|Some are intent on killing the goose that lays the golden egg.|
London, or more specifically the City of London, is the world's financial capital. New York isn't; not by a long shot. These yahoos are running the risk of turning it into another offshore economy like, say, the Cayman Islands. It may be a particularly big offshore economy, but it will become smaller as the transaction costs of doing business in a non-EU country increase. To its credit, Ireland is seeing the potential of siphoning away at least some support activities like backroom operations even if the UK ultimately stays as the baseline scenario still suggests:[US banks] said their plans were in most cases still at very early stages. But they said the US banks had started preparing for the eurozone’s impending banking union that threatens to isolate Britain and, ultimately, for a possible UK exit from the EU. “I’m frankly looking at moving some activities to Ireland,” said one senior UK-based manager at a Wall Street bank. “I think the Irish central bank and government would welcome this. It is not so much Brexit, more about legal entity optimisation.”
Most US and Asian banks have chosen to base their main European operations in the UK, giving them an automatic passport to carry out their services across all 28 countries in the EU. But senior US banking executives said the UK was unlikely to be granted the same “passporting” rights if it left the EU – the so-called “Brexit” scenario.
Prime Minister David Cameron has promised to hold a referendum on a renegotiated EU membership if his Conservative party wins next May’s election. Executives at American banks in Europe are reluctant to speak publicly about the issue for fear of upsetting the UK regulators. One said: “I don’t think people are making enough of it – a lot of passported activities that cannot take place in London will not exist here any more.”
The UK hosts more than 250 foreign banks and last year it generated a financial services trade surplus of $71bn, about a third of which came from trade with the EU, according to TheCityUK, a financial lobby group.Leaving the EU would be an unthinkably stupid thing for the UK to do, but hey, WWI looked pretty unlikely until about a hundred years ago, didn't it?
Most observers assume that if the UK did leave the EU then Frankfurt or Paris would be the most likely alternative for US banks looking to shift parts of their European activities out of the UK. But Ireland’s attractions for US banks include its low corporate tax rate, English speaking population, English-style legal system and eurozone membership. “Dublin is selling itself very hard at the moment,” said one banker.