For the Big Banks, Is London Closed for Business?
Once or twice a month, in a West London branch of a well-known UK bank, I spend Saturday morning asking myself why I don't simply ditch it for an entirely new one.
"There is no credible reason for Barclays to stay in London when New York is awaiting them with open arms. What does London have that New York doesn’t? The answer is nothing. New York has the talent, the legal infrastructure, and New York appears open for business."
Standing in a queue for up to an hour only be told that a simple banking transaction isn't possible because I have the wrong identification, or being told by a bank teller that "I don’t want to be here either" has made me pretty angry over the last few months, and made me question whether I should simply move to a bank that actually wants my business.
On a number of occasions I've even thought about complaining about poor service—especially while watching adverts telling me how helpful my bank is, despite my own experience and that of hundreds of other disgruntled customers I've gotten to know while waiting in line for more hours than I care to think about.
I've never bothered to actually complain though. Why not? Well, once I am finally free of my local branch on a Saturday morning, I would rather not spend another second thinking about said bank. I want to get on with my weekend.
It appears others are not so lenient on their bank in the UK. Data from the Financial Services Authority shows that 10,000 people a day complained about their branch last year, with Barclays topping the league table for complaints. Having claimed top spot from Spain’s Santander, the boss of Barclays' retail business, Anthony Jenkins, said he is “committed to reducing the number of complaints it receives and making substantial improvements to the overall service we provide customers”
Jenkins' boss, Barclays Chief Executive Bob Diamond, is working hard at finding a home where thousands of people do not ring up and complain about you everyday, and where the authorities actually welcome you with open arms.
"It's our obligation on behalf of shareholders to look at the alternatives” said Diamond at a meeting of bankers in London this week. "This is home and where we want to stay."
Over in the New York, the mayor was showing some leg and telling a press conference that the Big Apple would welcome Barclays with open arms if Diamond decided that all the complaints, and a few regulatory and tax issues in UK, couldn’t be ironed out.
Barclays leaving the UK would be a major blow for George Osborne as he battles with a budget deficit many voters in the UK blame on the banking system (and Gordon Brown of course). With Barclays paying nearly 3 billion pounds in taxes into the UK’s Treasury in 2010, the chancellor will be worried that he might have to raise even more money from taxpayers already smarting at a higher VAT, fewer public services and poor service at the bank on Saturday mornings.
The UK is mulling higher Tier 1 capital ratios, and the Independent Commission on Banking is considering whether to force banks to separately capitalize their investment banks. The government has imposed bank levy’s on the banking industry and this, added to 50 percent income tax for those earning over 150,000 pounds a year has led Barclays and rivals like HSBC and Standard Chartered to consider finding a new home where the regulations are less onerous.
Regulatory arbitrage is nothing new for the financial services industry. Considering a move is regularly considered while new regulations are being formalized, but it remains to be seen whether Barclays, Standard Chartered or HSBC will make good on the threats and actually move to New York or Hong Kong. This time, there may be something to the threats.
Peter Toogood, the head of research at Old Broad Street Research, says major banks could decide headquarters in the UK are no longer worth it.
“There is no credible reason for Barclays to stay in London when New York is awaiting them with open arms” Toogood told CNBC on Thursday. “What does London have that New York doesn’t? The answer is nothing. New York has the talent, the legal infrastructure, and New York appears open for business.”
“London has bank levies and New York and the US authorities are hoping to clean up," he said. "Britain needs to stop banker-bashing,” Toogood said.
Chris Wheeler is a Bank Analyst at Mediobanca and also believes Barclays could leave the UK.
“I have long questioned whether Barclays should split its retail division from its investment banking operations, and new draconian regulations in the UK could very well see Barclays head to New York or even Toronto where regulations are more favourable”
“HSBC has become more hawkish on the UK in recent weeks. Standard Chartered is the bank that probably should leave the UK, but where can it go? Singapore? Given the size of its assets, moving to Singapore would really mean Standard Chartered would be too big to fail,” Wheeler told CNBC.
Boris Johnson, the mayor of London, is consistently warning the government that London cannot take its financial centre’s leadership for granted. George Osborne, for his part, doesn't want to be seen as soft on bankers and is caught between a rock and a hard place with angry voters and mobile bankers.
Like more than 90 percent of the population, I won't be changing my bank however rude they are to me on a Saturday morning. The work it would entail for the pay-off is too small.
Bob Diamond, Stuart Gulliver and Peter Sands, on the other hand, may find they can get more out of changing countries.