FinanceAsia Magazine

Issue: March 2013

Issue: March 2013

No room for bonus refugees

The last mass migration out of Europe involved tens of millions of the downtrodden, fleeing Dickensian conditions. Today’s great expectations of exodus also involve huge sums — of money, not of people.

The European Parliament’s impending capping of banker bonuses on a 2:1 ratio to salaries is the latest, most serious threat to the City of London and to ‘Anglo-Saxon capitalism’. Just to make sure everyone knows the continentals are serious, they’re extending the caps to hedge funds and private equity.

So once again we ask ourselves if this is what will drive all the talent and money to Asia; if London’s loss is Dubai, Hong Kong, Singapore and Shanghai’s gain.

The answer is no. Regulatory arbitrage is, of course, the number-one game in a roughly globalised world, and dictates the flow of capital. But flow of people is a different matter.

First, do the people who govern Asian centres of finance want to throw open their doors to lots of disgruntled financiers from the West? It seems to me that they would rather develop their own local pools of talent. Hiring from the West will involve cherry picking those with the right skills.

Second, are Asian societies going to embrace Anglo-Saxon mores? Before 2008, it may have looked that way. But excited notions that Asia was inexorably following the United States’ example were always half-baked, and today look ridiculous.

Third, governments may be attacking bonuses in Europe but the direction of regulation remains difficult to predict in Asia. Regulators are not interested in transparency and setting rules in stone; they play their cards close to the chest, to maximise their ability to operate — and, occasionally, to punish.

The likelihood of a bank moving its operations to Asia in the hope of getting yesterday’s bonus regime and tax breaks is remote because there is no certainty that the perks would remain intact were Western institutions to move here en masse.

Finally, banks also enjoy hidden subsidies in the West that they would not necessarily get in Asia. Banks’ borrowing costs are extremely low because the market assumes they will be bailed out. That might no longer be the case were an HSBC to move its headquarters to Hong Kong. I don’t see the HKMA or Beijing providing that implicit backstop. This surely is a reason why HSBC announced it will remain based in London, lousy bonuses and all: it’s only too big to fail so long as it stays in the UK.

Besides, try finding a school for all of those bankers’ kids in Hong Kong or Singapore — or a working permit for the spouse in Dubai. The ecosystem just isn’t the same.

Tax regimes are friendly in the region’s entrepots, but attitudes toward the role of banking and finance in society are different than in the West. There is still a conviction here that finance is subservient to government and the economy. The wild-west cowboy enrichment one finds from China to Indonesia is for insiders, not for white-shoe New Yorkers and Londoners in pin stripes. (Just ask Nate Rothschild.)

The bonus kerfuffle in Europe is not going to drive banking to Asia. For better or worse, Asian countries must build their own capital markets and human talent – and that is happening, as our cover story shows. European financiers unhappy with their lot are more likely to exit the industry than to move East.

 

About FinanceAsia Magazine

Established in 1996, FinanceAsia is the leading publisher of financial news in the Asia-Pacific region. Our combination of print and online products provide the latest news, analysis and insight into Asia’s financial markets.

Published monthly from our office in Hong Kong, FinanceAsia magazine provides our readers with the latest financial trends, interviews, features and investigative reports. The publication has a readership of key decision-makers at corporations, governments, investment and commercial banks, institutional investors, asset managers, brokers, traders and financial intermediaries.

Our regular sections include:

Data Story
We look at the key data behind a topical theme in Asian finance, showcased with an array of graphs and tables.

Greenshoe
A monthly opinion column from the FinanceAsia editorial team. We provide our thoughts on a topic making the headlines.

Deal of the Month
Our regular two-page spread with its signature artwork and in-depth analysis examines the equity, debt or M&A deal that we feel has had the biggest impact on the Asian capital markets that month.

Investor Dialogue
For company CEOs and CFOs, what investors think is a critical concern, and in this column we help them understand just this. Each month we speak to a Chief Investment Officer of a top fund and outline their views on corporate governance, what stocks they like and where they expect to generate the best returns.

Soapbox
A monthly opinion piece from a respected author or commentator on Asian business, finance or economics.

People on the Move
Here we summarise the key hires, fires and moves at the region’s banks, highlighting at least one major move each month.

Deal Tracker
We examine the major primary markets deals of the month and comment on the quality of the debt or equity transaction and the secondary market performance.

The Arts of Finance
A light-hearted look at investment opportunities surrounding the arts business in Asia.

 

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