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> 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 a
by GreaterFool 8y ago
> 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.
- sabertoothed 8y ago> Deals are made in UK because English law is really, really good. Can you elaborate?
- hkt 8y agoWe 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/ 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.
- vmarsy 8y agoSo 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 ?
- tlarkworthy 8y agoYes since the Magna Carta of 1215
- avmich 8y agoIs 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.
- tlarkworthy 8y agoI 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/home-news/british-people-most-honest-in-the-world-and-have-uk-politicians-to-thank-a6922306.html 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
- flexie 8y agoSo 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.
- growlist 8y agoYou might find this of interest: https://www.qlts.com/blog/why-english-law-governs-most-international-commercial-contracts https://www.qlts.com/blog/why-english-law-governs-most-inter...
- NicoJuicy 8y ago> 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_Justice 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-fails-to-retain-voice-in-european-court-of-justice 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, ... )
- pseudolus 8y agoEnglish 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.
- steve_gh 8y agoEnglish 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_foundation_for_commercial_economies 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.
- JAlexoid 8y agoThat'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.
- jayalpha 8y agoNo, 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.
- tejaswiy 8y agoPresumably 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.
- onetimemanytime 8y ago>>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.
- spiralx 8y agoBanks 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".
- flexie 8y agoWhen 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.
- stuaxo 8y agoA 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.
- benj111 8y ago"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.
- dheelus 8y agoIt 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.
- ryan_j_naughton 8y agoYour 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.
- cm2187 8y agoWhat 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).
- growlist 8y agoThis 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.
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- GreaterFool 8y agoYes, 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.
- benj111 8y ago$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).
- jotm 8y agoSuppose 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.
- jcfrei 8y agoAssuming 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.
- 24gttghh 8y ago>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#Money_multiplier https://en.wikipedia.org/wiki/Fractional-reserve_banking#Mon...
- cm2187 8y agoThe UK has significant liquidity requirement.
- soVeryTired 8y agoReserve 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.
- joezydeco 8y agoSo what happens (post-Brexit) if the GBP weakens and the EUR strengthens? Does the location matter now?
- yakshaving_jgt 8y agoNitpick: GBP*.
- joezydeco 8y agoD’oh! Fixed, thanks.
- JAlexoid 8y agoEver heard of overnight loans? The more cash you hold, the more you can finance.