Are Paris and Frankfurt the new Geneva?

Another week, another threat to London's position as the preeminent financial centre in Europe. This time it comes from Paris and Frankfurt.

French president Nicolas Sarkozy seems to be leading the charm offensive, having supposedly held talks with European investment banking heads about the possibility of moving their HQ to Paris in return for long-term tax breaks.

Finance ministers in Europe have "made it clear that we can have whatever we want, whatever it would take to get us to move our headquarters", one head of an investment bank in London told the Sunday Times.

It would, of course, be foolish to discount this possibility entirely, but it's doubtful whether you should immediately start brushing up on your French and German language skills.

Let's not forget that Switzerland has long been touted as the location of choice for firms looking to escape the City, but so far it's largely only managed to attract a smattering of hedge funds, which are decidedly nimbler than investment banks when it comes to switching jurisdictions.

While the UK's appeal to bankers will have been tarnished by the 50% top-rate income tax, and the FSA's previously crackdown on bonuses, both Paris and Frankfurt will come under the EU's strict new rules around variable pay. They are therefore not obvious places to relocate if you want to escape onerous pay restrictions.

There's also the fact that the UK's banking levy - another source of anger for City institutions - is like to be rolled out in both France and Germany in the not-too-distant future. As the FT points out, this could mean that banks with a significant presence in both jurisdictions could end up paying twice.

And, as we pointed out previously, most banks have built up substantial UK corporate tax credits from their losses in the downturn, and the ability to offset these again future UK profits could keep them here for years to come.

All this does, however, come after thinly veiled threats from UK banks that onerous regulation may prompt them to move elsewhere.

And a going concern is the fact that firms in the City do appear to be losing staff to locations less hampered by regulatory crackdowns. According to figures from corporate finance advisory firm IMAS, over 4,000 senior financiers left London in the first six months of 2010.