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PANEL DISCUSSION: “London v New York and the top financial centres in North America and Europe versus the rising financial services centres”
Chair: Professor Michael Mainelli, Executive Chairman, Z/Yen
Panellists: Keith Boyfield, Managing Director, Keith Boyfield Associates/Sandra Boss, Partner, McKinsey & Co/Michael Gaffney, Global co-head of Taxation, Merrill Lynch/Anthony Belchambers, Chief Executive of the Futures and Options Association (FOA).
Professor Mainelli opened the discussion by asking panellists how a financial services industry can be grown amongst the various financial centres globally that benefits us when governments appear to be “leaping when there’s a bit of wealth to be had?”
“I think that governments are going to get greedier because our expectations are so high and at the moment a number of governments are in a bit of a crisis,” said Anthony Belchambers. They’ve got no money of their own so what are they going to do to get it? In addition, stealth taxes are fading because they’re now becoming more obvious and we can identify them much more easily, so that’s another change taking place which has consequences for governments.”
He continued: “I’m not convinced that the US Treasury Blueprint is deliverable, so I think the US has got some very, very brave steps to take and I think it has to take them very, very quickly otherwise it could be a lingering death and you end up relying upon a domestic economy with buckets of international business sitting around it, which is not healthy.”
Keith Boyfield referred to Sovereign Wealth Funds: “because more and more of the wealth of the world is being transferred to oil producing countries we’re seeing a renationalisation of hydro carbons across the world and an underinvestment in oil production, which is one of the reasons why oil prices are so high at the moment. But there’s also a commercial opportunity for banks and private equity funds and others to tap in to that tremendous source of capital.” | | Mike Gaffney, global co-head of taxation, Merril Lynch and Sandra Boss, partner McKinsey & Co, lead partner on the McKinsey-authored Mayor Michael Bloomberg-Senator Charles Schumer report on New York's future as a financial centre (2007) |
Michael Gaffney commented that governments have “a tough time ahead and they’re going to have to exercise some form of leadership which requires a certain amount of education to understand that the world is a different place to what is was in the 1960s or 1970s. The issue for them is how do they lead in today’s world?”
Turning the discussion to principle-based versus rules-based regimes, Professor Mainelli asked panellists if they agreed that ultimately a rules-based approach will dominate over time.
“I think the inevitable reality is that principles in the US have to be guidance for a while and a mechanism for rationalising rules,” said Sandra Boss. “I think it will take quite some time if you imagine the evolution from multiple regulators to few regulators, to rationalisation of rules to rationalisation of oversight against those rules. That is probably a 5-10 year process.”
Anthony Belchambers claimed that principles-based regulation falls into two parts: principles for regulation and principles for businesses. “It’s worth remembering that when the UK developed its approach to principles for business it wasn’t with all those altruistic things that we talk about, it was actually designed to enable the five SROs that were in existence to develop their own rules and be freed from the central rule book that they were tied to.”
He continued: “What’s perhaps more interesting is that they took effect as rules and there was no dismantling of the rules themselves in favour of principles until 2007, so we actually had something like 15 years when those principles were used to supplement enforcement action and there was no commensurate abbreviation of the rules books.”
Looking to the future, Professor Mainelli asked panellists to offer their prediction on which global financial centre they consider is the one to watch.
Sandra Boss offered Hong Kong and Shanghai, saying that, “the interesting thing to ask is the extent to which they are allowed to co-exist and the extent to which there is an ultimate shaping over time by China as to which one it wants to win and for what purpose.”
Michael Gaffney opted for Singapore: “If Singapore can work with other people in exchange information sharing I think there is a lot of developed jurisdictions which would enter into tax treaties with them.”
Mumbai was Keith Boyfield’s choice: “if it sorts out its infrastructure”; whilst Anthony Belchambers is looking towards Asian countries, in particular Malaysia and Vietnam.
PANEL: “Offshore Centres & The Middle East & Far East Financial Centres”
Chair: Patrick L Young
Panellists: Geoff Cook, director Jersey Finance; Jane Dellar, Managing Director, Bahrain Financial Services;John Spellman, Director of Finance, Isle of Man;Aidan Walsh, partner, Ernst & Young;Bob Moore, Director, Guernsey Finance
The panel was asked to set out the advantages of their respective financial centres by providing facts, figures and unique selling points about their financial centres.
When asked which financial centre represented on the panel that he used and why, Aidan Walsh of Ernst & Young said that he used them all for different things. “Every one of these centres has their own advantages“ he said. “One of the interesting things in financial centre analysis is that every really good, successful centre will always have smaller centres around it that will fill in the gaps and complement it. I think this is something that’s often not appreciated by the big centres - they should view it as a valued component in their offering.”
Moving on to the role of stock exchanges, Patrick Young asked the panel whether they considered them as “vanity football teams or essential part of a market’s structure?” | | (l-r) Geoff Cook, chief executive, Jersey Finance; Bob Moore, director, Guernsey Finance and Patrick Young, Session Chair and author of author of Capital Market Revolution and New Capital Market Revolution. |
“I believe the stock exchange is an important component of a financial centre and in some respects it can be a badge of honour showing you’ve got substance to complete the offering. It gives credibility and substance,” said Geoff Cook.
“In the region I’m working in stock exchanges have been traditionally for trading purposes and continue to be so,” said Jane Dellar. “However, there are changes being made to stimulate it and develop it and evaluate the purpose of the exchange, which involves talking to various relevant parties and that side of it is definitely on the agenda.”
The Isle of Man has no stock exchange, but has established strong links and relationships with the London Stock Exchange. However, John Spellman indicated that this could change: “looking to the future I see a changing world and the Isle of Man is a base for a number of companies who trade carbon, so I don’t rule out the opportunity to do something but it won’t be a ‘me too’, it will be a vehicle that drives a commercial need with liquidity, so watch this space.”
Finally, panellists were invited to give their opinions on what they viewed as the key competitive issues coming from ‘new’ financial centres in the Middle East and other centres. “I’d probably focus towards the Far East as the impetus towards transparency is there. I think the more traditional centres have successfully broadcast that the respect for privacy of the individual is there, so you have to balance the transparency aspect and the privacy aspect, which can be challenging,” said Bob Moore.
Geoff Cook claimed that: “I think places like the crown countries have a bright future leveraging off their heritage, but they’ve got to combine that with speed to market, innovation and agility as I think the emerging centres are investing very heavily. Also, ‘newer’ centres have the opportunity to leap into the race without the legacy baggage of the past. The issue of transparency could also create a divide as some countries are moving towards greater transparency and some are not showing any signs of change, and this could be problematic particularly for European centres. We’d like the OECD to sort some of its own members out and get them engaged too.”
The issue of banking secrecy in various cultures is one which Aidan Walsh recognised as a very difficult issue. “Different centres have different views and attitudes towards banking secrecy embedded within their culture and I can see why Singapore and Hong Kong don’t want to engage because I think culturally for them to get rid of all banking secrecy is really an impossibility.”
Jane Dellar provided another example of cultural differences, when she claimed that: “the issue of tax is something that the Middle East just doesn’t understand because they simply have no concept of it in any capacity. So it’s not about being secret or not wanting to co-operate, it’s just about really not understanding why it’s there in the first place.”
“From the Isle of Man’s perspective this is probably the most sensitive area,” said John Spellman. “We have a history of privacy, but we’ve got to be careful we’re not excluded from the game of international finance centres by carrying too much of a legacy past - it’s a very difficult thing to balance. I am a fan of transparency in the right context - and a fan of agreements with newer financial centres to move forward on this.”
PANEL: “Offshore centres, European and other Regional and Emerging centres
Chair: Patrick Young
Panellists: Enrique Prados del Amo, Madrid Financial Centre/Akkie Lansberg, Managing Director, Holland Financial Centre/Hartmut Schwesinger, Director, FrankfurtRhineMain/ Andrew Rigby, Partner, Brodies
Patrick Young commenced proceedings by asking participants their opinion on the importance of branding in a financial centre perspective.
“I think a brand does matter and it’s something that we believe we need to build on a little bit better than perhaps we’ve done in the past,” said Akkie Lansberg.
“Over the last 25-30 years we took the decision that to become a successful financial centre we had to become very proactive and at that time the City and the banks began to develop certain events, like the European Banking Conference and we have a European Finance Week,” said Hartmut Schwesinger. “We have worked hard on various initiatives to build the brand because what is a brand? It is a promise of quality and opportunities and of trust and I think all of these are components that we’ve worked on and continue to work on.”
Andrew Rigby admitted to wearing two metaphorical hats for the purposes of the roundtable, one relating to London and one to Scotland: “I think in terms of brand it’s interesting to see how Scotland’s been trying to position itself in the global financial centres market. One of the key factors for Scotland is that small countries prosper by specialising and it is positioning itself in two ways: one through the brand of Scotland and secondly through its financial services top ten, including Royal Bank of Scotland and HBOS. In addition, there are newcomers who are coming into Scotland for asset servicing and fund management, including Citibank and BNY Mellon.”
The concept of “revolution” was raised by Patrick Young when panellists’ views were sought on whether they agreed that financial centres are going through their own revolution similar to the industrial revolution.
Schwesinger claimed that the financial centres “revolution” will mirror the movements of the industrial revolution: “financial centres were a European invention, very much dominated by an Anglo-American understanding of the business, and it’s slowly moving away and other global economies are taking over,” he said.
“The 29 financial centres that we now know in Europe are not going to last in the form that we know them today,” added Akkie Lansberg. “It might take ten or 20 years, depending on how optimistic you are about the future, but that number will probably reduce to ten centres. No financial centre can take it for granted that they will remain in that group and they have to fight for their own place.”
Inevitably, the discussion turned towards the credit crunch and its impact on the various financial centres represented on the panel going forward. “We don’t have the default problem with mortgage in Spain,” said Enrique Pados del Amo. “However, we have the problem of over-investing and a very high external trade deficit. We invest much more than we save and to finance that in the current credit situation is very difficult and will affect growth in the next couple of years.”
He was also asked if he considered that Spain would increase its ties with Spanish speaking countries in South America, for example, to increase the leverage of the financial centre: “Definitely - many Latin American countries are following the Spanish system and structure, because they know the potential problems and the answers. Obviously, this helps to increase our profile as a prosperous financial centre.”
Holland’s solution to raising its profile is to leverage on its unique public/private partnership between government and the financial sector. “This means that we are working together to join forces to profile the companies’ and the country’s strengths,” said Akkie Lansberg. “It’s important to innovate and to build on what we’ve got to operate on the international stage.”
Hartmut Schwesinger agreed that innovation is required to operate effectively in today’s market: “We have recently had an influx of new international banks, one of which entered the retail market and had €160 million worth of new business without a single piece of marketing.” Akkie Lansberg pointed out that this fact alone is evidence of the increasing attitude and response to globalisation: “ten to 15 years ago it would have been hard to imagine a European country putting money into ‘foreign’ banks, but this is all part of what going global is about,” she said. | | (l-r)Hartmut Schwesinger, Director, FrankfurtRhineMain; Enrique Prados Del Amo, President, Asocación de Mercados Financieros; Akkie Lansbergen, Managing Director, Holland Financial Centre (Chair) and Patrick L Young, Author of Capital Market Revolution and New Capital Market Revolution . |
Andrew Rigby claimed to be slightly more pessimistic about the future, claiming that: “one of the opportunities we in the West have to face is the impact of emerging markets, in particular India, China and possibly Brazil and Dubai. We are seeing Sovereign Wealth Funds already starting to enter the market, and it’s important for all the European regions to face that challenge head on.”
The concept of “revolution” was raised by Patrick Young when panellists’ views were sought on whether they agreed that financial centres are going through their own revolution similar to the industrial revolution.
Schwesinger claimed that the financial centres “revolution” will mirror the movements of the industrial revolution: “financial centres were a European invention, very much dominated by an Anglo-American understanding of the business, and it’s slowly moving away and other global economies are taking over,” he said.
“The 29 financial centres that we now know in Europe are not going to last in the form that we know them today,” added Akkie Lansberg. “It might take ten or 20 years, depending on how optimistic you are about the future, but that number will probably reduce to ten centres. No financial centre can take it for granted that they will remain in that group and they have to fight for their own place.”
Inevitably, the discussion turned towards the credit crunch and its impact on the various financial centres represented on the panel going forward. “We don’t have the default problem with mortgage in Spain,” said Enrique Pados del Amo. “However, we have the problem of over-investing and a very high external trade deficit. We invest much more than we save and to finance that in the current credit situation is very difficult and will affect growth in the next couple of years.”
He was also asked if he considered that Spain would increase its ties with Spanish speaking countries in South America, for example, to increase the leverage of the financial centre: “Definitely - many Latin American countries are following the Spanish system and structure, because they know the potential problems and the answers. Obviously, this helps to increase our profile as a prosperous financial centre.”
Holland’s solution to raising its profile is to leverage on its unique public/private partnership between government and the financial sector. “This means that we are working together to join forces to profile the companies’ and the country’s strengths,” said Akkie Lansberg. “It’s important to innovate and to build on what we’ve got to operate on the international stage.”
Hartmut Schwesinger agreed that innovation is required to operate effectively in today’s market: “We have recently had an influx of new international banks, one of which entered the retail market and had €160 million worth of new business without a single piece of marketing.” Akkie Lansberg pointed out that this fact alone is evidence of the increasing attitude and response to globalisation: “ten to 15 years ago it would have been hard to imagine a European country putting money into ‘foreign’ banks, but this is all part of what going global is about,” she said.
Andrew Rigby claimed to be slightly more pessimistic about the future, claiming that: “one of the opportunities we in the West have to face is the impact of emerging markets, in particular India, China and possibly Brazil and Dubai. We are seeing Sovereign Wealth Funds already starting to enter the market, and it’s important for all the European regions to face that. |
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| Article appeared in the August 2008 issue.
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