I’m very glad to be here this morning.
Now – this might sound like an insult to the organisers.
Which isn’t how I usually begin a speech!
But the issue I’ve been asked to discuss this morning.
Is – in fact – the issue I’ve been asked to discuss most often since becoming a Minister.
Namely; ‘London’s Future as the World’s Financial Centre’.
Or ‘How can London maintain its position as the World’s Financial Centre?’
Now you might think I’d be annoyed that I constantly have to address this question.
And that people and events all over the City seem to be discussing the exact same issue every few months!
But – in fact – I feel the opposite.
Because unless – as a city – London keeps asking itself that question.
Unless we keep assessing why this city is so successful.
And what can keep it successful.
Then we won’t achieve our aims.
Now, I won’t admit to being a big sports fan.
My newspaper of choice – as I’m sure is the case for many people in the room – has been the FT for a while.
Not best known for its sports coverage.
But I remember seeing a quote from Jose Mourinho – the Chelsea manager –the other day which said,
When you win a lot, you cannot forget why you win […]
If you think like that, you’re in trouble.
And that sentiment is absolutely true of this City.
We cannot forget why we’ve been successful.
And we need to keep on making changes.
Where changes need to be made.
So that we can remain successful.
As you just heard in the introduction
Before becoming an MP I worked in the banking industry for 20 years.
For both Chase Manhattan and Deutsche Bank.
So first: I know just how much this city has to offer as a centre for this sector:
- our location
- our concentration of financial institutions
- our tradition of welcoming foreign firms and investors
- our very well respected legal system
And second – as someone – who has since moved into politics.
I recognise the contribution that this sector makes to the entire economy.
- It employs more than 2 million people throughout the UK, in Edinburgh, Manchester, Glasgow, Birmingham… and, of course, London.
- It brings in over 10% of the government’s taxes each and every year.
And as our country moves from rescue to recovery.
The sector will not only provide real growth itself.
It will also provide the access to funding our businesses need to drive the economy forward.
So this is a sector I want to see perform well.
And this is a city I want to see remain a global leader.
But I know that maintaining this position won’t be easy.
We mustn’t forget why we win, as our friend Jose said.
And we need to keep adapting to global trends, social changes, and international developments if we want to maintain our position.
Lessons learned from the past
Of course, there has been no greater threat to this city – and this sector – than the recent financial crisis.
The public reaction to those events was one of deep suspicion, and often – if we’re completely honest – deep mistrust of anyone associated with financial industries.
In fact, I sometimes joke that.
When I arrived for my first day as an MP three years ago – after twenty years in banking – I had a unique sensation…
…a sensation that I don’t think any other member of the intake shared.
That I was moving into a more popular profession!
But it’s true that, as well as highlighting some very poor individual and commercial decisions.
The financial crisis also highlighted mistakes made by policymakers, politicians and regulators, both domestically and abroad.
So when my Party came to power, one of the first things we had to do was change financial regulation.
Not only to help rebuild the trust between the sector and the public.
But also to ensure that we wouldn’t see a repeat of that financial crisis.
The Financial Services Act – which was the vehicle for that change – placed responsibility for financial stability back with the Bank of England.
It created a new prudential regulator – the PRA;
And it also created the Financial Policy Committee and the Financial Conduct Authority.
These are reforms that will deliver more effective regulation.
Reforms that will make our sector:
- more stable
- more resilient
- more efficient
And reforms that will be central to maintaining the attractiveness of this city – and the UK as a whole – as a global financial centre.
Our other big – post crisis – project, has been to improve bank resolvability.
A central part of which will be the ring-fencing of retail from investment banking.
Now, I know that this project has some detractors.
Some of whom will no doubt be in this room.
But it will protect retail banking services – whose continuity is essential to our economy – from global financial shocks.
And it will make UK banks easier to resolve if they get into financial difficulties.
In short, we’re learning from the lessons of the past decade.
And we’re making sure that we create a country – and of course, a city – in which our citizens can trust that their money is secure.
And in which our financial sector can flourish.
Bringing benefits to the entire UK economy.
But the action of the government alone won’t be enough.
Industry – like you – need to take the lead.
You’ll have to demonstrate high standards of conduct to win back the public trust and the international repute that was lost during not only the crisis.
But subsequent events like the Libor scandal.
And you will also have to oversee more lending (especially to SMEs).
And demonstrate more innovation.
These will be crucial in showing the UK public that a successful financial sector isn’t just good for those that work within it.
As people – understandably – think.
But that it’s good for households and businesses the length and breadth of the UK.
Things for the future
But as well as learning from – and correcting – the mistakes of the past…
We also have to look towards the future.
And I’d like to spend the rest of my time exploring what we – as government – are doing to help– the sector – adapt to the changing world…
Firstly – and most importantly – in an increasingly international business environment, we need to be at the forefront of global discussions.
We have to be a strong voice in international fora, such as the G20 and the Financial Stability Board.
And in the last five years, we’ve shown real leadership here, playing a central role in reforms like Basel 3, and changes to OTC derivatives.
We have to be a strong voice in Europe too.
Making sure that the EU focuses relentlessly on the single market.
And on creating a stronger, more competitive economy for the continent.
Our position on financial services within the EU has always been clear.
We expect the Single Market and the freedoms set out in the EU Treaty to be upheld, and exercised in a non-discriminatory way.
And we’ve stood up for the sector on many occasions.
We’ve launched a legal challenge in the European Court against the ECB’s location policy.
We’ve taken a challenge to the ECJ over the Financial Transactions Tax proposals.
And we’re also pushing back on the idea of harmonised EU rules on third countries.
These aren’t pieces of political posturing.
Or arguments for arguments’ sake.
They are examples of the UK taking a stand where we see EU regulation at its worst.
Acting as a hindrance – rather than a help – to the European economy.
Of course – at its best – the EU can provide incredible trading opportunities for its members.
And the launch of the free trade agreement between the EU and the US is a once in a generation opportunity.
As part of that agreement, we’ve been very clear that we want to see further integration and trade between the world’s two largest financial centres.
And we’re working hard to make sure the agreement has financial services at its core.
But while every so often we need to flex our muscles internationally, when we believe barriers are being created.
We also need to open our arms internationally, when we believe opportunities are arising.
And that – being open to new developments and new opportunities – is the second important factor in securing this city’s future.
It’s for this reason that we created the Financial Services Trade and Investment Board.
Which will work closely with industry and the City to identify, agree and pursue high value trade and investment priorities.
I think it’s crucial that we open up the city to new export markets.
And that we look to benefit from the opportunities that emerging economies create.
During my time as a banker I specialised in emerging markets, nobody needs to tell me about the opportunities that are out there.
And one way in which we’re doing this, is by working to develop London as the western hub for RMB.
I was at the 3rd Annual Conference on the future of the RMB in global markets just this Tuesday.
And it was clear to me then, that there are real economic gains to be realised by corporates if they use RMB products and denominate their trade with China in RMB.
London is already responsible for more than 60% of RMB trading outside of Greater China. And I want to see London play an even greater role in the internationalisation of the RMB.
We’re also incredibly keen – as most of you will know – to promote the UK as the western centre for Islamic finance.
When the World Islamic Economic Forum was held here in London two weeks ago.
It was the first time that the Forum has ever been hosted outside the Islamic world –
And the event was a huge success.
There were 16 heads of state or government in attendance –
There were 46 government ministers –
And nearly 3,000 registered delegates from 128 countries.
And to show just how serious the UK is about engaging with the Islamic world –
Our Prime Minister announced that the UK wants to be the first Western country to issue a sovereign Islamic bond.
So we are opening our country up to opportunities internationally.
But we must also.
And this is the third – and final – area I’d like to discuss this morning.
We must also be prepared to look at the work going on here in the UK.
Recognise – and be proud of – the areas where we already excel.
And make the changes we need to make domestically to ensure that we continue to excel in this area.
One of those sectors where we recognise our world-leading status is in Asset Management .
So back at the Budget this May, we introduced an Asset Management action plan, to enable the sector to go from strength to strength.
The headline measure – if you will – was the abolition of Schedule 19 stamp duty reserve tax.
Schedule 19 – for anyone who doesn’t know – is a special stamp duty reserve tax currently applied to UK collective investment schemes, which industry identified as a major deterrent to locating funds in the UK.
So we listened, we took action, and the tax will be abolished.
Although the rest of Europe is looking at new ways to tax financial transactions, we are busy abolishing this.
The plan also included ambitious plans on reforming regulation.
Increasing marketing of our sector abroad.
And because that strategy was so well received.
And because our actions are already helping to attract more asset management activity for the UK…
We’ve launched a similar growth action plan for our insurance sector.
All being well – you should be hearing a lot more about that plan over the coming weeks.
Strong advocate of city
I want to be a strong advocate of this city.
I want the Treasury as a whole to be strong advocates of this city.
And – I hope – the actions I’ve laid out to you this morning have shown how committed we are to maintaining its success.
Not only through fixing the mistakes of the past.
By introducing a more stable and resilient banking sector.
But also by preparing you for success in the future.
- standing ground during global economic discussions
- creating opportunities at home and abroad
- and recognising – and promoting – the areas where you can be global leaders
Of course, we can only set the framework for your industry to succeed.
And you’ve got to put in the hard hours to make it work.
I’m sure you will.
Because the thing I always say about the financial sector.
The thing I found during my two decades in the industry.
Is that this isn’t a sector that that judges you by your surname or your colour or your religion.
It’s a sector that judges you by the hard work you put in.
I want to continue working hard – with you – to maintain our position as a world leader.
And I very much expect – and look forward to – more invitations to events just like this.
And to discuss this exact issue.
Let’s keep asking ourselves why we succeed now.
Let’s keep asking ourselves what we can do to succeed in the future.
And I’m sure that if we do.
We’ll keep hold of our position as the global financial centre.
Thanks for listening.