Mar 11 2011

FT and Economist: bankers’ threats are bluff: face ’em down

Posted by: Nick Shaxson in: Thoughts

First, an editorial in the FT (hat tip: Liberal Conspiracy via Tax Research.

“Institutions have warned that further regulation would simply result in defections to less onerous jurisdictions. HSBC is talking to its shareholders about whether it should move its domicile to Hong Kong. Standard Chartered has hinted that it might do the same. Such threats should be faced down, not just because they are unreasonable but because they are of questionable credibility.
. . .
(if some of these banks did reduce their operations in the UK as a result of tighter regulation,) it would not be a disaster. And were it to be the price of financial stability, this would be a price worth paying.”

The emphasis is mine. It’s so important, because this is an FT editorial. Quite right, quite so. Politicians the world over quail far too often in the face of this bullying lobbying. But now it’s not only the FT weighing in on this issue. The Economist is taking a somewhat similar line too, in an excellent editorial of its own explaining why the bankers are, so often, bluffing. Lots of the threats made to London are of the form ‘don’t tax us too much or we’ll run away to Switzerland:

“They might be bluffing: Geneva’s finance minister recently said that the city was running out of office space—and some might in any case be deterred by the experience of the trailblazers. Many exiles find Switzerland oppressive and miss London’s variety. Some are bored and plan to come home.”

Indeed. I live in Switzerland (see why here), and while it has many attractions, it is boring in many ways. It’s difficult to find anywhere affordable to live, and, although all the Swiss rules don’t bother me so very much (though I don’t like being tsked! at when I take my bottles to the bottle bank on the wrong day) the libertarians who people the world of high finance often take a different view:

“Free-wheeling financiers who sought a lighter regulatory touch in Switzerland are infuriated that petty rules are rigidly enforced outside work. Kit, the head of a trading outfit, tells of a visit from a policeman one morning. He was threatened with a fine because his maid had put out the rubbish before 7am. Toilets cannot be flushed, or washing machines used, after 10pm without provoking strife. Taxis must be hailed from a rank. Red tape is rife. Yet it is boredom that seems to hurt most.”

In short, the Economist and the FT are arguing, the UK authorities shouldn’t take those anti-democratic threats from bankers seriously. Call their bluff, tax and regulate their industries properly, and they may whine and throw their toys out of their prams. But they will, by and large, stay.

4 comments so far

PJB19 3th March, 2011 4.27 pm

Agree wholeheartedly, in fact it would be great f they did go. Then we could actually organise a better society based on sustainable principles and shared benefits rather than the silly idea of personal wealth.

Of course to organise a better society we dont just need the b(w)ankers to go but we also need to change the voting system. Whilst AV is probaby not right, it’s certainly better than FPTP.

Then we need a sustainable economy based on much lower consumption of all types and regrettably higher taxes, but it can be done.

Richard Heller 3th March, 2011 8.03 am

If all the tax-dodging bankers fled to Switzerland there would be a glut of them and their rewards would go down, rather than up. They might also bore each other to death without making the rest of us listen to their specious whining.

I have just posted six proposals inspired by Treasure Islands on my website – link herewith.

No reply from addressees – comments welcome to

Frances Coppola 4rd April, 2011 12.41 pm

If banks such as HSBC choose to move their HQ elsewhere it will be because moving the HQ confers strategic advantage – of which lighter taxation and/or regulation may form part but not the whole. In the case of HSBC I think it is likely that they will move back to Hong Kong at some point because of the strategic importance of the Chinese market to them. We should ignore their underhand attempts to influence govt policy by crying wolf.

SPEARSBrigitte32 8th August, 2011 10.46 am

According to my own investigation, thousands of people in the world get the personal loans at different banks. Therefore, there is good chances to find a commercial loan in all countries.

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