A version of this speech was presented at the 27th Special Seminar on International Finance, Hotel New Otani, Tokyo, November 16th 2016.
Any views expressed in this speech are strictly those of Paul Fisher and not of any institution that he is, or has been, affiliated with.
TEXT OF SPEECH
Good afternoon. I am deeply honoured to have been invited to address such a distinguished gathering at this important seminar.
I have been asked to speak about the future of London as an international financial centre, in the context of the United Kingdom’s decision to exit the European Union. I first want to address some of the global economic issues which have been driving events, and then turn to the challenges facing the EU and then London itself.
The economic challenge for developed economies
I think it is important first to set the context. We sometimes forget that, for all our local concerns about the rate of income growth in our own countries, in the European Union, the United Kingdom, the United States and Japan, on average the standard of living is still, historically and geographically, very privileged. Let me spell that out: compared with previous generations, and compared with the average lives of billions of our fellow men and women elsewhere in the world today, the average living standard in the developed countries is high.
Among the many fundamental problems facing the planet, such as climate change, poverty, war and disease, it may seem disproportionate to be focused on sustaining prosperity in these rich developed countries. And yet the means to address many of those same great social issues of the day may well start with the continued commercial success of the democratic capitalist systems of both west and east, which through trade and knowledge sharing, can in turn contribute to higher living standards in the developing and emerging economies.
Many of the developed economy jurisdictions face similar challenges in sustaining a rate of income growth which matches previous expectations. In my view, the underlying problem is one of slow productivity growth in manufacturing and services in those same economies. Despite the rapid rise in computing-based technologies, there does not seem to be a sufficient extent of real investment opportunities to generate new, highly productive and hence high income jobs. And when labour productivity growth is slow, workers either have to price themselves into low-paid jobs or accept unemployment. On the other hand, owners of capital can benefit by calling on cheaper or more productive labour forces in developing or emerging economies.
So we see a growing disparity in income in those countries, which in turn is causing an anti-establishment political reaction. A lack of real investment opportunities also limits financial returns for savers. It is worth emphasizing that returns from financial assets depend on the returns of the real assets that they fund, and that low real interest rates are reflecting slow economic growth, not the other way round.
This is not an altogether new phenomenon and may have its roots in past success. During sustained periods of growth, deep inefficiencies can become embedded in the economy. Those inefficiencies may well generate localised economic surplus for particular vested interests whether they be capitalists or workers, private or public sectors. Reforms to re-establish a dynamic economy, in which new companies and innovation thrive, can be difficult to implement as change invariably requires tackling those existing vested interests. And so it often takes a generation or more to put in place effective reforms – literally, it can require a younger generation to come through saying ‘this is no longer acceptable’ for necessary economic adjustments to be made. Japan is an obvious example, as your journey on the path of economic reform started around 1990 and seems to have some way yet to travel.
Let me apply this analysis to the European situation.
The economic and political challenges for Europe
In the United Kingdom, we appeared to hit a glass ceiling in the late 1960s. The shocks to the oil price in the 1970s and early 80s made the adjustments much more brutal, but deep-rooted problems were already evident. It took successive UK governments, of left and right, until the early 1990s to complete reforms to all parts of the UK economic system, including to fiscal and monetary policy, such that it regained a truly dynamic character. In particular, labour market reforms were needed to reduce high unemployment. Unemployment in the UK peaked at nearly 12% in 1984 and despite rising to around 8% during the Great Financial Crisis, is now just 5%.
Germany has managed a similar transformation over the past 15 years or so. During that period German industry benefitted hugely from a real exchange rate for the euro which was undervalued from the German perspective. The export success of Germany – especially to China – gave a platform on which to make the necessary labour market improvements, such that unemployment fell from a peak of over 11% in 2005 to just over 4% in 2016 – apparently without much impact from the Great Financial Crisis.
Unfortunately, across much of continental Europe, similar reforms have not taken place. Those countries for whom the nominal euro exchange rate implied an over-valued real exchange rate, nearly all of them starting from a position less wealthy than Germany, were able to enjoy a higher standard of living temporarily following their apparently successful adoption of the single currency. But a range of imbalances were created which eventually boiled over and they now face severe challenges to restore balance and growth to their economies. Inefficient labour markets and over-valued real exchange rates are just the most obvious of problems (Spain has an official unemployment rate of around 20% and Greece even higher).
Most of southern Europe requires extensive reforms to the supply side of their economies, including to industrial and social policies, not just labour markets. And some need fairly drastic reforms to government processes such as tax collection. My expectation, consistent with previous examples, is that this will all take 25 years or more to complete.
It is most likely that the EU will not be able to manage the transition from where it is now to a more dynamic economy without substantive political change. In my opinion, either the EU needs to give power and responsibility back to constituent countries to make reforms through national policies, or it needs to pull together and become one country so it can deal with the issues by common policies from the centre. Neither route would be easy, but a status quo in which every authority tries to put the blame somewhere else, is almost certainly not going to be effective or sustainable.
Existing political leaders in the EU often say that they are committed to an ever closer union, although it is not clear that such a choice is being presented to the electorates of their countries. Nevertheless, we should observe that, if the EU is genuinely committed to a single market in which there is free movement of people, goods and services, and for most a single currency, that will be sustainable in the long run only with an overarching fiscal authority and with corresponding political union of some kind.
Personally, I might have been happy for the UK to join a single country of Europe. But as far as I can ascertain, a large majority of the UK electorate would be opposed. Even those who voted for ’Remain’ in the referendum would mostly not have voted to join the single currency and would never have voted to merge into a single European nation or federal state. So, in my view, the separation of the UK from the EU was probably inevitable. It didn’t have to happen now, nor in this disorderly fashion. But in truth the UK was only ever ‘half in’ – it did not accept the Schengen agreement for unchecked movement of people across borders, it did not join the single currency nor the Single Supervisory Mechanism for banking regulation. And there are numerous other aspects of the EU from which the UK has opted out.
I think this may explain why, although the referendum only recorded 37% of the electorate as voting to ‘Leave’ – which is difficult to represent as a clear demonstration of the will of the people – there seems to be little enthusiasm amongst the ‘Remain’ camp for trying to overturn or ignore that decision. None of the main political parties in the UK have said they will try to block Exit. Most seem to have recognized the inevitable and battle is being enjoined on what ‘Leave’ will look like.
The Exit process
So let us briefly consider the Exit process. The UK Government have announced their intent to trigger Article 50 of the Lisbon Treaty by the end of March 2017. That may or may not get delayed by deliberations in the UK Parliament. There are political factors influencing the timetable, not least the unwelcome prospect of UK elections to the European Parliament in May 2019, if Exit has not been achieved by then. But I would see the main economic argument for an early trigger as simply a desire for the uncertainties to be addressed sooner rather than later. It is that uncertainty that will act as a short-term drag on investment and spending decisions and hence will slow demand growth in the UK. The sooner we all know the future arrangements, the better.
The technical process for Exit is somewhat under-specified in the Treaty of Lisbon: once Article 50 is triggered, there is supposed to be a negotiation on future arrangements. Exit can be achieved whenever agreement is reached between the two sides or after 2 years, whichever is soonest – unless both parties agree to an extension. So 2 years is strictly neither a minimum nor a maximum period for the negotiations and process, although it appears to be the most likely outcome.
There is certainty about what will happen to EU legislation that currently affects the UK. 2 years is no time at all in terms of changing those EU laws which directly apply to the UK. And they are so pervasive that simply ripping them up is also not feasible. So the UK Government has announced the inevitable: that EU legislation will continue to apply until the Exit date at which point relevant EU laws will simply be folded over and automatically become local UK law. That process will be achieved in one swoop by a somewhat confusingly titled Great Repeal Bill. But please be clear that this does not mean that those laws cease to apply. It is the opposite – EU law will be replaced by identical UK law and nothing will change on day 1.
There is no consensus yet as to what the UK’s future trade arrangements will be. Many influential people and businesses in the UK want to remain part of the European Single Market in goods and services. But hitherto, the EU has only granted access to the Single Market to non-EU members – such as Norway for example – if they are prepared to accept the EU’s rules. Rules such as the right of EU citizens to migrate into those countries and payments made to the EU budget. These ‘costs’ of EU membership may be red lines for the UK. After all, what would be the point of having all the perceived costs of the EU but no say over them? It would seem that membership of the Single Market on that basis would be inferior on every count to remaining a member of the EU.
So the future trading arrangements between the UK and EU are unclear. It is quite possible that two years will expire without agreement on, or extension of, the negotiations and that WTO ‘most favoured nation’ rules will then apply.
This outcome will doubtless be of concern to Japanese businesses located in the UK and trading into Europe. But there are grounds for cautious optimism. Treating the rest of the EU as a single bloc, UK official data suggest that the EU exports around $100bn more annually to the UK than it imports – indeed the UK is the most important market for the net exports of goods and services from the ‘rest of the EU’ bloc with around a 17% share, narrowly ahead of the US. For much of UK trade with Europe, competition is not direct or is seen by both sides as positive, such as the trade in cars. There are deals that could be done that would be mutually beneficial.
Even if new trade agreements cannot be reached, it is possible that the exchange rate for sterling will remain weak enough to more than offset any tariff barriers (although the precise benefit of that depends on the extent and source of imported components and materials). Finally, of course, the UK Government will be under huge pressure to use its new found freedoms to support investment in UK industry. There are risks to this rather rosy view of course, but I want to address those in the context of the financial sector.
London’s future role
Given this complicated and uncertain future for trade arrangements, what can we say about the future of London and its financial services? Well first of all I want to stress that London is the world’s leading international financial centre, as well as the main European financial centre. New York and Tokyo are both great financial cities and have the biggest markets in their time zones. But I see New York being very much focused on financing the US economy (and dollar markets elsewhere) and Tokyo as being focused on the Japanese economy. The truly international centres are London, Hong Kong and Singapore and of these London is easily the largest. The UK economy certainly benefits from the presence of London and its financial markets, but sterling and UK assets are relatively unimportant behind dollar, euro, yen and increasingly renminbi currency and assets.
Financial centres wax and wane and market shares shift. London has been on a high for the past few decades, after its revitalisation in the 1980s. As in the rest of the global economic system, market shares are dynamic and nothing is given. There can be no complacency. But London’s past success was not an accident – it had a strong hand to play.
London’s global role is enhanced by several well-known factors:
- its time zone, which overlaps New York and Tokyo (which of course are not overlapping themselves);
- a commitment to the free movement of capital;
- an immigration policy which has welcomed in the best and brightest financiers from around the globe;
- a robust regulatory regime which gives fair access to foreign firms and does not favour domestic firms, people, or contract holders over others;
- the English language which is used as the basis for the majority of cross-border financial transactions;
- English contract law and its legal system which is arguably the most trusted in the world;
- a strong backdrop of other supporting services such as accounting, financial technology and so on;
- and a truly cosmopolitan and welcoming city with international schools, shops and restaurants. There is even a French member of parliament elected by the French residents of London!
It is hard to see a European city which could hope to emulate London’s role given these natural advantages and developed strengths. It would not be good manners to decry the attractiveness of other cities in Europe. But if you want to be a successful international banker, insurer, financial lawyer or hedge fund manager, London is clearly the best place in Europe to be. And again, to counter the difficulties of Exit from the EU, the UK Government has every incentive to further encourage business in London.
As an example, one of my many roles is as Chair of the London Bullion Market Association. The physical bullion market is truly global with producers, users and investors all over world. But for market-making, the hub is in London, alongside the vaults where much of the traded gold resides. We cannot yet see any direct significance of the Leave vote on the bullion market. The LBMA is, of course, constantly looking for any negative impact, and I will now turn to what I perceive the risks to be.
So what are the risks?
A lot of my colleagues are most concerned about the likelihood that UK-based financial firms will lose the right to ‘passport’ into Europe – a right which is accorded to all authorized financial firms within the European Economic Area (the EEA), for their branches or agents to carry out certain activities across borders, supervised by their home regulator. Essentially it treats all EEA regulators as equivalent. About 5,500 UK-based firms passport in to other European countries and about 8000 European firms passport into the UK. Technically, it is possible that the UK might obtain EEA membership in which case passporting would not be an issue. But EEA membership also requires acquiescence to the many EU rules which would be red lines for the UK and so it is not clear at this stage whether that is a feasible option.
Passporting is an important and complex issue which, if not resolved, could well create considerable difficulties for UK-based firms. Personally, I am not sure that this really is the biggest risk, even if it crystallises, but it is certainly complicated! Not having an EEA passport currently does not automatically mean that a non-EU firm cannot operate across borders – rather it has been a discretionary decision by the host regulator. That discretion has usually been operated by regulators in a local rules-based way, depending on factors such as size and importance to the host economy and the equivalence of home regulation.
For example, London welcomes bank branches and subsidiaries from many foreign jurisdictions, including Japanese firms and more recently the branches of Chinese banks. The UK will surely continue to welcome EEA branches and subsidiaries. Similarly, the EU will surely want to welcome business from firms based in non-EU jurisdictions: I cannot see how they could or would discriminate against UK-based firms relative to, say, US-based.
It is true that the advent of the Single Supervisory Mechanism or SSM, located within the ECB is a powerful force for good. And many large, international banks will want to have a supervisory relationship with the SSM which will require having substantial operations located somewhere within the EU. But that was likely to happen regardless of whether the UK was part of the EU and it can be achieved without moving front office operations away from the main market centre.
So what is the problem if passporting is not retained? The complication is MiFID: the Markets in Financial Instruments Directive, which is the EU legislation that regulates firms who provide services to clients linked to ‘financial instruments’ (shares, bonds, units in collective investment schemes and derivatives), and the venues where those instruments are traded.
MiFID II is due to come into force at the start of 2018 which, among other things, harmonises the rules for non-EU financial firms’ access to the single market. It does allow for the possibility of equivalent non-EU regimes, enabling non-EU firms to gain a MiFID II passport to carry out activities within the EEA. But the processes being contemplated are long and bureaucratic. And MiFID II passporting would not automatically cover all the business that an investment bank may wish to carry out in the EU, such as commercial lending, trade finance or deposit taking. So some functions may need to be relocated within the EEA. This could be costly, messy and inefficient. So it’s definitely bad if passporting is lost.
And most of the derivatives in the EU are cleared through London-based clearing houses. It would be an extremely bad outcome – possibly a systemic risk – for the whole of Europe if that business was suddenly disrupted. So at the very least, there would need to be transitional arrangements. In the medium term, fragmenting the liquidity pools currently based in London would also be a serious problem for Europe as a whole.
But in a curious way this underlines the challenge of trying to create a truly international financial services hub that sits within the EU. The EU’s rules for financial services are not designed to be global in outlook. London is much more open now than the EU rules appear to provide for in future. So in the medium term, narrowness of EU regulations could be both a challenge for London-based firms but could also create a significant barrier to anywhere else within the EU becoming a truly international financial centre.
- The generic risks
I think there are two generic risks. The first and most significant is the unknown and unpredictable reaction of the EU authorities. Alongside its global role – especially in activities such as rates trading and foreign exchange – London is still a gateway to Europe. In many countries there will be, and may already be ‘Leave’ campaigns. The more successfully the UK Exits, the more such pressures will grow. Some EU political leaders have already said that they cannot be seen to be giving the UK a ‘good deal’ for fear of encouraging others to follow suit. So, although a sensible trade agreement would be in the economic interests of both parties, it may not be seen to be in the political interests of the EU. And what goes for trade might also go for financial services. We simply do not know how much economic pain the EU may be prepared to inflict on itself, in order to inflict punitive costs on an exiting country.
The second generic risk is that UK politicians may be under pressure to follow a ‘populist’ agenda which damages London’s interests. Let’s face it, the financial sector is not exactly held in high esteem by the general public in any part of the world right now. The fact that the Great Financial Crisis did so much damage to ordinary people’s lives; and the discovery of criminal behaviour by a few market participants before and during that period, has meant there is little public support for any problems that the financial services industry faces. Yet the livelihood of the UK as a whole still depends on having a vibrant and successful financial sector. That should be one of the main lessons learned from the Great Financial Crisis.
Financial and related professional services is of national importance to the UK, not just London, they employ 2.2 million people across the UK, two-thirds outside London and account for nearly 12% of national GDP. And financial services generate a trade surplus of nearly £60bn (in contrast to a trade deficit on goods of £120bn). The UK government can ill afford for the sector to decline sharply. And much of that national activity is either in London or feeds off London’s role as an international financial centre.
A specific example of this risk is immigration policy. One of London’s main assets has been its willingness to accommodate bankers and others from around the globe – the welcome being social and economic as well as legal. But immigration was a big issue for many people in the 2016 referendum. If immigration rules were to be tightened in a way which restricted the mobility of London’s international workforce, then one of its main supporting planks that give it a competitive advantage would have been weakened.
A second example is that the unfair distribution of income in western economies deserves to be tackled. But overly punitive tax measures could simply see the high income earners – and some of their business – relocate to New York or Hong Kong. A careful balance will be needed. On both counts, the domestic authorities need to be careful to avoid doing unintended damage themselves.
What of the longer term?
Exit is likely to dominate political discussions in the UK over the next few years. But there are even more fundamental forces at work which will affect both London and all other financial centres, so let me turn briefly to those.
Perhaps the most obvious is the potential growth in demand for financial services from China and other growing economies in that region. Much of the global growth in financial markets is going to be driven by that part of the world, not by the Americas or EMEA regions which is where around 80% of London’s financial services currently go. Rather than focusing on carving up the European pie, where slow growth in the real economy will act as a drag, many international firms have been looking to the Asian markets for developing their businesses. London may be able to use its traditional advantages to connect up investors and investment opportunities in both East and West. But London’s market share may well fall even if in absolute terms its markets continue to grow.
Perhaps the most obvious risk to London comes from the global regulatory agenda. The financial industry is complaining about over-regulation and its end users about the cost and difficulty of services they used to be able to access more easily and cheaply. But the truth is that financial risks to the balance sheets of intermediaries had become under-priced and there can be no return to the pre-crisis feeding frenzy. The regulatory agenda can be depicted in many ways. But my interpretation is that almost everything that is being done on prudential regulation is to prevent public money being needed again to bail out the financial sector. And quite right too.
Risks need to be properly priced and paid for by those who benefit from the taking of them. The UK authorities believes in having safe and sound financial firms and have been at the forefront of pushing the regulatory agenda to achieve appropriate requirements on capital, liquidity and governance. I firmly believe that having a reputation for being soundly regulated, backed up by strong balance sheets, will help London-based firms to win more business in competitive markets.
And that applies to conduct regulation as well as prudential regulation. The ‘over-the-counter’ or OTC markets have played a huge part in the success of financial services as an industry – success in delivering products that are tailored to meet the individual client’s needs in the way that exchange trading cannot always deliver. But some people in those markets have been caught putting their own interests before those of their customers. That has to stop. Thankfully, perpetrators have been found guilty of offences in a number of cases, even though the underlying markets were not regulated, and further cases are still going through the courts.
As befits its role as host to the world’s largest OTC markets – for fixed-income, currencies and commodities (FICC) – the UK authorities have been taking the lead in promoting better conduct. We cannot rely just on the courts to decide what is right and wrong after the event. The Fair and Effective Markets Review, initiated and led by the Bank of England, the Financial Conduct Authority and the UK Treasury, focused minds on what is needed to make sure that such improper behavior is not repeated. New global codes of conduct are being written for the foreign exchange and bullion markets. And 2 new organisations – the Banking Standards Board and the FICC Markets Standards Board have been set up in London, dedicated to maintaining standards in their respective markets. And the UK has uniquely introduced a Senior Managers Regime to make sure that senior executives and board members take responsibility for what happens within their firms, alongside new rules to enable the reclamation of variable pay when things go wrong. That is intended to establish new standards of behaviour, not just to hold people accountable ex post.
On a more constructive note, another challenge to the financial services sector comes from financial technology or ‘fintech’. New developments such as block-chain technology could revolutionise the way that payments and other financial services are provided. And London is already one of the leading fintech hubs globally and the biggest in Europe. Evidence, such as that from the success of mobile payments firm M-Pesa in Kenya and elsewhere, already suggests that fintech can support the provision of financial services to those people living in places where the banking infrastructure is weakest. We don’t know yet all the destinations that particular journey may take us to, but it is surely best to be at the forefront of finding out!
Other areas for development, where London is keen to establish itself, are in Islamic finance and internationalisation of the Renminbi.
Finally, I want to address one of the biggest risks of all to the financial sector – climate change. There are both downside risks and opportunities arising from climate change. And although the physical manifestation of climate change may take many years to fully develop, there are risks and opportunities that are right here, right now.
The risks can be allocated to three blocks. The physical risks are best known – rising global temperatures and sea levels, more climate related events and so on. That is of immediate relevance to the insurance sector which needs to take account of the changing risks it has written protection for. Insurance losses from Super Storm Sandy were significantly increased by the existing rise in sea level in New York – and that was in 2012. But anyone invested in assets such as property has climate-related exposures that need to be evaluated now.
Of perhaps more concern and less predictable in the short-to-medium term are the transition risks. They arise from both structural changes that will occur in the economy and changes in government policy. Some examples of structural change we can already predict: one surely wants to be invested increasingly in electric cars not petrol-driven cars, and renewables not old-fashioned energy sources. The risk from policy change is less obvious but potentially greater. Governments promised at COP21 in Paris in 2015 to take action to limit global warming. That promise has now been implemented as a binding international agreement. As Governments seek to make good on their promises, then financial asset prices will reflect the policies adopted– perhaps precipitately. Think that’s a long term risk? It has already happened in both the US coal sector and the German utility sector where, in both cases, announced changes in energy policy led to the collapse of individual stock prices.
Finally, there is legal risk – people who can be shown to have caused climate change, or not taken action to mitigate it when they could, will get sued by those who can demonstrate consequential losses. The insurance sector is already worried about this as they write directors and officers’ liability insurance. But all company directors of financial firms should be concerned. Fiduciary duty almost universally across jurisdictions requires company directors to take account of known, material financial risks. The set of risks associated with climate change is already well researched and documented, widely known and has already led to significant financial losses for some investors. Whether one believes that climate change is man-made or not is immaterial – disbelief in the science will not serve as a defense in court!
Why is climate change relevant to this talk? Because the London markets are at the forefront of assessing these risks and acting upon them. For example, Lloyd’s, and the London insurance market more generally, have been a source of some of the best climate modelling work, which should not be a surprise given their global role in writing catastrophe risk.
UK-based investors are among those seriously altering their investment portfolios to reduce their exposure to climate related risks. And leading UK university research centres such as the Cambridge University Institute for Sustainability Leadership are quietly working with firms and regulators to improve understanding.
Mark Carney, Governor of the Bank of England, made the world aware of some these issues, and the Bank of England’s path-breaking work on the topic, through a famous speech in September 2015. That was followed by the FSB setting up a Financial Sector Task Force to look at climate-related disclosures globally, which is due to report in the next couple of months. The City of London is right behind these initiatives, not just to protect itself from the risks but to look for new business opportunities whether it be in insurance markets, investment in new goods, services and technologies or underwriting the potentially huge market in green bonds. And some Japanese firms, through their participation in London markets, are both aware of the developments and contributing to them.
Let me try and bring together the wide range of issues that I have raised today. I have touched on the challenge of slow productivity growth in the advanced economies in general and Europe in particular. The Exit of the UK from the EU needs to be understood against that background: Europe needs substantive change to become a dynamic economy again and its preferred route of ever closer union would be easier to achieve without the UK. The UK would never have voted for a single federal state in Europe, so in my view separation may well have been inevitable. The main focus in the UK is on achieving the best possible terms.
London is a truly international financial centre, not just a European one. There is no fundamental reason why it should not continue to thrive based on the same reasons that created its success to date.
Of course there will be risks to London as a financial centre from the UK’s Exit from the EU and the loss of the passporting regime is the one that the City is focussed on. In addition, I have highlighted the two generic risks that concern me most. The first is the risk of EU authorities seeking in some way to penalise the UK so as to discourage other countries from leaving – we cannot foresee what detailed problems that might bring. But it would be in the continuing economic interests of the EU both to establish mutually beneficial trading relationships and to allow financial firms and markets to continue to operate on the existing basis. The fragmentation of London’s liquidity pools would severely damage European industry. Yet we don’t know whether that economic interest will outweigh the politics for the various EU authorities.
The second risk I can see is if the UK authorities, in their own reactions to the vote domestically, take actions which undermine the attractiveness and the welcoming attitude of London to its international firms and workforce. So far, although there have been some unfortunate comments, there is no serious sign of adverse actions and I believe that common sense will prevail. We will want to continue to welcome Japanese businesses, including financial firms, to have their main European base in London.
Meanwhile there are other pressing issues – the future is not all about the UK’s Exit from the EU. There is the continuing implementation of the regulatory agenda, a conduct agenda, financial risks and opportunities from fintech and from climate change. It is important we do not lose sight of these other risks and opportunities. The financial sector plays a fundamental role in allocating capital efficiently between competing needs. We have seen what happens when that process goes wrong. London will want to be in the lead when it comes to getting it right, for the benefit of the global economy and I am optimistic that will continue to be the case.
 The agreement with an exiting country, on the part of the European Council, is by qualified majority voting but agreement to extend must be unanimous within the Council.
 Of course there is more trade between countries within the ‘rest of the EU’ bloc.
 Technically the ‘Third Constituency for French residents overseas’ includes some 10 Northern European countries, but in 2012 over 80% of the registered voters in the constituency were in the UK. The numbers in London are not known but are thought to comprise a large majority.
 E.g. see http://www.shlegal.com/docs/default-source/news-insights-documents/07_16_brexit_the_mifid_passport.pdf?sfvrsn=2 or https://www.dlapiper.com/en/uk/insights/publications/2016/07/no-more-passporting-post-brexit
 Lloyd’s (2014) ‘Catastrophe Modelling and Climate Change https://www.lloyds.com/~/media/lloyds/reports/emerging%20risk%20reports/cc%20and%20modelling%20template%20v6.pdf
 Look up Peabody Coal in the US and RWE in Germany to get the background on the stories.
 For an Australian legal opinion on fiduciary duty, see here:
http://cpd.org.au/2016/10/directorsduties and for a similar view in the UK see here: http://www.clientearth.org/pension-trustees-face-legal-challenge-ignoring-climate-risk-leading-qc-confirms .
 Bank of England Prudential Regulation Authority (2015). http://www.bankofengland.co.uk/pra/Documents/supervision/activities/pradefra0915.pdf
 e.g. Tokio Marine Kiln in the insurance sector.