ROSS NORMAN : Regulatory Tail Wags The Bullion Dog
Any article that starts by suggesting we should go easier on bankers is unlikely to resonate
or win the support of the common man. But let's say it as it is ... and this is a message to EU
regulators and UK decision-makers.
The London bullion market remains the global capital for trading gold and few of us are bankers; the bullion market has fought long and hard to demonstrate it is an honest enterprise against countless allegations of impropriety - all unproven - and now it is being throttled by regulation and exchange - it is a position shared with colleagues in parallel commodity markets.
Gold trading is a significant revenue generator to the UK exchequer with about 24 billion cleared here each day. Our colleagues at the London Metal Exchange are similarly world class with an estimated 85% of global non-ferrous metals trading going through their exchange - and then there are the oil traders, right down to the minor metals chaps who again dominate the world for specialist rare metals ; few of the players that operate in these markets are financial institutions yet new EU regulation will undoubtedly curtail participation in commodities here. The UK commodity sector should now officially be on the endangered species list as regulation and red tape is on the cusp of driving the business abroad- to Asia.
At the recent gold conference in Vienna the phrase "compliance arbitrage" was coined and it
sums it up ... if UK Plc (or indeed the EU) wants to disenfranchise the commodity sector in
London then there are plenty of countries who would kill for our hard won tradition as the leading market globally. And it doesn't end there ...
The Bank of England might stop to consider why so many leading central banks hold their bullion in London - it is not because it might give them a chance to sample our cooking when they visit - it is because we are supposedly centred in the globe's bullion capital... for liquidity purposes this is essential. You might need more than a photo op of the Queen at your vaults if this unravels .. and there is a real danger it could.
You get the picture though ... this has the potential to impact in seemingly unconnected businesses in ways one may not anticipate, right through the metals value chain to the many supporting industries and sectors that depend upon being in London where it happens.
Sadly the UK does not even now have a "London good delivery refinery" to support its globally
accepted standards for bullion - in short, there is a real danger of the commodities sector being strangled by regulation and compliance and hollowed out in the same way that much of our manufacturing industry has. Who is going to stand up for us ... ?
27 Oct 2015