
Banks May Need $50B New Capital After Brexit - JumpCrisscross
https://www.bloomberg.com/news/articles/2017-07-31/banks-may-be-hit-with-50-billion-capital-needs-after-brexit?em_pos=small&ref=headline&nl_art=7
======
fogetti
What a sad story. My heart is broken. Please everyone, let's start a gofundme
campaign for those innocent wholesale banks.

~~~
nerdponx
_HSBC Holdings Plc was the first bank to spell out the cost of Brexit,
forecasting Monday it will have to pay as much as $300 million in relocation
and legal costs as it moves 1,000 investment bankers to Paris, about a fifth
of its London workforce._

Oh dear. 3% of their first-half 2017 profit [0]. What ever will they do?

0:
[http://www.bbc.com/news/business-40772965](http://www.bbc.com/news/business-40772965)

~~~
Zenst
Indeed HSBC is a global bank and with that an indicator upon the fiscal state
of the global economy, not the UK, nor Europe.

ANy finance jobs that move will be ones involved with EU related business and
frankly as it stands I feel financial transactions in a EU members country
should be taxed in that country and not cherry picked into one single members
coffers. But that alas is the case in so many area's of the EU and a real
contentious issue. ANother bigger issue is the single market that allows any
EU company to route and pay TAX in a EU members country of choice and in the
UK's case we see time and time again large corporations avoiding UK
corporation TAX via the use of Ireland and Luxemburg who have special TAX
rates. More sad is the latter (Luxemburg) was wholly setup as such by one Mr
Junker who went on to become the overall leader of the EU (presidency) and
even with his knowledge and expertise this issue has dragged on and still gone
unaddressed. This creates unfairness amongst members. Then you have the EURO
(UK not part of that) which shifts all QE centrally and as such pegs all
members of it into whatever position they joined and if one member needs QE
(say Greece) then all other members equaly gain as that single member can no
use QE to fix there problem. This means it is extreemly hard, if not
impossible for memebrs to climb up the charts, so to speak.

But alas many issues and calls for reforms get overlooked and ignored over the
years...decades. So you start to see why many wanted to leave the EU and the
perception that its all because people are racist is not only narrow minded,
but racist in itself. Sadly many parrot on that false perception upon all
people who voted to leave and that frankly is vile and wrong.

But as to your main point, you are totally right, the effect upon HSBC is
negligible at best as they are a global bank.

------
nerdponx
I'm sure they could find the money somewhere. I can only hope that no
politician has read this and is thinking "I know, let's loan them the money at
no cost".

This is a great opportunity for right-wing politicians to put their money
where their mouth is. They claim to support free markets, so this is what they
should do: allow banks to reduce or end business in the UK, and then allow the
willingness to pay for banking in the UK to rise to the point where it comes
profitable again to operate there. Banks are run by, well, bankers. Surely
they can figure out the accounting on their own without government assistance.

~~~
lmm
That's a little disengenous when we talk about banks, which are creatures of
governmental regulation from top to bottom. How much of this capital is
"needed" solely because of regulatory requirements?

(Of course governments are quite right to impose requirements on those
organizations they're providing backstop funding for. But you can't talk about
a "free market" in one aspect of banking in isolation; it isn't and can't be a
free market unless you change myriad other aspects of how the banking system
works)

~~~
nerdponx
I'm not sure I buy that. Regulation on "how to run your business" is somewhat
different from "where to run your business" and "how much to charge for your
business", or for that matter "here's some free money to help you keep profits
higher than they would be otherwise".

There is plenty of regulation in computer monitor design and construction by
way of FCC requirements, emissions standards, and e-waste recycling rules.
Would you argue that the computer monitor market is not free as a result?

Without regulation on fractional-reserve banking, you would have a serious
principal-agent problem that, if anything, would make the market for banking
less free if left uncontrolled. I see no analogous argument for the government
using taxpayer money to buffer major banks' operating expenses.

~~~
lmm
> There is plenty of regulation in computer monitor design and construction by
> way of FCC requirements, emissions standards, and e-waste recycling rules.
> Would you argue that the computer monitor market is not free as a result?

The computer monitor market is notoriously unfree for various reasons, but I
suspect that's an accidentally bad example and will assume we were talking
about something else.

I'd say it's a matter of degree. A simple, objective regulation doesn't
interfere with a free market; a government directly instructing a business to
make particular decisions distorts it greatly. Banking isn't quite at the
latter level but it comes close.

> Without regulation on fractional-reserve banking, you would have a serious
> principal-agent problem that, if anything, would make the market for banking
> less free if left uncontrolled. The risk of economic collapse is an enormous
> externality. I see no analogous argument for the government using taxpayer
> money to buffer major banks' operating expenses.

It's never as simple as that. Obviously the government should not be handing
bags of cash to banks or any other businesses. But we generally regard doing
regulation as something the government should bear its own costs for rather
than passing on to the regulatee.

~~~
freeflight
> But we generally regard doing regulation as something the government should
> bear its own costs for rather than passing on to the regulatee.

How so? If the government regulates that you shouldn't dispose your chemical
waste into the river because that's bad for everybody, then it's still your
problem to figure out what to do with that chemical waste, after all, it's
_your_ waste and not theirs.

The government has no responsibility for bearing any costs which result from
you merely following the rule of law.

~~~
lmm
> How so? If the government regulates that you shouldn't dispose your chemical
> waste into the river because that's bad for everybody, then it's still your
> problem to figure out what to do with that chemical waste, after all, it's
> your waste and not theirs.

It's your problem to figure out how to dispose it safely, sure. But if they
want to e.g. audit where the waste is going, that would be widely seen as
something the government should do/pay for themselves. And that's how it is
with a lot of banking regulation: complying isn't the expensive part,
measuring and demonstrating that you're complying is.

~~~
freeflight
> But if they want to e.g. audit where the waste is going, that would be
> widely seen as something the government should do/pay for themselves.

The government has a reason for wanting to audit that waste because it's
dangerous and if it's not properly stored in can cause untold damage to whole
generations.

If we could trust private interests to do the same, we would, for the longest
time that's exactly what we did.

But experience has shown that private interests usually outweigh public
interests. Meaning: If we let people just do whatever they want, they tend to
do quite a bit of public damage in the pursuit of their private profits,
that's why we started to regulate.

So, if your business involves handling dangerous substances you better make
sure you have the facilities and capabilities to properly dispose of them, the
government will, rightfully, hold you accountable to that because if they
don't then _no_ _one_ _else_ will.

Let's also keep in mind that it's usually the public, aka the government, who
has to pay the clean-up costs when some big private venture turned out to be
quite destructive, they are usually the ones left holding the bill while all
the private profits already went outside the country.

------
struppi
This is the third or fourth article about the cost of Brexit I read this week.
Another interesting one was how ridiculously expensive border control and
customs could become

There's still almost two years of negotiations ahead, but right now the
rhetoric of the British government seems to be geared towards a hard brexit
(e.g. "There will be no freedom of movement after 2019, even if we lose access
to the single market").

The rhetoric on this side of the channel seems to be a bit more nuanced - but
not much. Both sides have drawn some red lines, and they do not seem to
overlap.

So, I fear we'll have a mostly hard Brexit in two years, and it will cost, the
UK, Europe and many companies billions.

~~~
arkitaip
Could part of the problem be that EU politicians view the British POV as not
only arrogant but very greedy? Historically Britain has benefited greatly from
the EU, pulling off deals granted to no other EU country. Now they try to make
those exclusive deals for their post brexit but don't bring enough to the
table. This short clip by School of Life [1] explains just how privileged
Britain's position in the EU has been.

[1]
[https://www.youtube.com/watch?v=kgu6pFz5oxA](https://www.youtube.com/watch?v=kgu6pFz5oxA)

~~~
gadders
Britain is a net contributor to the EU, so it puts in more than it gets out.

~~~
afandian
Of what? Cash or all benefits (including intangible ones)?

~~~
dazc
OK, I'll bite. What would be an intangible benefit, for example?

~~~
icebraining
Participation in Erasmus, to take a random example. Hard to put an euro amount
on it, but it's a benefit for the students and probably for the countries.

~~~
dazc
As someone who has lived in Alicante for a period of time I have seen Erasmus
in all it's glory thank you. It's not something I am going to miss paying
towards.

~~~
cr1895
>As someone who has lived in Alicante for a period of time

Among intangible benefits was your ability to live in Alicante for a period of
time, without having to apply for a work/study visa or whatever other hoops
someone non-EU would have had to jump through.

~~~
dazc
Yes, I could argue that the hoops to jump through aren't that great, but I
will concede that I was able to move on a whim, and did. If I had to apply for
visas, etc I may not have bothered.

~~~
cr1895
>I could argue that the hoops to jump through aren't that great

Yes, it might have been doable. But you must also remember that such an
ability is a privilege, not a right- if you lost your job, quit school, or
whatever granted you your hypothetical residence permit ceased to be a thing,
you'd have to leave and uproot your life. As a UK citizen EU member, you had a
right to live and work anywhere in the EU. Post-Brexit, not so much.

------
Silhouette
_Banks may need to find $30 billion to $50 billion of additional capital to
support new European units in the aftermath of a hard Brexit_

It's worth noting straight away that, as with much commentary about Brexit,
this is based on hypothetical analysis of one possible result, in this case, a
"hard Brexit" where there is no UK-EU deal on financial services at the point
of the UK leaving. There are other plausible outcomes, and no-one really knows
how likely each of these possibilities is yet.

 _A hard Brexit, where banks lose privileges access to the European Union’s
single market, would “fragment European wholesale banking,” Oliver Wyman
partners including Matt Austen and Lindsey Naylor said in the report. “It will
also make it significantly less profitable. Banks could see two percentage
points knocked off their returns on equity.”_

It would also most likely cause serious harm to European businesses that
currently rely on City-based financial services. Even senior figures like the
German finance minister seem to be very wary of allowing this to happen. Both
the UK and the EU do therefore have a very good incentive not to screw up that
aspect of any successor arrangements.

------
stuaxo
Most of the people that work in these banks (even in the financial centre) are
not the ones taking home massive bonuses, this could have a massive knockon on
people, who while not poor are not rich either.

------
lvoudour
>Banks may need to find $30 billion to $50 billion of additional capital to
support new European units

No explanation given for those absurd figures, no evidence, no calculations,
nothing. And that's 50B without relocation cost, which the article suggests
it's gonna cost another billion. And who publishes "estimations" with such
level of uncertainty (30 to 50) without blushing?

------
AJRF
Good. You don’t get to be isolationist and racist without losing the benefits
of trade with the rest of Europe. The nation will be punished for the series
of missteps that led it here, but this time they can’t blame diplomats in
Brussels.

~~~
tyingq
Xenophobia and racism aren't necessarily the same thing.

Edit: I'm open to the idea that some (edit: some portion of..I have no idea
what the split is) supporters aren't xenophobic either. The "racism" tag just
bugs me in this context.

~~~
Zenst
"some" \- many if not most, but what would I know apart from living there and
knowing many non-racist people.

~~~
tyingq
I specifically chose "some" because I have no idea what the split is, and
again...I don't presume racism.

~~~
Zenst
Yet the wording use of "some" implies a minority and that infers the majority
are racist, which counters you explanation and probably you intentions. No
denying all countries have racists, they get to vote and in many cases are a
small minority and yet so many project the few upon the many and run with it
that it is utterly shocking to see and disenfranchising at best.

~~~
tyingq
Edited. (though "some implies a minority" is debatable. look it up)

However, you keep saying "racist". My point was racism is less likely than
xenophobia. Country of origin and religion aren't race.

~~~
Zenst
Racism and xenophobia are very much symbiotic and hand in hand, lets just call
them unwarranted discrimination. But then, are religious people xenophobic
towards non-religious people as that does hold more true than people care to
discuss and does seem to be a bigger issue in many a country.

------
abhi3
My guess is that the public mood is going to shift quickly when it becomes
clear how big a loser UK is going to be in any exit deal (or no deal). The
conservatives will have to necessarily put the deal to vote in parliament or
likely a referendum and post defeat the government will have to resign. EU
membership against becomes an issue in the General election and voters elect a
party which promises to get UK back in EU.

