THERE can be no doubt that Asia holds the key to the future growth of the global financial services industry, providing a whole host of new opportunities for the international business community, including many UK firms.
And it is in all of our interests to help these rapidly emerging markets succeed and grow. That is why I have spent the past week in China to foster greater cooperation with the Chinese authorities and offer support for Chinese institutions which are looking to do more business in London. I sit on the Shanghai International Financial Advisory Council, which aims to gather international expertise to help Shanghai fulfil its ambition of becoming an international financial and maritime centre by 2020.
Over the years, the City has benefitted massively from decisions taken in other jurisdictions as they have sought to restrict the size and scale of their financial services industries.
To allow this to happen to us is unthinkable. Which is why George Osborne’s Budget announcement, introducing a bank levy in the UK, provides cause for concern.
Of course I understand the Chancellor’s reasoning – he wants the banking industry to repay its debt to the UK taxpayer and to be seen to be contributing to the economy – but he could be walking a political tightrope.
The £2bn the Chancellor hopes to raise may not be as huge a sum as some initially feared but it remains a significant imposition upon an industry that is vital to future UK and world economic growth. After all, our financial services sector contributed an estimated £61.4bn to the UK last year.
Unless we address the uncertainty surrounding our tax and regulatory regimes and change the global perception that an “anti-banker” sentiment continues to prevail in the UK, the City’s ability to compete with other financial centres around the world will surely be diminished.
Whilst it is true that we have not acted alone – France and Germany joined the UK in committing to introduce a levy on banks’ balance sheets and the US has also produced specific proposals of its own – it is worth bearing in mind that many countries such as Canada, China, India and Brazil have not. They did not have to bail out their banks, and see no reason why they should punish their financial services industry and diminish their international competitiveness.
These differences apart, the City needs to retain a degree of regulatory equivalence with all of our major competitors. The G20 summit meeting in Toronto is ideal for such a debate.
Of course it is unrealistic to expect unanimity within G20 on specific regulatory issues, particularly with regards to a bank tax.
But even with such diverging opinions, it is essential that the major jurisdictions work in partnership to agree on some common standards by which the global marketplace can operate.
Regulatory arbitrage is a dangerous thing, especially when it is the City that is at a competitive disadvantage! EU and US interests, whilst not identical, are certainly compatible. We must use the City’s unique position as Europe’s financial capital and one of only two truly global financial centres to encourage greater dialogue and understanding between our European and transatlantic partners.
Stuart Fraser is the Policy Chairman at the City of London Corporation.