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Reuters
16-07-2025
- Business
- Reuters
Breakingviews - Guest view: The City of London requires a strategy
LONDON, July 14 (Reuters Breakingviews) - A coherent strategy to foster the growth and competitiveness of the United Kingdom's financial services sector is long overdue. Britain is the second-largest exporter of financial services in the Group of Seven rich economies. The industry, as the Chancellor Rachel Reeves has observed, is the crown jewel in the UK economy. Yet output in financial services has declined since the millennium, particularly since Britain left the European Union, while other services sectors in the UK have powered ahead. Although not the implosion some predicted, the City of London has been suffering a slow puncture as business and jobs in wholesale finance gravitate to the EU and other global financial centres like Singapore, Dubai, and New York. Brexit cost the City some 40,000 jobs according to former Lord Mayor Michael Mainelli, but that is only part of the story. One of the legacies of leaving the EU is that many of the new jobs in wholesale finance are now created in other capitals. One big U.S. investment bank expects the proportion of jobs based in London relative to EU financial centres to shift over time from 90% to more like 60%. Mending the City's puncture demands a comprehensive top-down strategy based on both its strengths as well as the headwinds it faces. So far attempts to address the City's problems have been sticking plaster solutions, involving a half dozen uncoordinated reviews. Some, such as the UK Listings Review conducted by former EU commissioner Jonathan Hill, came up with sensible recommendations. But an overarching strategy has been sadly lacking. Reeves has the chance to change this when she unveils her plan for financial services on Tuesday. There is much at stake. Financial and professional services account for more than 12% of total UK tax receipts – more than the whole education budget. There is also significant opportunity. Trust is a critical commodity that helped the City achieve its position as the leading global intermediary in wholesale finance, managing international capital flows, international investment, and dispensing advice. The uncertainty engendered both by U.S. President Donald Trump's administration and geopolitical tensions makes London's reputation more valuable. However, the chancellor needs to tackle challenges and weaknesses. For starters, the regulatory burden on the City is unnecessarily high. Politicians and watchdogs need to draw a sharper distinction between safeguards for domestic consumers and rules governing wholesale and international activity. Anecdotal evidence suggests that the compliance burden in the UK is higher and more expensive than needed, and lead times for authorisation of new entrants unduly long. The Financial Conduct Authority recognises this difficulty and is now on a mission, opens new tab to reduce regulatory complexity and the administrative burden in wholesale markets. It is also providing extra support for wholesale, payments and crypto assets firms seeking approval to set up in the UK. Then there is the much-debated issue of how much society should be protected from financial failures. Reeves needs to set the tone by clarifying that the public should not expect 100% protection when things go wrong, and by providing unambiguous guidance to regulators about the degree of risk appetite acceptable in international and wholesale finance. There is no point blaming regulators for being too cautious when politicians' expectations and the legislation they have passed drives those bodies to be risk averse. Britain also needs to encourage a move more towards a standards-based regulatory approach to international and wholesale finance, based on outputs rather than binary 'blackline' rules. Such regulations are necessary in areas such as authorisation and capital adequacy. But writing specific rules to cover new, complex, and fast-changing areas of financial activity can be both stultifying and inhibiting. Standards of good practice developed by practitioners have proved an effective complement to FCA regulation in the fixed income markets through the work of the Financial Markets Standards Board, which was set up with official endorsement in the wake of the Libor and foreign exchange scandals. The Standards Board for Alternative Investments has also been effective at promoting good practice in the hedge fund industry. Standards can also be much more effective in new areas such as artificial intelligence, green finance, and cryptocurrencies, where the required outputs can be defined but the means of delivery are fluid. Moving further in this direction should be part of the government's strategy. The UK must also ensure it shows a welcoming face to the talented individuals required in a leading international financial centre, at a time when technology and AI are reaping huge changes. It is unfortunate that many highly paid, wealthy individuals have been leaving the UK, in part because of the abolition of tax breaks for 'non-domiciled' residents. It is welcome that the government appears to be reconsidering its decision to make these individuals' worldwide assets subject to inheritance tax. Finally, there is the EU. With the relationship between the two undergoing a reset, the government should take a hard look at where they can benefit from working more closely together in financial services. Both sides want to strengthen their capital markets and encourage productive investment by life insurance companies and pension funds. As the governor of the Bank of England suggested recently there can be benefits to both sides in closer alignment in financial services. Of course, any dynamic alignment with EU rules will provoke accusations of squandering the opportunities of Brexit. But Britain must face up to the inevitable tradeoffs. Would greater access to the EU financial services market in return for a degree of rule-taking be better than the position the UK is now in? The government has already accepted that dynamic alignment with EU standards on food safety and animal welfare will benefit farmers and the public. So far, the government's main regulatory preoccupation has been to encourage more investment in infrastructure by pension funds. Whatever the merits of this idea, the emphasis should be on developing a strategy for the UK's entire wholesale financial activity. The City's great strength is as an international intermediary. The issues are complex, which is why they have not been tackled before. But there is too much at stake, both fiscally and in terms of influence, to miss this opportunity to preserve and strengthen the City's position.
Korea Herald
27-03-2025
- Business
- Korea Herald
Seoul's global financial ascent fueled by fintech, says ex-lord mayor of London
The former Lord Mayor of London, Michael Mainelli, underscored the importance of connectivity in positioning Seoul as a global financial powerhouse, highlighting fintech innovations and a robust regulatory framework as key strengths. Mainelli, now chairman of think tank and consultancy firm Z/Yen Group, believes that enhancing interconnectivity within the global community is essential for Korea and its cities to advance further and remain competitive in the rapidly evolving global economy. 'Connectivity is everything. You have to be connected to be a commercial center. You can't be an international commercial center without international people,' he said while delivering a speech at a forum hosted by the Institute for Global Economics, focusing on Korea's global competitiveness. The event took place at a hotel in Seoul on Thursday. Mainelli also recognized the importance and influence of Korean popular culture. 'Do not underestimate the impact that K-culture has had around the world, including K-pop and K-drama. There are people who would have never heard of Korea and now have it beamed by Netflix into their sitting rooms, watching and absorbing Korean culture.' 'Reputation is vital. You can lose a good one just overnight,' he added. Sharing the findings of the Global Financial Centres Index released by Z/Yen Group last week, the chairman noted that Seoul has made significant strides in its quest to outperform major cities. 'Seoul has been doing extremely well, but it wasn't even on this chart 20 years ago. So it is tremendous progress,' said Mainelli, an expert in financial markets, technology and the development of financial centers. Seoul ranked 10th among 133 cities in the latest index, which evaluates and ranks the competitiveness of financial centers worldwide to reflect shifting dynamics and emerging trends in global finance. Seoul previously ranked 36th in 2019, steadily climbing to 16th in March 2021, and to 12th in March 2022. Since 2023, it has consistently ranked in the top 10. Notably, Seoul maintained its 10th-place ranking in the 'fintech' category for the second consecutive year, reaffirming its position as a digital financial hub. 'Fintech again, Seoul does very well, and I believe this could be core to your competitive advantage due to the skills that you have here throughout Korea, especially in Seoul and Busan,' Mainelli said. The Z/Yen Group head said the strength of Seoul's regulatory system is particularly satisfying, which provides a sense of optimism as it is recognized globally as a strong framework. Seoul Mayor Oh Se-hoon, who also attended the event, pledged to develop Seoul to emerge as Asia's preeminent financial hub. 'We will create a vision for Seoul and drive change by focusing on transforming the fundamental financial structure and ecosystem,' he said. For the Korean economy to make significant advancements, the revitalization of finance will play a major role in fostering a business-friendly environment and boosting investments in research and development, he added. Mainelli further emphasized that fair treatment is a fundamental strategy for creating a successful financial hub, and "goes well beyond telling your regulators to be fair." "Take for example, something as simple as competition regulation. If I enter a market where there's one giant pension fund as a foreign entity and I begin to have a problem, we know who's going to win and it's not me. So I stay out of those waters.'
