Morning Coffee: Brexit negotiations going incredibly badly for London banks. Ruination of 35 year-old ex-Goldman banker
As the summer wears on and investment banks' patience wears thin, it's becoming increasingly apparent that the British government doesn't have much of a clue about negotiating the country's exit from the European Union. Bloomberg says that German officials - who are all for creating a custom-made solution for the UK's needs post-Brexit, are becoming frustrated. The UK government is too taciturn. Maybe it doesn't understand the complexity of the task ahead of it?
Maybe not. Either way, the Financial Times suggests it's all a bit of a mess. There are at least four bodies lobbying on behalf of the City in the Brexit negotiations: the British Bankers Association (BBA), The City UK, the Financial Services Negotiating Forum, and a task force of City grandees led by Shriti Vadera, the chairman of Santander UK. These four exist in a state of competition rather than complementarity. They're all jostling for the ears of David Davis, the UK's secretary of state for Brexit, and of Michel Barnier, the EU's chief Brexit negotiator. Neither man is entirely receptive to the needs of banks.
This might be why the 'solution' that seems to be emerging is a probable non-starter. Like Germany, the FT says the grandees have hit upon the idea of a "unique trade deal" with the EU. Strangely, they still seem to think the UK holds the whip hand. "It is not in the interests of the other EU countries to be cut off from their main financial centre, especially at a time they are all seeking to boost economic growth,” says Anthony Browne, a former journalist and head of government relations at Morgan Stanley who's now head of the BBA.
It's certainly true that most of the EU's capital markets activity is conducted in London - think-tank New Financial calculates that 78% of it happens there. But as any fund manager will tell you, the past is not always a predictor of the future. Both Germany and France would like more of this activity on their home turfs. This is their chance.
And while Germany might be making encouraging noises about a bilateral agreement between the UK and the EU, who's to say the agreement will favour finance - or that the other 26 states (each with a veto), will agree?
The FT says some kind of "Swiss-style" accord between the UK and the EU in which the UK gets full passporting rights for its finance firms as long as its regulations are deemed equivalent, is now desired by most of the British negotiators. However, the Swiss experience suggests this is likely to be contingent upon the free movement of people, which the UK isn't keen on. Even assuming a compromise can be found, it's the EU which gets to decide what equivalence amounts to. "The next version of MiFID – MiFID III might require that the control of all functions be located in the eurozone,” says Graham Bishop, head of communications for the negotiating forum. “And then what?” Complacency is an ongoing problem when it comes to Brexit, and there's little sign of this lifting. In the meantime, the FT reminds us that banks are mindful of the fact that it could take them two years to migrate to mainland Europe and are looking for certainty about their future in the UK as soon as possible.
Separately, spare a small violin for the now-35 year-old Edward Chin, who joined Goldman Sachs aged 22 and left again aged 31. Chin has just been commanded to pay $400k in personal fines after the SEC found found he was deliberately misleading clients when he was head of Goldman's residential mortgage desk. In a seemingly typical example of Chin's malfeasance, he reportedly told a client he was doing him a favour by selling a bond at cost price and for no compensation when he was in fact selling part of his inventory and making $200k in profit.
The Deutsche Bank whistleblower who alerted the world to the bank's dubious accounting practices just turned down a reward of $16.5m. He says he won't accept it unless it's clawed back from the bonuses of Deutsche's executives, otherwise it's just coming from shareholders: "I will not join the looting of the very people I was hired to protect." (Business Insider)
The head of investigations at Standard Chartered just joined the FCA. (Bloomberg)
Simon Dove, former head of Sun Trading in London is having a little career break: "taken the decision to take a few months out to spend some quality time with my family and improve my dismal golf swing!" (Financial News)
Who cares that Deutsche Bank board members might give up their bonuses? Salaries are pretty high there anyway. (Financial Times)
All-star analysts are more optimistic in their forecasts than non-stars. (Sciencedirect)
Coming soon to a hedge fund near you: management fees of 1.25%. (Bloomberg)
One of Citi's last remaining prop traders (a woman) just left to set up a hedge fund. (Bloomberg)
Credit Suisse says TMT bankers who left stole its information. They say they had to leave as CS is pulling back from investment banking. (Reuters)
It's fun running the Olympics if you've worked for Goldman Sachs. (Bloomberg)
Brain scans can tell how generous you are. (New Scientist)
A dad-of-two is suing a posh private school for the £125,000 he paid for his son's education - after he left with just one GCSE. (Stoke Sentinel)