Opportunity or caution? How should the banks respond to Brexit?
Not long after my first experience on a trading floor I observed a bond trader seemingly agreeing a negative perspective on some bonds with an investor and shortly thereafter sharing a positive perspective on the same bonds with a different investor. Obviously, markets are made of different investment perspectives, but I wanted to know what really was the trader's perspective and asked him. He didn't answer directly, but said the ""the key is to remember to never believe your own 'story'"" - actually he didn't say 'story' but an item associated with a horned farm animal and my theme today is about believing or thinking about what to believe. This is a critical matter for those in banking & finance, because mis-information is a risk event.
Yesterday, considerable media attention was focused whether UK banking industry leaders should be seen as positive about the post Brexit opportunity for UK banking & finance or should heed more attention to Jamie Dimon, Chairman of JPMorgan Chase, who has highlighted the uncertainty over JPM's UK business. In the interest of disclosure, upon finishing my education I joined a bank that through many mergers is today JPM and indeed I worked in the same building where Jamie now sits.
Over the past week, criticism has also been directed at the Bank of England for its cautious economic forecasts and regulatory management of banks providing a gloomy view. Today's (14 July) MPC decision may also be viewed as plus or minus from many perspectives. I certainly agree that both frequent negative or positive comments can be reinforcing of trends, but I don't think that speaking positively or negatively would be likely to reverse a trend; more so, directly disputing reality ultimately results in a loss of credibility.....there's also a point when ignoring or omitting become propaganda, but that is for governments and not banks and businesses who eventually have to produce profit & loss statements.
For those in banking & finance, now is the time to collect as many 'views' - facts are thin on the ground in real time and often are revealed too late - as possible to understand arising or withdrawing risks and whether they need to be managed. Brexit supporters claimed opportunities would be created with winning the referendum. If today's leading banks leave or fail to grasp such opportunities, it is hard to imagine that another bank won't sieze them. However, banks, bankers, and regulators adding to the debate can only help inform government, regulators, users of the financial system, and employees. Like my trading colleague of the past, everyone involved should realise where there is bias, conflicts of interest, and attempts to influence but the best thing for banking & finance is the broadest debate.
Dr Peter Hahn is the Henry Grunfeld Professor of Banking at ifs University College. You can read his entire series on Brexit and it's implications here.