
Bank Execs in Davos Privately Say London Clearing Probably Safe - JumpCrisscross
https://www.bloomberg.com/news/articles/2017-01-19/bank-execs-in-davos-privately-say-london-clearing-probably-safe
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kartan
All the article is difficult to understand as it just throws information to
the reader without getting anywhere.

If you look to an older article from November 2016
[http://www.telegraph.co.uk/business/2016/11/17/europe-is-
unl...](http://www.telegraph.co.uk/business/2016/11/17/europe-is-unlikely-to-
seize-euro-based-clearing-from-london-says/) from another news source it is
better written and makes a more clear point.

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fergie
It comes as absolutely no surprise at all to find out that the UK's post-
Brexit Banking industry will be just fine.

At this point, the only possible opportunity Brexit gives the Conservatives is
to turn the UK into an offshore financial tax haven.

~~~
branchless
The uk and its islands are already tax havens. No checks if you wash your
dirty money through land.

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gumby
We need a warning for sites like Bloomberg: (autoplay video).

I miss flash since by not installing it I didn't have to see autoplay video.
What's the best way to defeat it?

~~~
flukus
Firefox has an option not to auto play movies but it can be hit and miss. It
also doesn't cater to the middle line like youtube where I want auto play but
not until the tab is focused.

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anoother
> youtube where I want auto play but not until the tab is focused

Chromium does this by default

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runeks
Maybe it's just me, but attempting to restrict the geographic location of
where something can be cleared seems completely delusional to me. Isn't the EU
basically asking the UK clearing firms to "give" their customers to the EU --
whatever that means?

I would assume that moving EUR clearing to the EU would involve setting up a
company in the EU that can compete with the clearing services of the UK
companies, thereby winning over customers, rather than attempt to put a
restriction on which kinds of contracts (Euro derivatives) other people can
enter into.

~~~
matt4077
How is delusional? If the EU wants it, they pass the necessary regulation and
/bam/, it's the law and it's done.

But maybe just the power to do so is enough to secure the EU/ECB's objectives.
Doing it just for the jobs would be a bit petty.

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edblarney
"they pass the necessary regulation and /bam/, it's the law and it's done."

You do not move a trillion dollars in clearing simply by passing a law.

These things are deeply entrenched in law, culture, talent, eco-systems,
support systems, staff etc. etc..

It would be like saying 'America just needs to require all products sold in
America are manufactured here /bam/ \- it's done'

~~~
zigzigzag
America does pass laws like that, frequently. Things related to defence, for
example.

The EU can absolutely impose trade sanctions on the UK in order to force
business out of it. The UK can do the same in reverse. Brexit is a trade war,
have no doubt about it. People just don't call it that.

~~~
edblarney
I think your conflating a little in both examples.

Everyone understands that 'defence' contracts are geopolitical, and there have
always been expectations around those controls - from parts to purchases - so
it's already in the system.

"The EU can absolutely impose trade sanctions on the UK in order to force
business out of it. The UK can do the same in reverse. Brexit is a trade war,
have no doubt about it. People just don't call it that."

All of those points are not appropriate.

There will not ever be any 'trade sanctions' for UK doing clearing of EU
dollars. Nobody is even suggesting that. To do so would rattle all markets
internationally, and kill confidence in the Euro. The Euro would lose 20% of
it's value overnight, and would never recover.

The UK could not do the same in reverse (how does it ban the EU from doing
Euro cleared transactions?)

And Brexit is not a 'trade war'. It's just Brexit. The 'worst case scenario'
is the UK is a country that trades with EU like any other: USA, Japan, Canada.
There is no 'trade war' between USA and EU.

The issues regarding EU wanting to have it's clearing within it's own
jurisdiction are reasonable, but the system can't be changed overnight.

The EU is about to go through another crisis because Italian banks are about
to default, and all of that lending goes through London. So guess who the EU
needs?

Brexit will probably work out with some kind of trade deal, specifically
involving financial services.

~~~
zigzigzag
Not appropriate? You may not agree, but how are my opinions "not appropriate"?

I was obviously talking in generalities: if the EU banned or tariffed its
citizens from buying service X from the UK, that doesn't mean it has to be
service X that is banned or tariffed in reverse. That's never how sanctions
are applied.

 _The 'worst case scenario' is the UK is a country that trades with EU like
any other_

I can think of many worst case scenarios worse than that. I think what you
mean is, you don't personally anticipate it getting worse than that.

~~~
krona
_> if the EU banned or tariffed its citizens from buying service X from the
UK_

It can't, because the UK will be a member of the WTO, like the EU. Members of
the WTO can't discriminate unfavorably against individual nations in the way
you're suggesting.

~~~
lhopki01
The UK won't be a member of the WTO since it never joined. It'll have to apply
after it leaves the EU.

~~~
zigzigzag
The UK appears on the WTO's member list:

[https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.h...](https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm)

~~~
lhopki01
I stand corrected. The inherited membership via GATT.

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breatheoften
Under what circumstances does the ECB's role as lender of last resort for a
clearinghouse provide value? Would not having to provide that service for
these clearinghouses be a good thing if it obligates (or effectively forces)
the Bank of England to serve in that capacity instead?

~~~
krona
_Under what circumstances does the ECB 's role as lender of last resort for a
clearinghouse provide value?_

A Euro liquidity crisis.

 _Would not having to provide that service for these clearinghouses be a good
thing if it obligates (or effectively forces) the Bank of England to serve in
that capacity instead?_

Um, the BoE doesn't _do_ Euros. By converting such derivatives to GBP, it
would exacerbate a Euro liquidity crisis.

~~~
breatheoften
What happens to the clearinghouses if there's a euro liquidity crisis and the
ecb doesn't lend clearinghouses the needed euros?

Couldn't the Bank of England keep sufficient euro reserves to backstop the
clearinghouses in a liquidity crisis?

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ksenzee
Headline should read "Bank Execs in Davos Privately Say London Clearing
Probably Safe". Right now the last bit is chopped off.

~~~
StavrosK
TL;DR: It's too dangerous to move the whole banking system that's set up in
London, so it's probably going to stay as it is for now.

~~~
_delirium
This is a bit more limited than that, one really specific part of the banking
system. Right now, Euro-denominated transactions can be cleared in many
locations, of which London is one, with a large share of the total volume.
Some Eurozone countries would like to require that this take place only in
Eurozone countries, and unsuccessfully pushed for that previously. Some of
them think the UK leaving the EU presents a good opportunity for a renewed
push in that direction (since it weakens the UK's role in internal EU
politics). The people quoted in this article think that's unlikely to happen.

This is all pretty deep in the weeds for a nonspecialist audience though, I
think.

~~~
nemo44x
> This is all pretty deep in the weeds for a nonspecialist audience though, I
> think.

It's the tip of the iceberg perhaps. Deep in the weeds for sure but rather
influential. Clearing is important but really what this is saying is "business
as usual".

The UK would be wise to play chicken as not cooperating with the UK is bad for
everyone (The EU knows this but they have to posture). The UK will smartly
make some concessions that especially punish the districts that made this
happen (No one will really talk about this). British Sterling will suffer for
awhile as being less global should make your currency less valuable and it
will - expect parity with the USD in the short term. Those who don't travel
won't care and those that can won't notice.

Everyone wins then. The will of the people is had, the people that are
affected contain the blast radius and life goes on, business as usual. Which
is good. And we all live on.

~~~
solidsnack9000
> The UK will smartly make some concessions that especially punish the
> districts that made this happen (No one will really talk about this).

The districts that voted for it?

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Wildgoose
Governments can't "punish" Parliamentary Constituencies so presumably he means
most of England outside of London along with the whole of the country of
Wales.

Which just goes to show how ludicrous the assertion is - all the Parliamentary
talk right now is about desperately trying to connect/reconnect to the voters
in these areas (who remember are the MAJORITY of the voters in those areas).

The only people who will be punished will be those who try to punish others.
The former Chancellor of the Excheqeur (Finance Minister) talked about a
"punishment" budget if the people voted to leave the EU. Please note I said
"former" \- he was sacked.

~~~
mcintyre1994
They don't need to explicitly punish areas like Wales, just treat them like
they have been treating them - business as usual without EU Regional
Development funding will be devastating. Nobody's talking any more about
having vast sums of money available to reallocate, so unless we're cutting
somewhere else I don't see how that vast EU pool is being replaced.

~~~
_delirium
Same is likely to happen in Cornwall. The local MPs are pushing for the UK
government to replace the EU structural adjustment funds with equivalent
amounts of UK funding, but it's now looking very unlikely that this will
happen.

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jza00425
EU has this attitude like others cannot survive without her. Too egocentric.

