Claims by banks that they will relocate to foreign shores in protest at strict new rules are largely empty threats, the global financial regulator has suggested.
Big banks in the UK and US have threatened to "migrate" if they are subjected to strict new regulations, taking tax revenues and future investment with them.
However, big banks are not necessary an attractive prospect, Svein Andresen, secretary general of the Financial Stability Board (FSB), argued at the International Monetary Fund's (IMF) spring meeting in Washington.
Countries may refuse to let big banks redomicile because, as the new host country, they would be responsible for the cost of any potential bail-out. Mr Andresen argued that ratings agencies could downgrade both the sovereign debt and the bank's bonds if they felt the risk was too big for the country to bear.
He said: "You shouldn't take it for granted at all that other jurisdictions would want the banks."
FSB chairman Mario Draghi added that regulation is not the decisive reason a bank might redomicile. Highlighting tax regimes, business models and political stability, he said: "Differences in regulations are only one reason why banks might move."
The FSB's observations followed similar comments from the UK's Independent Commission of Banking last week, when it was dismissive of bank threats to move abroad.
The comments came as The Telegraph reported that major shareholders in Barclays would prefer the British bank to be domiciled outside the UK.
Mr Draghi also used the IMF meeting to restate concerns about exchange traded funds (ETFs) - stand-alone investment vehicles that typically track the performance of a single asset class such as gold or copper. Retail investors as well as institutions have used ETFs as a proxy for the commodities they back and have invested $1.4 trillion in them, according to BlackRock. However, many are highly leveraged.
In some of his strongest words yet about ETFs, Mr Draghi likened them to the derivatives that triggered the financial crisis.
He said: "It is reminiscent of what happened in the securitisation market before the crisis."
Source: http://www.telegraph.co.uk
Big banks in the UK and US have threatened to "migrate" if they are subjected to strict new regulations, taking tax revenues and future investment with them.
However, big banks are not necessary an attractive prospect, Svein Andresen, secretary general of the Financial Stability Board (FSB), argued at the International Monetary Fund's (IMF) spring meeting in Washington.
Countries may refuse to let big banks redomicile because, as the new host country, they would be responsible for the cost of any potential bail-out. Mr Andresen argued that ratings agencies could downgrade both the sovereign debt and the bank's bonds if they felt the risk was too big for the country to bear.
He said: "You shouldn't take it for granted at all that other jurisdictions would want the banks."
FSB chairman Mario Draghi added that regulation is not the decisive reason a bank might redomicile. Highlighting tax regimes, business models and political stability, he said: "Differences in regulations are only one reason why banks might move."
The FSB's observations followed similar comments from the UK's Independent Commission of Banking last week, when it was dismissive of bank threats to move abroad.
The comments came as The Telegraph reported that major shareholders in Barclays would prefer the British bank to be domiciled outside the UK.
Mr Draghi also used the IMF meeting to restate concerns about exchange traded funds (ETFs) - stand-alone investment vehicles that typically track the performance of a single asset class such as gold or copper. Retail investors as well as institutions have used ETFs as a proxy for the commodities they back and have invested $1.4 trillion in them, according to BlackRock. However, many are highly leveraged.
In some of his strongest words yet about ETFs, Mr Draghi likened them to the derivatives that triggered the financial crisis.
He said: "It is reminiscent of what happened in the securitisation market before the crisis."
Source: http://www.telegraph.co.uk
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