Scotland - an International Centre for Finance and Investment by Owen Kelly (8.10.12)

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  • Try to put Scotland and Sc fs industry in context, rather than go over what we all read in economist/ft. Economic probs at all levels. At UK level, about 90% of retail customers of Scottish fs companies in rest of UK so what happening in UK economy more important than Scottish. Major challenge for life/pensions – savings culture – Nish – OECD predicts in 2013 UK h/h rate will be 5.4%, France 15%, Germany 10%. Lending to economy lightning conductor issue but banks all confirm that demand is down so role of oiler of wheels become much more difficult. Eurozone is major uncertainty, perhaps biggest. Eased a little in recent weeks since Draghi announcement but been here before. Still some way from settled situation. Internationally, make no claim to special insight but China looking increasingly uncertain,politically and economically. Property bubble in particular – need a lot of faith in ability of technocrats to manage it. The eurozone situation has operational impacts, especially for our asset servicing sector, as they respond to client demand for assets to be moved into other currencies. But also for trade finance, where increasing demand for hedging and contractual changes. Loss of trust a long term problem for the industry, as a whole. Banks, yes but people don’t distinguish. Need that trust for long term savings. Evidence that all gains wiped out by LIBOR. So a long way to go. Regulation continues in flood at all levels. In UK, BoE being restrurctured to take on full panoply of powers – conduct, prudential, systemic. Balance between invasive regulation and
  • Scotland - an International Centre for Finance and Investment by Owen Kelly (8.10.12)

    1. 1. Scotland: an international centre for finance and investmentOwen Kelly, Chief Executive, Scottish Financial Enterprise
    2. 2. Scottish Financial Enterprise• Represents Scotland’s financial services industry• Membership organisation• Members in Edinburgh, Glasgow, Aberdeen, Dundee and elsewhere• Objectives: promote Scotland as an international financial centre; influence government and regulators on behalf of members; promote thinking and innovation in the industry• Work closely with EU, the City of London, UK government and Scottish Government
    3. 3. Scotland as an international financial centre• Part of the European Union – regulated by Bank of England• United Kingdom’s 2nd largest financial centre; integrated with City of London• Leading centre for pensions, investment, banking and professional services• Scotland is 4th largest centre for asset management in EU• HQs of Standard Life , Royal Bank of Scotland, Aberdeen Asset Management, Baillie Gifford , Martin Currie, Scottish Widows• Home to major international operations for some of biggest names in finance worldwide, like BNY Mellon, HSBC, JP Morgan, State Street, Barclays, Citi
    4. 4. History of financial services in ScotlandOver 300 years of innovation: • 1694 Bank of England founded by Scotsman William Paterson • 1695 Bank of Scotland established – Britain’s first joint stock clearing bank • 1714 First public bank in France (Banque Générale Privée) founded by Scotsman John Law • 1728 The Royal Bank of Scotland invents the overdraft • 1748 Invention of life insurance by Wallace and Webster with Scottish Ministers’ Widows’ Fund • 1810 The first mutual savings bank founded by Reverend Henry Duncan, leading to worldwide Trustee Savings Bank movement • 1826 The Royal Bank of Scotland prints the first double-sided banknotes • 1870s First professional institutes in the world in accountancy, banking and actuarial science • 1873 Launch of collective investment vehicles which help to fund westward growth of US economy
    5. 5. Banking• Banks in Scotland employ about 40,000 people• Lloyds Banking Group and Royal Bank of Scotland – 2 major players with core presence in Scotland• Royal Bank of Scotland, Tesco Bank, Virgin Money - headquarters in Scotland• Clydesdale Bank (part of National Australia Bank Group), Bank of Scotland (part of Lloyds Banking Group), HSBC and Barclays also big presence• Provide full range of domestic and international banking services• Print Scottish bank notes, denominated in sterling
    6. 6. Insurance and pensions• Insurance companies provide over 20 percent of financial services industry jobs in Scotland and 24 percent of all UK insurance industry employment is in Scotland• Life assurance companies based in Scotland manage investment funds, pension funds, annuities, health insurance and other investment products• Standard Life, Scottish Widows, AEGON UK, Royal London, Aviva, Prudential – all have large operations in Scotland• Standard Life, Scottish Widows, Aegon UK – headquarters in Scotland
    7. 7. Asset management• Around £750 billion of funds are currently managed directly in Scotland, with £250 billion invested worldwide in equities and bonds. 4th largest centre in EU after UK, France, Germany• Assets under management grown since financial crisis• Extensive investment management experience includes: investment trusts, global equity, global fixed income, money market funds, private equity, venture capital, property funds, hedge funds, specialist equity and bond funds,emerging market funds• Leading companies: Standard Life Investments; Scottish Widows Invesment Partnership (SWIP); Aberdeen Asset Management; Alliance Trust; Baillie Gifford; Martin Currie;
    8. 8. Asset servicing• Over the last 30 years Scotland has become established as a major European centre, with Dublin and Luxembourg• 4000 people now employed in the industry.• Global asset servicing organisations based in Scotland provide a comprehensive list of services including: custody, securities servicing, investment accounting , performance measurement, trustee administration, shareholder services, compliance, client management, retail fund administration• Complements fund management/ asset management sector
    9. 9. Issues facing the industry• Economic circumstances – UK, eurozone, international• Eurozone – operational impacts• Loss of trust• Regulation• Scottish independence
    10. 10. Conclusions• Regulation – an unfolding story with the ending still to be written• Asset management/servicing – central to Scotland’s continued success• Uncertainties• Enduring strengths?
    11. 11. Questionscontact: okelly@sfe.org.uk

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