Pity the Porsche salesmen of Connecticut. Before the financial crisis, first UBS and then Royal Bank of Scotland built two of the world's largest trading floors in the state.This content was published on June 3, 2014 - 12:10
At the time, UBS issued a press release boasting that its floor was "approximately the size of two football fields", and served by a "garage with room for 500 cars".
Today, the buildings - which are just across the street from each other - look like monuments to a lost era. The infrastructure is still there but RBS's floor never hummed as it was supposed to. UBS only enjoyed a brief burst of the good times before the turmoil of 2008 and the doldrums of recent years. Now, the rooms are becoming even quieter.
Under regulatory pressure and amid a downturn in trading, RBS announced last week that it would cut about 300 jobs in mortgage trading over the next two years. To fill the void left by its own staff cuts, UBS has even relocated some of its "back office" compliance staff to bulk out the floor, like seat fillers who take the stars' places at the Oscars ceremony. The garage is presumably less full of flash cars, too.
Fearful of an outright withdrawal, Connecticut has offered incentives to keep the banks in the state, betting that they will remain significant employers.
But at the national level, the reverse is true: policy is being developed that will arguably make the US less attractive for overseas banks.
The Federal Reserve is imposing tough stress tests and capital requirements on foreign broker-dealers that have more than $50bn in assets. Its motivation seems clear: officials are keen to avoid propping up an ailing overseas bank, as they did with emergency lending during the last crisis.
RBS is in the process of slimming down below the $50bn threshold. Most of its peers - notably Barclays - are also making changes to comply with, or mitigate against, the impact of new rules.
Then there are the legal penalties for foreign banks in the US. HSBC, Standard Chartered, Credit Suisse and BNP Paribas are being clobbered by US authorities for wrongdoing that ranges from enabling tax evasion (in the case of Credit Suisse), to failing to prevent money laundering (HSBC), to violating US sanctions (Standard Chartered). BNP has also set aside money to settle a sanctions case.
Executives at each of those banks have said they feel hard done by - though they have not said it very loudly for fear of further antagonising a justice system they suggest is capricious, politically motivated and harsh.
US banks, notably JPMorgan Chase, have also paid multibillion-dollar penalties in recent months. But some foreign bank executives have intimated that they are the objects of discrimination based on nation origin.
The record shows that they have paid a large proportion of the biggest penalties - but does not prove whether or not that is because they are worse behaved.
In different times, the foreign banks might have received support from some US politicians.
A report from the mayor of New York and the senior Democratic senator for the state condemned "a greater perceived litigation risk [which has] reduced the appeal of the US market to many foreign firms" and "a complex and sometimes unresponsive regulatory framework . . . forcing more business overseas". The report urged reform and warned of a "chilling fact that if we do nothing . . . we will no longer be the financial capital of the world".
Alas for the banks, that report was written back in January 2007 by then New York mayor Michael Bloomberg and Charles Schumer, still the senior senator for New York.
It was a call to arms to compete with the "light-touch" regulation then favoured in London.
However, since catastrophe also befell the UK's financial sector in 2008, few politicians have voiced similar sentiments. Mr Bloomberg has been replaced by the more leftwing Bill de Blasio. Mr Schumer remains in place but is now a very muted defender of Wall Street.
One French politician blames US hegemony for emboldening the authorities' in their harsh response. He may have a point. Because of the continued dominance of the dollar, and partly because UK regulators have also adopted a tougher posture, there is little chance of New York being eclipsed as a financial centre.
Fears about competition may re-emerge over time. But the days in which Swiss banks compared their trading floors to American football fields or boasted of the size of their parking lots look to be gone for good.
Copyright The Financial Times Limited 2014
This article was automatically imported from our old content management system. If you see any display errors, please let us know: firstname.lastname@example.org