The Great Debate UK
By Kathleen Brooks. The opinions expressed are her own.
Standard Chartered is the latest UK-based bank that seems to be getting it in the neck from our friends across the water. Firstly, there was Barclays and the Libor scandal, then there was HSBC which was fined for allowing drug-trafficked money from Mexico to go through its system and now there is Standard Chartered which is charged with “wilfully misleading” the New York Department of Financial Services and clearing $250 billion of Iranian transactions through its U.S. operation.
Two can be a coincidence, but three in as many months? Since the news on Standard Chartered broke there has been a torrent of investors, politicians and even some in the media who have queried whether this is just an attempt by Washington to discredit London and re-establish New York as the world’s financial centre.
There are three reasons why I don’t think this is so. Yes, the Standard Chartered case in particular, is sensationalist to say the least. The newly established New York Department of Financial Services and its head, Benjamin Lawsky, are trying to make a name for themselves on the world stage with this case. However, the recent attacks against some UK banks suggest that regulation is on the increase in the U.S. and financial services are in the firing line. This isn’t just going to affect UK banks, but also domestic bank and other foreign financial institutions with operations in the U.S. This is my first point. Not only do banks and other financial companies have to deal with the Dodd Frank legislation, they also have to deal with a whole new regulator based in New York, the beating heart of the U.S.’s financial sector.
Whether or not you agree that a bank should be able to do business with whoever they like (and not be dictated to by the U.S.), more regulation tends to mean higher costs, and in the current environment when it is hard enough to make money some banks may choose not to relocate from London or elsewhere and move to New York if they think the regulatory burden there is growing or going to cost them money in the future.
–Gerard Lyons is chief economist at Standard Chartered. Any opinions expressed are his own. –
Britain is clearly a Jekyll and Hyde economy. Or that at least is what the Chancellor would like us to believe. The bad news we are now seeing in the economy, public finances and across parts of the financial sector will not last. We are in the Mr Hyde phase. But, don’t worry, we will soon be back to the normal Dr Jekyll soon.
The outcome of this financial crisis depends on the economic fundamentals, the policy response and confidence. Chancellor Alistair Darling presents this Budget in an environment where the fundamentals are poor, confidence has been shot to pieces and the credibility of policy and his ability to spend any more is being widely questioned.