal of Volcker or depth of market making capabilities
2. It’s a bureaucratic mess, and onerous regs push up costs. MiFIDII will reduce market liquidity as compliance costs are too high
3. Bifurcation of clearing etc; is inherently bad and increases friction costs.
4. The EC has already lost to the BoE / UK on attempts to enforce Eurozone clearing of EURs @ the ECJ. Furthermore the US clearers can do it…
5. Disruptive fintech will bypass a lot of national rules / FIAT money constraints. There are already digital currencys / settlement coins with 1:2:1 conversion into FIAT monies about to be launched with global G-SIB backing
6. Post GFC financial reform and deflationary / sluggish growth in the Eurozone are actually mutually exclusive constructs (it’s a whole other topic)
7. The EC is gearing up for a Foreign Banking tit for tat with the US. The US DOES penalise offshore / foreign banks Vs. US ones. The Eurozone is launching a tit 4 tat response (holding co & resolution rules). There are over 3k financials across Europe; many foreign owned that this may actually impact.
8. You can’t polish a turd. The banks & PBs lending into the asset managers etc in Europe are locked into a death spiral. Clearing volumes are down, as they cannot afford to support high balance sheet intensive activities (or leverage extension)
For smarter posters, I’m surprised it gets trotted out as a catch-all (although if one believes the nonsense pumped out by the 90% economists and big 4 consultants with an axe on idiosyncratic risk predictions I wonder why). Passporting makes my teeth itch more than the tripe pumped out by Powerstroker.
PS whilst you can't polish a turd if it fresh and warm enough you can roll it in glitter
B'stard Child said:
PS whilst you can't polish a turd if it fresh and warm enough you can roll it in glitter
Ah!, you have experience in debt repackaging & ABS. 
I'm in Luxembourg next week for the Global Funding & Financing Conference. Should be interesting to see some of the Central banks, SWFs plus Euro banks. Expect Brexit to be high on the agenda. these are always comical events where everyone says something palatable; but its followed by a nudge:nudge:wink:wink or SSS (Secret Squirrel Sh*t) discussion. Said discussion is nearly always on jurisdictional or industry type arbitrage.
Article on single market
http://www.ibtimes.co.uk/theresa-may-right-single-...
http://www.ibtimes.co.uk/theresa-may-right-single-...
Article said:
The case for the Single Market is even weaker when you examine the way it discriminates against a British economy so heavily dependent on services such as banking, international finance, insurance and legal expertise. EU rules are regularly and cynically rigged to prevent us utilising these skills properly.
Isn't the Single Market supposed to guarantee freedom of services? Indeed it is. But again and again countries such as France and Germany have conspired to wreck schemes that would have allowed Britain to operate in European financial markets. And so an ambitions Services Directive proposed in 2006, was deliberately neutered, to Britain's great disadvantage. A planned Takeover Directive was wrecked too, in order to frustrate 'Anglo-Saxon predators'.
So is it really worth our while to belong to this flawed and failing system when it costs us £9bn ($11.2bn, €10.4bn) net in financial contributions every year, prevents us from controlling our own borders and erects so many obstacles to our services sector? Clearly not. When Jeremy Corbyn complains that Theresa May 'seems to be wanting to have her cake and eat it' , he simply shows – not for the first time - that he's badly out of touch.
There are several threads where parts of that would be relevant Isn't the Single Market supposed to guarantee freedom of services? Indeed it is. But again and again countries such as France and Germany have conspired to wreck schemes that would have allowed Britain to operate in European financial markets. And so an ambitions Services Directive proposed in 2006, was deliberately neutered, to Britain's great disadvantage. A planned Takeover Directive was wrecked too, in order to frustrate 'Anglo-Saxon predators'.
So is it really worth our while to belong to this flawed and failing system when it costs us £9bn ($11.2bn, €10.4bn) net in financial contributions every year, prevents us from controlling our own borders and erects so many obstacles to our services sector? Clearly not. When Jeremy Corbyn complains that Theresa May 'seems to be wanting to have her cake and eat it' , he simply shows – not for the first time - that he's badly out of touch.
Jockman said:
kurt535 said:
Jockman said:
kurt535 said:
.....price of property in frankfurt has stormed up in value in anticipation of relocations lined up.
Nothing to do with "strong economic growth, 1.1 million refugees, high work-related immigration, weak construction supply and low interest rates"?No, squarely increased post - Brexit vote.
Not hard to understand why that would happen surely?
http://www.globalpropertyguide.com/Europe/germany/...
All German property prices have been rising, not just Frankfurt.
It's akin to saying that all house prices rise in London are the result of the City of London.
https://www.bloomberg.com/news/articles/2017-01-13...
B'stard Child said:
stongle said:
walm said:
That means that if London is shut off from passporting, Markit will be fine because he can shift everything London was doing under passporting to one of his other offices.
It isn't good news.
Why oh why do people buy into this passporting stuff as wholesale destruction of City of London. IHSMarket is a fintech; aside from the actual IP its value is in its people. It also has sizable client base, still in London. It won’t up sticks as it needs to retain this marketing link. Nor will their people be queuing up to leave for lower pay conditions or worse tax in EU states.It isn't good news.
The passporting argument is like turning up to a gunfight with a peashooter. Its an overplayed banner wheeled out to explain otherwise less than savoury news (such as disruptive fintech / DLT etc – we’re doomed, doomed I tell thee).
Sure we may leak a little bit; but a wholesale exodus simply won’t happen. The offices going into the Eurozone will be wafer thin to the minimum of the local regulatory standard. The size required is going to be relative to the services offered. Operational processes are already off or near-shored for a lot of G-SIBs – and if anyone wins in Europe I suspect it won’t be the “obvious” candidates of Paris or Frankfurt (as workers council etc resource costs are far too high); but Eastern European locations with lower labour costs (or more easily influenced labour laws). In Germany France, headcount becomes a fixed cost; rather than a variable it's a dumb business strategy.
For summary, the following macro issues will “pwn” passporting as an argument to move business:
1. Listing in US/UK is more effective for companies – especially given repeal of Volcker or depth of market making capabilities
2. It’s a bureaucratic mess, and onerous regs push up costs. MiFIDII will reduce market liquidity as compliance costs are too high
3. Bifurcation of clearing etc; is inherently bad and increases friction costs.
4. The EC has already lost to the BoE / UK on attempts to enforce Eurozone clearing of EURs @ the ECJ. Furthermore the US clearers can do it…
5. Disruptive fintech will bypass a lot of national rules / FIAT money constraints. There are already digital currencys / settlement coins with 1:2:1 conversion into FIAT monies about to be launched with global G-SIB backing
6. Post GFC financial reform and deflationary / sluggish growth in the Eurozone are actually mutually exclusive constructs (it’s a whole other topic)
7. The EC is gearing up for a Foreign Banking tit for tat with the US. The US DOES penalise offshore / foreign banks Vs. US ones. The Eurozone is launching a tit 4 tat response (holding co & resolution rules). There are over 3k financials across Europe; many foreign owned that this may actually impact.
8. You can’t polish a turd. The banks & PBs lending into the asset managers etc in Europe are locked into a death spiral. Clearing volumes are down, as they cannot afford to support high balance sheet intensive activities (or leverage extension)
For smarter posters, I’m surprised it gets trotted out as a catch-all (although if one believes the nonsense pumped out by the 90% economists and big 4 consultants with an axe on idiosyncratic risk predictions I wonder why). Passporting makes my teeth itch more than the tripe pumped out by Powerstroker.
PS whilst you can't polish a turd if it fresh and warm enough you can roll it in glitter
So let me give a simple but realistic example of why passporting matters.
Let’s take Eurobond issuance. This is a vital product for large companies to raise funding. Large company do not borrow from banks. Most of the leading providers are based in the UK.
I do not have the figures but I would suggest in terms of likely issuers in the EU, 25% will be UK based and 75% will be rEU based.
If the UK loses passporting a UK FS firm can only respond to an rEU issuer if specifically requested.
This is a highly competitive market the firm who compete in the market cannot wait to be asked they will be marketing there service to potential issuer all the time.
Without passporting the sales people servicing the rUK customers will need to be largely rEU resident.
So we now have 70% of the sales force in the rEU, so the head of sales rEU is a bigger job than the UK head of sales.
Trading can still remain in the UK because they have limited customer contact.
However, Eurobond trading is not just dependant on issuance it’s also dependant on providing execution services to investors.
At the moment most of the large fund managers are UK based. They will also be relying on passporting to sell their products in the EU and to service EU customers.
Since saving are closely related to GDP they will also be moving management and sales to the rEU.
Since the investors in Eurobonds will then mainly be rEU based, the bank will be moving 70% of those who sell the execution service to the rEU.
So now the bank has 70% of all its eurobond sales people in the rEU. Now it can keep trading in the UK but this is not particularly efficient so better to move it all to the rEU.
Ignore this idea that you can avoid passporting by having minimal staff in the EU. Regulator do not accept this they insist all key decision makers are resident in the EU.
So the business heads, head of compliance, finance director, head of risk will have to be rEU based. Now they can outsource much of the day to day operation to the UK. My experience however, of these people they do not like sitting on their own they want staff around them. So with the new rEU roles being much bigger that the UK roles guess where jobs will be moving.
By the way the accountants and lawyers advising the company, and the rating agency will also now need to be rEU based.
At the moment in the UK 2m people are employed in FS and FS pay £60bn in taxes. I am not suggesting it will all be lost but it’s stupid to say FS are unimportant.
Mrr T said:
I actually had not replied to the post because it’s all over the place. Previous posts even referred to Blockcoin replacing parts of the financial markets!
So let me give a simple but realistic example of why passporting matters.
lots of stuff...
I'm showing that other costs are greater than the passporting benefit (bottom line). You are presenting Operational arguments that (IMHO) are overstated. Tail wagging the dog has been mentioned.So let me give a simple but realistic example of why passporting matters.
lots of stuff...
I'm drawing a comparison on why you overstate passporting compared to job losses coming from disruptive tech. DLT is coming, conversion of digital asset to FIAT money is coming, trade finance using blockchain is coming. the jobs are not moving to Europe - they are going full stop.
Passporting is a convenient bogeyman to explain other negative effects
Re the EuroBond strawman.
I suspect we are not going to agree; I will use arguments re credit capacity & cost and ability to make secondary markets (tbh you've absolutely had yourself with the Eurobond example as its a classic example of regulators getting it wrong destroying liquidity). With very poor risk buffers (in rEU) you cannot even Prop book it so you may become reliant on Hedge Funds to fill this void - (so positive effect of passporting is to increase shadow-banking?).
I could go one re the modelling of risk; but you will default with the same argument that passporting is great (when in fact its just a cost). When other negative costs of being EU based hit firms the gravitational pull reverses - why do you think London is the centre (and will remain) of many financial markets.
I agree some jobs will move (we both agree that); but in very small numbers. I'm clearly not stating that FS are not important I'm employed (& Equity stake) in firm providing execution, trading (own MTF) and structuring services (so I have skin in the game as it were).
Its all a trade, you have your view I have mine (I'm well hedged with a Euro entity if need be and dual passport). Perhaps that's why I can see the Alpha opportunity of Brexit...
walm said:
loafer123 said:
I have done plenty of regulated financial services business in Europe and elsewhere in in the world and, as Stongle explained above in some detail, businesses will be able to move the minimum amount of business to existing regulated entities in Europe, for example retail sales of investment products, whilst maintaining the vast majority of their operations in London.
OK, so you agree with me.stongle said:
Mrr T said:
I actually had not replied to the post because it’s all over the place. Previous posts even referred to Blockcoin replacing parts of the financial markets!
So let me give a simple but realistic example of why passporting matters.
lots of stuff...
I'm showing that other costs are greater than the passporting benefit (bottom line). You are presenting Operational arguments that (IMHO) are overstated. Tail wagging the dog has been mentioned.So let me give a simple but realistic example of why passporting matters.
lots of stuff...
I'm drawing a comparison on why you overstate passporting compared to job losses coming from disruptive tech. DLT is coming, conversion of digital asset to FIAT money is coming, trade finance using blockchain is coming. the jobs are not moving to Europe - they are going full stop.
Passporting is a convenient bogeyman to explain other negative effects
Re the EuroBond strawman.
I suspect we are not going to agree; I will use arguments re credit capacity & cost and ability to make secondary markets (tbh you've absolutely had yourself with the Eurobond example as its a classic example of regulators getting it wrong destroying liquidity). With very poor risk buffers (in rEU) you cannot even Prop book it so you may become reliant on Hedge Funds to fill this void - (so positive effect of passporting is to increase shadow-banking?).
I could go one re the modelling of risk; but you will default with the same argument that passporting is great (when in fact its just a cost). When other negative costs of being EU based hit firms the gravitational pull reverses - why do you think London is the centre (and will remain) of many financial markets.
I agree some jobs will move (we both agree that); but in very small numbers. I'm clearly not stating that FS are not important I'm employed (& Equity stake) in firm providing execution, trading (own MTF) and structuring services (so I have skin in the game as it were).
Its all a trade, you have your view I have mine (I'm well hedged with a Euro entity if need be and dual passport). Perhaps that's why I can see the Alpha opportunity of Brexit...
So from what I do understand we should not worry about losing passporting because:
1. The jobs are being off shored anyway – That’s certainly happening but we still have a lot of FS jobs losing even a 100,000 and say 10bn of tax revenue in 2018 will have a serious impact/
2. Freed of EU regulations the UK can grow new FS – This is fine but since you will not be able to sell those products to the rEU which is 75% of your customer base is not so good.
3. Blockchain will replace trade finance and cash management – Maybe in 50 years but we need the current jobs.
4. That the Eurobond business will go to the rEU anyway because of costs of capital – I have no idea why that would happen because with passporting come regulatory equivalence. Also issue and trading take minimal capital so long as you clear inventory over month end.
I am glad you are protecting the position of your MTF by already having an rEU regulated vehicle. So if we lose passporting are you one of the key decision makers who will have to move to the rEU.
Strocky said:
As someone who grew up in England but has roots and friends in other countries in Europe so can do an "outside looking in" view, that pretty much nails it. Ouch.Mrr T said:
I do still find it hard to address what is almost a list of random comments.
So from what I do understand we should not worry about losing passporting because:
1. The jobs are being off shored anyway – That’s certainly happening but we still have a lot of FS jobs losing even a 100,000 and say 10bn of tax revenue in 2018 will have a serious impact/
2. Freed of EU regulations the UK can grow new FS – This is fine but since you will not be able to sell those products to the rEU which is 75% of your customer base is not so good.
3. Blockchain will replace trade finance and cash management – Maybe in 50 years but we need the current jobs.
4. That the Eurobond business will go to the rEU anyway because of costs of capital – I have no idea why that would happen because with passporting come regulatory equivalence. Also issue and trading take minimal capital so long as you clear inventory over month end.
I am glad you are protecting the position of your MTF by already having an rEU regulated vehicle. So if we lose passporting are you one of the key decision makers who will have to move to the rEU.
Argh!!!! Passporting does not exist in isolation. Finance firms do NOT make decisions on a single axis; but take a portfolio approach. You constantly pick 1 tree out of the wood; and fail to take a look at the macro environment or forest.So from what I do understand we should not worry about losing passporting because:
1. The jobs are being off shored anyway – That’s certainly happening but we still have a lot of FS jobs losing even a 100,000 and say 10bn of tax revenue in 2018 will have a serious impact/
2. Freed of EU regulations the UK can grow new FS – This is fine but since you will not be able to sell those products to the rEU which is 75% of your customer base is not so good.
3. Blockchain will replace trade finance and cash management – Maybe in 50 years but we need the current jobs.
4. That the Eurobond business will go to the rEU anyway because of costs of capital – I have no idea why that would happen because with passporting come regulatory equivalence. Also issue and trading take minimal capital so long as you clear inventory over month end.
I am glad you are protecting the position of your MTF by already having an rEU regulated vehicle. So if we lose passporting are you one of the key decision makers who will have to move to the rEU.
I'd make you a price on jobs lost due to Brexit if we could prove it. Maybe we could trade the delta betweens jobs lost in London Vs. jobs gained in the EU (the EU will game the numbers though).
One thing you should note, word to the wise as it were.
Your timing estimates are off either end of the scale. 2018 for job losses is 11months away, way to early to crystalize Brexit headcount losses. Regulations actually prohibit firms exiting markets that threaten stability. There is NOT a cats chance in hell execution will move by then (its an obvious fail in your argument). There is also a trader maxim that says "there is no first mover advantage to regulatory change". Change will create opportunity, there will be plenty of jurisdiction arbitrage to keep us going (in London) if Brexit is as you say...
DLT / Blockchain is coming in next 18mths - mainly driven by ledger optimisation. Trade Finance follows shortly. The fracturing of R3 and IP protection by the G-SIBs is a precursor event. You should also read proper research on effects of Blcokchain on share price, MS did I think. Predicted horizon is 3yrs (which further degrades bookvalue).
I'm not advocating Bitcoin or other magic beans, simply the use of DLT (which is where the real value is, ether, BTC is just a bit of fun).
I'm simply giving you all the information you need to dig-up Real world impacts to FS that trump passporting (rather than throwing back strawmans and the likes of E&Y prejudiced & discredited anaylsis).
I'm not arguing anymore!
gazapc said:
Imagine the irony of it. By the time negotiations get under way the EU trump card will be"If you don't accept free access to the single market, we will refuse to provide you with migrant workers"
kurt535 said:
Jockman said:
kurt535 said:
Jockman said:
kurt535 said:
.....price of property in frankfurt has stormed up in value in anticipation of relocations lined up.
Nothing to do with "strong economic growth, 1.1 million refugees, high work-related immigration, weak construction supply and low interest rates"?No, squarely increased post - Brexit vote.
Not hard to understand why that would happen surely?
http://www.globalpropertyguide.com/Europe/germany/...
All German property prices have been rising, not just Frankfurt.
It's akin to saying that all house prices rise in London are the result of the City of London.
https://www.bloomberg.com/news/articles/2017-01-13...
Prices were already rising but as you say, it makes sense that prices would rise further on an expectation of relocations.
Bloomberg does acknowledge these potential relocations as a hypothesis based IIRC on a unit rise of 5,000. It will be interesting to see how this transpires.
Mario149 said:
Strocky said:
As someone who grew up in England but has roots and friends in other countries in Europe so can do an "outside looking in" view, that pretty much nails it. Ouch.
article above said:
The referendum vote does not deserve to be respected because, as an outgrowth of English narcissism, it is itself disrespectful of others, of our allies, partners, neighbours, friends, and, in many cases, even relatives. Like resentful ruffians uprooting the new trees in the park and trashing the new play area, 17 million English, the lager louts of Europe, voted for Brexit in an act of geopolitical vandalism
Mario149 said:
Strocky said:
As someone who grew up in England but has roots and friends in other countries in Europe so can do an "outside looking in" view, that pretty much nails it. Ouch.MDMetal said:
Mario149 said:
Strocky said:
As someone who grew up in England but has roots and friends in other countries in Europe so can do an "outside looking in" view, that pretty much nails it. Ouch.MDMetal said:
Mario149 said:
Strocky said:
As someone who grew up in England but has roots and friends in other countries in Europe so can do an "outside looking in" view, that pretty much nails it. Ouch.the self righteousness just oozes from every word . another that thinks they know best for the little people but really needs to get a grip on reality. if that was a child of mine that wrote that i would be utterly embarrassed , not only for them but my own failing as a parent for raising a child with such a closed mind.
anyone of the same view is an utter waste of space tosser , see ,we can all have biased opinions
MDMetal said:
Mario149 said:
Strocky said:
As someone who grew up in England but has roots and friends in other countries in Europe so can do an "outside looking in" view, that pretty much nails it. Ouch.Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff