Although bankers have learned to keep their heads down since the financial crisis, they will have been quietly popping champagne corks following last weeks surprise Tory victory.News that Ed Balls had lost his seat was greeted with cheersat City dealing desks on Friday morning.
Labours Ed Miliband and Ed Balls had threatened further misery for investors with their plans to break up the big four banks, and hit them with a one-off bonus tax and higher bank levy for good measure.
That wont happen now.
Osborne Has Form
But thats old news now, the election victory is in the price. Bankers now have other worries on their mind.
Chancellor George Osborne didnt exactly go easy on the banks in his first five years in the job.
He repeatedly hiked the banking levyto fund his spending commitments or spike his political opponents guns, liftingit an incredibleeight times in just four years.
And Prime Minister David Cameron has committed himself to areferendum on EU membership by 2017 at the latest, which shouldalso cast a cloud over the big banks.
The banks have meekly taken their punishment since the financial crisis, grudgingly accepting their status as public enemy number one.
Butnow they are starting to talk tough, led by Stuart Gulliver, chief executive at HSBC Holdings (LSE: HSBA), who has threatened to quitthe UK in protest at the banking levy, which hits it harder than any other bank, even though it didnt need a bailout and 80% of its revenues come from outside of the UK
Gulliverhas also warned of the dangers of a Brexit vote in the EU referendum, which mightalso inspire it to relocate its headquarters. Paris has even been mooted as a rival venue.
No Bonus, No Fun
I would expect Mr Osborne to respond to the first threat by going easy on the banker bashing. I would be surprised if he increased the banking levy again or attacked bonuses. Politically, whats the benefit? He certainly doesnt want to be blamed for forcing a major bank out of the UK, with the resulting losses in jobs and tax revenues.
The EU referendum will depress investor enthusiasm in the weeks before the referendum, even though I would ultimatelyexpect the UK to vote to stay in.
Another question is what happens to Scotland in the wake of the SNP landslide. Both Lloyds and RBS have their headquarters in Edinburgh, and threatened to head south of the border if the Scots voted for devolution. They didnt, but what if they get another vote?
The Tory victory is undeniably good news for the banks. But if it pushes the UK out ofthe EU, or Scotland out ofthe UK, it wont be seen as good news for long.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended HSBC Holdings. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.