Hammond must be heard

SENIor overseas bankers in London were unimpressed by last week’s cancellation of the Mansion House dinner. The sight of City bigwigs gorging themselves on good food and fine wine just a few short miles away from the grisly job of recovery at Grenfell Tower may not have been ideal but other traditional events, most notably the ‘Trooping of the Colour’ on Saturday went ahead.

The Mansion House is a big moment in the annual financial calendar and in the wake of Britain’s muddled election, bankers were anxious to hear what the Chancellor Philip Hammond and Bank Governor Mark Carney had to say.

There was an intake of relief in the Square Mile when Hammond was reappointed. Hammond and the Treasury have been listening to the City on Brexit whereas it was impossible to get through to Theresa May’s now displaced Praetorian guard at Number 10.

In spite of some overwrought reporting so far there has only been a mini-drift of jobs from London to other centres as banks, insurers and asset managers buy themselves a hedge against a breakdown of Brexit talks.

But there is a view that over time failure to secure a good deal for the City could lead to thousands of jobs going. After all, it is argued, it took two decades or so after the ‘Big Bang’ occurred in 1986 for London to assert its leadership as a financial centre. So no one should kid themselves that the City is unassailable. Continental capi- tals are relishing the prospect of capturing some of the spoils.

The fear is that Hammond’s disappearance from the Mansion House had broader significance. The argument runs that May was concerned that the Chancellor might break ranks by putting his case for, at the very least, a slow and gradual transition to Brexit. If that is the case financiers think the sooner Hammond finds a formal way of getting his message out the better.

THE bankers also were hoping to hear more of Carney’s ideas for a reciprocal free-market deal in financial services with recognition and respect for regulators on both sides of the channel.

All that we have had of late was utter confusion about interest rate clearing. Some 62pc of $544trillion of currency derivatives transactions go through clearing houses. The scale of the operations has been rendered even more important by the financial crisis, which saw these trades move from over-the-counter (or bank to bank) to recognised and supervised exchanges.

The effort by Brussels to exert control over the policing of the market must be regarded as something of a straw-man. After all LCH Clearnet, the biggest player, already accepts outside inspection from New York (and vice versa). So there is no real obstacle to the European Securities & Markets Authority (ESMA) gaining a bigger role.

Indeed, although clearing is a nice little income earner it is far from core to what investment banks do. It provides useful plumbing for the finance sector which benefits from having the best IT systems and cyber-security. But location doesn’t trouble the high earners in the City employed for their deal making, fund raising, asset management and entrepreneurial skills.

What does concern the bankers is a Brexit in which May fails to keep finance near the top of the agenda. And worst of all the election of a Jeremy Corbyn-led high-tax, socialist, anti-capitalist government that would destroy the Square Mile.