City PHOTO

UK could lose £10bn a year in City-related tax revenue after Brexit

A leading City figure whose former role involved governing the Square Mile has said Brexit could result in the loss of 75,000 jobs and up to £10bn in annual tax revenue.

Sir Mark Boleat, who was chairman of the City of London Corporation until last year, said a seepage of jobs from the capital was already underway and that the political rows over a deal or no-deal outcome was now “irrelevant” to City chief executives.

Banks including JP Morgan, Lloyds, Barclays, HSBC and Goldman Sachs have already established subsidiaries in other EU countries, or moved part of their business because EU law requires them to be legally compliant from the day the UK leaves.

“It is no longer contingency planning. If you are running a bank it is non-negotiable. The regulators won’t allow it,” he said.

In an interview with Advisory Excellence before a keynote speech on Wednesday at the Cass Business School in London, Boleat said the City would not die as the financial capital of Europe but would be damaged by Brexit.

“These moves are bad for London, but they are also bad for the EU because they will make financial markets less efficient,” he said. “Financial services will be fine, but I would say if the City has 80% of international business now, in future it will have maybe 60%.”

Boleat said Brexit has prompted expensive and unwelcome processes and the damage would be seen over the decade to come.

“This is a 10-year operation. In the short term it won’t be noticeable in terms of staff. Banks won’t be putting out press releases saying they are moving some of their operations because of Brexit because they don’t want the publicity. They are just getting on with it.

“Moving costs millions. Banks have had teams of 100 working on Brexit. It is an expensive process. You have to identify which city to go to, applying for a [banking] licence costs millions, then you have to find the IT staff, find accommodation.”

He also believes the government is in such disarray that the Brexit deal will be pushed back to December, leaving business planning elsewhere perilously close to exiting the EU.

In his address, Boleat will say he does not think financial services will get a special passporting deal to allow them to continue pan-European services from London and that banks are already past that moment of truth, whatever politicians think.

“Those who suggested that some business would move were accused of scaremongering,” he will say before listing 15 major banks and financial services who have already set up on the continent or Dublin.

He will quote a report by the Oliver Wyman consultancy that says if the UK strikes a deal giving full market access, the impact on the City would be modest, the equivalent of 3,000-4,000 jobs and a loss of £500m in tax a year to the Exchequer.

“At the other end of the spectrum if the UK had no special status with the EU, now the most likely option, the industry would lost £18bn a year in revenue which would put 31,000 to 35,000 jobs at risk along with £3.5bn to £5bn in tax revenue.”

Add the knock-on effect for related industries and the loss of entire business units, there is an estimated further losses of £14bn to £18bn in revenue and 34,000 to 40,000 jobs and £5bn in tax.

Asked whether the government was aware of the daily bleed of financial services to the rest of the EU, Boleat said: “Not enough, that’s the worry. It needs business to talk to MPs, not to give their view on Brexit, but to explain to them ‘this is what I am having to do because of Brexit’. This is not scaremongering, this is reality.”

Grad Cap Throw PHOTO

Why an MBA still trumps a master’s in finance in banking

A decade ago, an MBA was clearly the top qualification to have if you wanted to start down the path toward a high-level job in banking. Then quietly, more top business schools began offering an alternative: the cheaper, more technical master’s in finance degree. By 2015, hiring totals suggested that a master’s in finance may actually have trumped the MBA as the top qualification. However, new data shows that MBA programs may be having a renaissance of sorts, at least when it comes to compensation.

Comparing salary expectations for MBA holders versus those with a master’s in finance is a difficult task. While MBA programs usually require some previous professional experience, you can often enter a master’s in finance program directly from undergraduate studies. This means an MBA should demand a higher starting salary than a master’s degree, and in fact it does. But MBA holders are also now seeing greater increases in salary post-graduation than they did previously. The picture is more muddled for recent master’s of finance graduates.

The average degree holder at eight of the top 15 master’s in finance programs recently ranked by the FT reported lower annual salaries after three years of experience than those who graduated one year earlier. This only occurred with two of the top 15 global MBA programs – IESE Business School in Spain and the University of Cambridge, both of which ranked outside the top 10.

Meanwhile, graduates of every top 15 MBA program but one reported at least a 100% increase in salary from the time they entered the program to three years after earning their degree. Even graduates from IESE and Cambridge Judge saw their salaries more than double over that period. That’s a stark difference from just a few years earlier, when graduates of every top MBA program reported three-year salary increases that were lower percentage-wise than the previous year. The value of an MBA appears to be on the rise.

When it came to the Masters in Finance courses where students didn’t have prior professional experience, the FT compared the starting salaries directly following graduation to what degree holders were making after three years. Among top schools, graduates from first-ranked HEC Paris saw the biggest three-year salary bump of 82%. The master’s program at the U.K.’s Imperial College Business School fared the worst, with graduates only earning a 43% increase in pay over three years. Imperial College alumni from 2015 now earn an average of $92k, meaning their starting salary was around $65k after graduation. At HEC, it was around $75k.

For MBAs, sticking around pays

There are several possible explanations for the new narrative that top MBAs are still a good deal. A masters qualification is well-aligned with lucrative sales and trading jobs, fewer of which exist now than in years previous. And of course, not as many MBAs enter banking as often as in previous years; many now take jobs in tech and consulting, so pay could be rising due to scarcity value. But the data seems to reject the premise that other industries are out-paying finance professionals, particularly in the early years for those who went to top schools.

Business schools that are the chief feeders into finance – Stanford, Wharton, Booth, Harvard and Stern – all saw their graduates who remained in the industry take home bigger salaries than those who left or never entered finance in the first place. Graduates of all five with the exception of Stern earned salaries north of $200k if they stuck around for three years.

Banks are thirsty for masters candidates

Perhaps the best news for master’s of finance grads is that they are clearly in high demand. Over 95% of students from nine of the top 10 programs had a job within three months of graduation, with four schools sporting 100% employment rates. For top MBA programs, the highest employment rate was 95% (Booth), while several languished in the 80%-90% range.

If you have little or no experience, a master’s in finance appears a near-lock to find a decent job in the industry. But it still pays to have an MBA. You just need to land a job first and handle the culture of banking for more than a couple years.

Europe PHOTO

The Beginning of a New Era to Personal Data protection

Following four years of debate, the (EU) 2016/679 regulation of the European Parliament and Council of the 27th of April 2016, is enforced.

The regulation refers to the protection of individuals, concerning the process of their personal data, as well as, the free exchange of those data (General Regulation for Data Protection).

The regulation of the 27th of April 2016 (having a two-year harmonization period) entered into force on the 25th of May 2018.

The aforementioned regulation replaced the Directive 95/46 / EC, the provisions of which were transferred to the 2001 Personal Data Processing (Protection of Individuals) Law (Law 138 (I) / 2001).

The regulation, unlike the Directive, ensures a high level of harmonization and it is directly applicable to all European Member States.

The protection of natural persons, in regard to the processing of their personal data, it is a fundamental right. The Article 8 (1) of the Charter of Fundamental Rights of the European Union and Article 16 (1) of the treaty for the operation of the European Union (TFEU), specify that every person has the right to protect its personal data.

The worldwide integration and rapid development of the data processing, as well as, the functioning of a global market, have resulted in an unparalleled increase flow of data collection, processing and cross-border exchange, from both private companies and public authorities.

Target

The Regulation aims the uniformity and decisive protection of the privacy, of the citizens of the European Union. This requirement ascended, due to the intense daily increasing trend of personal data exchange, worldwide, which in many cases was subject to violations of the personal data of individuals.

Interpretation of Definitions

According to the provisions of the Regulation, “personal data” is defined as the data and any kind of information that directly or indirectly identify an individual. This information may relate to his / her private, professional and / or personal life.

The processing of personal data, in accordance with the Article 4 (2) of the Regulation, indicates that any act or series of operations carried out with or without the use of automated means, such as: collecting, recording, organizing, structuring, storing, adapting or modifying, recovering, searching of information, using, disclosing by transmission, distributing or any other form of supplying, associating or combining, restraining, removing or destructing of data.

“Controller” is the natural or legal person, public authority, service or any other body that defines the purposes and manners of processing personal data.

“Processor” is the natural or legal person, public authority, service or any other entity, which process the personal data on behalf of the controller.

Basic Principles of the Regulation

The basic principle of the Regulation is the harmonization and introduction of a set of data protection standards, which will apply uniformly, throughout the European Union.

Undoubtedly, one of the biggest changes in the regulatory field of personal data protection derives mainly, from the extended jurisdiction of the Regulation, in all the European member states. The Regulation applies to all companies and organizations, which process personal data of people residing in the European Union, irrespective of the company’s registered office location.

Additionally, the Regulation refers to all private and public enterprises, as well as, government authorities that collect, process and generally manage personal data of customers, employees, associates or other natural persons, which are European citizens.

In summary, the new Regulation applies to all businesses that process personal data of European citizens, regardless of their location (inside and outside the European Union).

Moreover, an equally important characteristic of the Regulation is to introduce and strengthen the rights of individuals, whose personal data are being processed.

Additionally, it is notable to mention that the new Regulation introduced new obligations to businesses on the way they process personal data.

In fact, the Regulation is significantly increases the obligations of all entities that manage personal data of European citizens.

Severe amount penalties, according to Article 83 of the Regulation will be imposed to offenders, with fines ranging from €10,000,000 to €20,000,000 or from 2% to 4% of the total annual global turnover of the previous business year of a business (applies to whichever is the higher). The fines will be applied according to the nature of the violation. Hence, the heavier fines will be exercised for breaches concerning the basic principles of the Regulation, related to data processing, data transfer in a third country without the consent of the individual and to the non-compliance with an order or limitation of the data processing, imposed by the supervisory authority.

Decisions, which are issued by the supervising authorities, in the context of the fine exercise power, will be subject to appeal before the Administrative Court on the basis of Article 146 of the Constitution.

Furthermore, another important fact of the Regulation is to strengthen the existing principles governing the processing of personal data, and according to Article 5 of the Regulation, they state that personal data must:

  • Be subjected to legitimate and lawful processing with a clear purpose (lawfulness, fairness and transparency).
  • Be collected for specified, explicit and legitimate purposes, and, not to be further processed in a manner incompatible with those purposes (purpose limitation).
  • Be appropriate, relevant and limited to what is necessary for the purposes for which they are processed (data minimization).
  • Be accurate and proceed with all reasonable steps to immediately delete or correct personal data that is inaccurate (accuracy).
  • Be stored, only for as long as it is required for the purposes of the processing of personal data and on the basis of the applicable legal requirements of each organization (storage period limitation).
  • Be processed in a manner that assures the appropriate security of personal data, including the protection against unauthorized or unlawful processing, loss, destruction or deterioration, using appropriate technical or organizational measures (integrity and confidentiality)
  • Entities collecting and processing personal data are responsible and must be able, at all times, to demonstrate compliance with all the principles governing the processing of personal data (accountability).

Rights of individuals

The Regulation based on the structure of the existing legislative framework, strengthens the rights deriving from the 1995 Directive and introduces new rights and obligations.

Indicative is the explicit legislative fortification of the “right to be forgotten”, which is the right that allows the individual to maintain control of his / her personal information, mainly in the cyberspace.

The imperative rights of individuals, whose personal data are being processed, are:

  • The right to object at any time, to the processing of their personal data.
  • The right to transfer the data that are based on their consent, on receiving or requesting the transfer of their data from one company to another.
  • Right to the information.
  • Right to access the data.
  • Right to correct the data.
  • The right to “be forgotten” or delete the personal data.
  • The right to limit the processing of date, when the accuracy of the data is in dispute or is illegal or when the company no longer needs those data.

If you would like to find out more information, please visit: https://www.eklawyers.com/

Maritime Trade PHOTO

The calm before the storm in International Trade?

A narrowing in the trade deficit in back-to-back months means good things for Q2 GDP, but this report is not yet capturing the extent of the steel and aluminum tariffs and survey data about trade is signaling a warning.

Trade Poised to Boost Second Quarter GDP

As the second quarter began, the U.S. trade deficit narrowed as exports increased 0.3 percent while imports declined 0.2 percent in April. After having widened for six consecutive months and now having narrowed in back-to-back months, trade is positioned to be additive to GDP in the second quarter, perhaps substantially so.

Our latest forecast published earlier today (prior to this morning’s trade report) looks for trade to add seven tenths of a percentage point to headline GDP in the second quarter. If that is indeed the contribution from net exports, it would mark the biggest quarterly boost to GDP from trade in more than four years.

Given the preoccupation that financial markets have had with tariffs and the potential for a broader trade war, might the flattering trade numbers be a salve for worried markets that there is nothing to fear in protectionist trade policies? Not so fast, keep in mind that this data is only through April and the broader extension of tariffs to our NAFTA trading partners and Europe was not effective until June. So the only impact observable for those countries in today’s report (and next month’s as well) would be to the extent that those countries scaled back in anticipation of eventual tariffs.

It is also useful to remember that international trade figures evolve with long lead times and a glacial pace. It takes a long time to build trust, relationships and global payment infrastructure between trading partners, and it remains to be seen if those bonds can be broken down more quickly. On that basis, it is unclear how long the shadow of tariffs will be cast on trade dynamics in coming years.

Steel and Aluminum Imports

If there is a storm coming, this might be the calm before it. Imports of iron and steel mill products increased $228 million in April alone and have increased more in the first four months of 2018 than they did in the same period of 2017. Meanwhile imports of bauxite and aluminum increased $44 million in the month. In the first four months of the year, the United States has imported better than half a billion dollars (or roughly 20 percent) more in bauxite and aluminum products than it did during the same period in 2017.

Softening in the Soft Data

U.S. manufacturers still report expansion in both exports and imports, but not to as broad an extent as they were just a few months ago. In the past three months, the ISM imports component has slipped 6.4 points, the largest slowing over a 3-month period since 2014, and the ISM exports component has come down 7.2 points, the biggest 3-month slowdown for this series since 2012.

DB PHOTO

Deutsche Bank’s head of corporate finance in London departs

The former Goldman Sachs partner brought in revive to Deutsche Bank’s investment banking business in London has left in the latest of a series of senior departures at the German lender.

Alasdair Warren, the big name investment banker hired two years ago as head of corporate finance for Europe, the Middle East and Africa, has departed, as Deutsche continues to strip away management layers under a strategy laid out by new CEO Christian Sewing.

Warren is leaving to “pursue other opportunities”, according to a memo sent to staff yesterday, seen by Advisory Excellence. His responsibilities will be taken on by Mark Fedorcik, currently co-president of the investment bank and the former head of corporate finance for the Americas, who will add Emea to his role.

“I am grateful to Alasdair for his contributions to Deutsche Bank over the past two years or so,” Garth Ritchie, head of Deutsche’s corporate and investment bank, wrote in the memo.

Warren, the former co-head of the financial institutions group at Goldman Sachs, was brought in by former CEO John Cryan, who was ousted in April as part of a broad range of changes at the top of the troubled lender.

Warren oversaw some significant recruits in Deutsche’s European investment bank as it struggled to maintain its formerly dominant position in the league tables. Robin Rousseau joined from Goldman Sachs in June 2017 to head M&A in Emea, while Thomas Piquemal was hired from EDF Energy as global head of M&A and country manager for France. He has since left the bank.

Deutsche Bank has also split the co-head of Emea corporate finance role, promoting Adam Bagshaw, global co-head of private equity and Nick Jansa, co-head of global leveraged debt capital markets. They will report into Fedorcik.

Ritchie added in the memo that “further organisation details from the [corporate finance] leadership will follow in due course.”

Sewing said during the bank’s annual general meeting last month that it was seeking to “de-layer” the management team across the corporate and investment bank, and its commercial and private bank. “Smaller committees, less hierarchy and more individual responsibility — that’s our motto,” he said.

BSA PHOTO

Getting The Deal Through – Distribution and Agency 2018

Global commerce depends, to a very great extent, on the relationships between manufacturers and suppliers on the one hand and their distributors and commercial agents around the world on the other. These relationships are the linchpin to moving goods and services to new markets around the world and they are governed, not only by the contracts negotiated between suppliers and their distribution partners, but by a wide range of laws and regulations, which vary widely from country to country. Developments in areas such as privacy and data protection and increasing concerns over cybersecurity affect distribution relationships as well, as a result of the normal sharing of customer information and other data between distribution partners.

This Distribution & Agency book covers the main points of law and regulation governing relationships between suppliers and manufacturers, and distributors and commercial agents, worldwide. Written by local experts in key jurisdictions, topics covered include: regulations governing direct distribution; potential restrictions, financial and tax considerations on foreign businesses’ operations; distribution structures available to suppliers; regulation of relationships between suppliers and distributors; restrictions on the distribution of competing products; relevant consumer protection laws; restrictions on contractual choice of law, courts or arbitration tribunals; and dispute resolution, mediation and arbitration procedures and processes.