At the heart of the matter is the clear need for a unified approach across Europe and the rest of the world, without which the City’s most senior bankers warned that Britain faces the prospect of lagging behind its future rivals.
“G20 governments have quite rightly promised to find a common approach to financial
regulation, but on the ground we are seeing an increasing divergence in the approaches to rule-setting and implementation,” said Colin Grassie, chief executive of Deutsche Bank in the UK.
“If no global consensus on regulation can be found, the UK’s position, as well as Europe’s position, will indirectly be defined by regulation in the US and ‘non-regulation’ in Asia. This will not be good for the US, but at least its market is more US-centric. It will be very bad for the UK, whose domestic financial services industry rubs shoulders with the truly international market for wholesale services.”
Of paramount importance is the UK’s stance on compensation and tax – both of which, according to Grassie, need to be handled with a sure hand by David Cameron’s government.
While our one-off bonus tax was a unilateral move which went beyond G20 principles and “moved us away from a level playing field”, Grassie said, the new proposals for a financial activities tax could also have the effect of a “bonus tax in disguise”.
Add to that the 50 per cent top band of personal income tax (Singapore and Hong Kong’s is just 15 per cent) and next year’s introduction of a bank levy in the UK, France and Germany, and the UK’s financial services industry faces the very real danger of being taxed out of the top tier.
“The UK is home to a core set of leading and world-class industries,” added Lloyds
Banking Group chairman Sir Win Bischoff, “but there are voices calling for a rebalancing of the economy by scaling down one of our key industries – namely, finance... Policymakers should be wary of confusing retribution with reform.”
London Stock Exchange chief executive Xavier Rolet added that the argument swings both ways, with the onus now on countries with less strict regimes to ensure their regulatory standards are up to scratch.
“All countries are now interconnected globally,” Rolet said. “For any country to see an opportunity to lift some business from the US or the UK on the basis of a looser regulatory policy would spell disaster.”