Morning Coffee: This could be the start of something bad. The real reason jobs will leave London
Remember the Global Financial Crisis? - The 'GFC' in the vernacular of those who like systemic meltdowns reduced to three letter acronyms? If you do, you will recall that it really began in August 2007 when BNP Paribas suspended withdrawals from three of its funds invested in the U.S. subprime housing market. BNP said it arrested the withdrawals, "to protect the interests and ensure the equal treatment of our investors during these exceptional times." Fast forward nearly nine years, and Standard Life just gated its UK real estate fund for 28 days citing, " uncertainty for the UK commercial real estate market following the EU referendum result”.
In recognition that Standard Life's move could presage something more nasty, the FT says we must "pray" that it's an "oddity" rather than the start of "deeper trouble for the investment industry." The real concern, however, must be that it doesn't presage the start of deeper trouble for the UK's banks. As George Hay, Reuters' European financial editor, points out on Twitter, commercial real estate accounts for 50% of UK banks' capital. If commercial real estate plummets in value, UK banks may need to raise more capital soon. This might be good news for London's FIG-focused capital markets bankers, but it's unlikely to be pleasant for anyone else.
The good news is that this isn't the first time a UK property fund has gone into lockdown for 28 days: Standard Life did the same in 2008 at the peak of the financial crisis, as did Friends Provident. Equally, Hay points out that UK banks have been stress tested against a 30% fall in the value of their UK real estate investments. The only flies in the ointment are that when UK commercial property prices fell in 2008 they declined by 44% according to Hays, and that UK investment in open-ended property funds rose from £15bn to £25bn between 2007 and 2015. Fingers crossed then.
Separately, a study from the Boston Consulting Group has hit upon the factors that will propel London finance jobs to the European provinces. Frankfurt is considered particularly desirable as an alternative to London because it boasts economic and political stability, says BCG - both things that London currently lacks. The consulting firm is predicting that London could lose 20% of its finance jobs over the next five years.
Brexit may cause a short term increase in trading revenues, but long term they will fall. (Financial Times)
Andrea Leadsom, the new Brexit candidate for leader of the British conservative party was a trainee bond trader at Barclays before she fell out with Bob Diamond (who tried to make her return to work soon after having children). (Financial Times)
Andrea Leadsom: “The result is final, it must be respected, and I will respect it. The UK will leave the European Union, freedom of movement will end, and the British parliament will decide how many people come to live here.” (Irish Times)
Remember when Andrea Leadsom stood up for banking bonuses? (Twitter)
UK immigration minister says there will be no immediate change on the status of EU citizens in the UK, but that he can't give them any assurances about staying. (BBC)
French Economy Minister Emmanuel Macron, said he wants to take the euro-clearing business from the U.K. and move it to Paris. (Bloomberg)
Robert Hoodless, ex- Citi FX trader, wins ruling that he was unfairly dismissed. (Bloomberg)
Less than half the people who work for Deutsche Bank are proud to work there. (Bloomberg)
70% of trading in euro-denominated interest-rate swaps, a major type of derivative, takes place in the U.K (Bloomberg)
The three Barclays traders convicted of manipulating LIBOR say they were only doing as their bosses had told them to. (Bloomberg)
Goldman Sachs Asset Management is cutting costs: you can only fly if you're doing it to drum up new business. (Financial Times)
MUFG is hiring fixed income markets professionals in London. (Financial News)
Only freaks work 60 hour weeks in finance now. (The memo)