‘Brexit’ Imperils London’s Claim as Banker to the Planet

“Everyone is preparing for the worst,” says Davide Serra, chief executive officer of Algebris Investments, a hedge fund he co-founded in 2006. “You will see the emergence of Frankfurt, Paris, Dublin, Luxembourg, Madrid.”

“To the world, London now matters more than New York,” he adds. “In 10 years’ time, New York will matter more.”

The Rise of the City

Looking out from the headquarters of Rothschild & Company, London’s past and potential future are effectively laid out on display.

The building sits on land that once held the home of the founder Nathan Mayer Rothschild. Conference rooms look down on the Bank of England. Across the River Thames, a 95-story, glass-fronted pyramid known as the Shard punctuates the view. It was erected by a consortium of investment funds from Qatar.

Within the original City of London — the heart of the finance industry, known as the Square Mile — cranes sit atop a half-dozen new skyscrapers in various stages of completion. Who will occupy them once Britain leaves Europe?

Nathan Mayer Rothschild saw the beginning. Born into a Jewish ghetto in Frankfurt, he landed in the English mill town of Manchester at the end of the 18th century, intending to buy patterns for his family’s textile business.

He soon sniffed out a better opportunity in the City of London, the warren of streets laid down by the Romans at the lowest crossing point of the Thames. The bounty of empire was landing on the docks — tea from India, silk from China, cotton from the American South. Trade required credit. Mr. Rothschild carved out a niche. He negotiated terms at the Royal Exchange — today, a shopping mall full of Italian luxury goods.

As the Duke of Wellington confronted Napoleon at Waterloo in 1815, Mr. Rothschild worked on behalf of the crown, quietly amassing gold and silver to pay the troops. Napoleon succumbed.

The Rothschild bank soon helped other governments finance operations by borrowing from British merchants.

By the middle of the 20th century, Warburg, another London bank, was selling bonds for the Italian highway network, raising $15 million in American currency. This was the first issue of so-called Eurobonds, those raised in foreign currency — now a mammoth business.

The mid-1980s brought the run of deregulation known as the Big Bang. Financial firms gained the freedom to set their own commissions, and to speculate and advise clients. Overseas companies could now acquire British banks.

In the foreigners came — especially the Americans. The rule of law prevailed. The English language sufficed. A banker waking up in London could trade in Asia in the morning, then across Europe, catch the opening of markets in New York, and still make it home for dinner at some…

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