Operating within an international banking system, inevitably financial institutions will find themselves subject to regulators from across the global.
No one can dispute the fact that the investigations by the New York Department of Financial Services into Standard Chartered and the US Senate’s Permanent Committee on Investigation’s probe into HSBC have been credible and forensically thorough. Clearly there are serious cases to answer at both banks which cannot be swept under the carpet.
It is unnerving to reflect that some four years on from the start of the financial crisis, British banks that emerged relatively unscathed at that time and had come to be considered almost unimpeachable, are now being dragged into a fresh wave of scandal. These latest stories, coupled with the revelations over LIBOR manipulation that centred upon Barclays, represent a potentially calamitous threat to the City of London.
The challenge for the UK is to maintain confidence in the City by vigorously rooting out bad practice and practitioners, without encouraging a momentum to build in favour of those who seek to present London as a fundamentally flawed jurisdiction. In the aftermath of trading losses at JP Morgan’s London office, there is little doubt that many in Wall Street recognise an irresistible opportunity unfairly to discredit the City of London as a whole in order to claw back some of the market share in financial services that New York had lost to London over the preceding decade and divert blame for some of Wall Street’s own misdemeanors. The mood music from Capitol Hill in this Presidential election year suggests too that politicians in the US will be keen not to take any prisoners as they trawl for fresh targets.
Growth in Asia is adding 20 to 25 million people a year to the ranks of the global middle class in India, China and South Korea, countries where there is a cultural propensity to save. These will be the customers and consumers of the financial services industry in the future. New York and London are in competition to secure a share of this growing financial services pie at a time when their Asian rivals – Hong Kong, Shanghai, Singapore – are upping their game. Whatever the current distaste for the banking fraternity, it is firmly in the national interest that the City of London and the UK maintain its global pre-eminence in this highly mobile sector.
We must treat these latest scandals seriously without letting the City’s competitive advantage in the financial services industry slip from our grasp. In a nation where banking and related services remain one of our few world-beating sectors, we simply cannot afford diffident complacency.