London isn't afraid to flaunt what it's got. The lawn in front of Whitehall Court shimmers in the morning sun, the facade of the Renaissance palace beams. On the other side of the Thames River, the London Eye, the colossal Ferris wheel, rises into the sky.
Down on the street stands a man who couldn't care less about his surroundings. Wearing jeans and a turquoise polo shirt, his belly protrudes slightly from his blazer. His unkempt hair is ash blond and his blue eyes are constantly in motion. Roman Borisovitch has invited us along on a sightseeing tour of London of a totally different kind.
He wants to provide a look behind London's facade -- now, as the British are preparing to vote on whether to remain a part of the European Union, and when the whole world is looking at the city with trepidation. In an aging tour bus, Borisovitch takes visitors to some of the most expensive residential buildings in London as part of what he calls "Kleptocracy tours."
Their owners are Russians, Chinese and Africans who have grown rich through corruption and exploitation. And they include places like the magnificent Whitehall Court Number 4 building, for example, where the British MI6 secret service used to operate and where a confidant of Vladimir Putin bought two apartments a few years back together with his wife valued at £11.4 million. The money is believed to have originated from dubious deals with Russian oligarchs.
That, at least, is the version told by Borisovitch, himself a Russian who has become well-known as a result of undercover reporting he did for television broadcaster Channel 4 on excesses in the London real estate market. The documentary, "From Russia with Cash," made a star of Borisovitch and embarrassed London financial elites who were presented as the minions of corrupt politicians.
"There are armies of enablers in London -- bankers, accountants, lawyers and PR agents who help the kleptocrats launder their money," says Borisovitch. "They bring it to British-controlled tax havens and back to London, where they invest it in high-end real estate. We don't need this money in London."
But the money seems to come to London on its own, both clean and dirty. As the world's most important financial capital -- ahead of even New York, Hong Kong or Singapore, and well ahead of Frankfurt -- London is a magnet for money.
'London Is Pure Capitalism'
Economically, London is as big as Sweden. It generates one-fifth of all British gross domestic product (GDP) and it is the world's largest exporter of financial services. Close to 730,000 people work in the sector in the city. Some 40 percent of global currency trading is conducted through London, with $2 trillion in volume each day.
Around 250 foreign banks have subsidiaries in London in addition to hundreds of law firms. According to the latest wealth report by residential and commercial property consultancy Knight Frank, London is the most important city for the super rich. No other major city in the world has the concentration of multimillionaires seen here.
And yet all these numbers are insufficient for showing what London really stands for. "London is pure capitalism," says Martha Boeckenfeld, head of the tradition-rich bank Kleinwort Benson.
An exploration of Canary Wharf and the loud, far-too narrow streets of the City of London, the financial district surrounding the Bank of England, combined with conversations with bankers, traders, lawyers or fund managers in the pubs at Square Mile, provides a decent look at how things are going in the world of financial capitalism today.
Both -- the financial world and its unofficial capital -- are still in a state of lasting uncertainty, even eight years after the financial crisis. They are constantly scrutinized by activists like Borisovitch, by regulators and by finance start-ups seeking to alter the landscape of the very financial system upon which London is so heavily reliant.
And now people in the British metropolis are also discussing the possibility of Brexit and the consequences it might have if the Brits vote to leave the EU on June 23. The vote is representative of a new longing to go it alone at the national level, to turn away from globalization -- a shift in thinking that could plunge London, a city that has been one of globalization's biggest winners, into an identity crisis.
London has survived wars and terrorist attacks, the stock market crash of 2001 and the global financial crisis of 2008. It emancipated itself from America and kept itself apart from the European currency system. London has adapted to all manner of political, economic and technological changes of the past decades.
The Financial World's Madonna
But one thing continued to grow even after the setbacks: The amount of money that was pouring into the city -- that was then pumped back out into the world via the London Stock Exchange or the more opaque channels of banks and asset managers and invested in whatever could provide the highest returns at that moment.
"London is for the financial world what Madonna is for pop music," says Chris Skinner, author, blogger and co-head of the Financial Services Club, a European financial industry network. He's a man who can feel London's pulse. "The city has reinvented itself over and over," Skinner explains, listing out what makes the megacity so strong: People speak English almost all over the planet, British law is acknowledged and applied in large parts of the industrialized world and London attracts talented, ambitious people. The city is both international and pragmatic.
The Royal Exchange Ground Café, located kitty-corner to the Bank of England, where Skinner is talking about the advantages of London, is one of the places where London's rise to become a global trading center began.
The merchant Thomas Gresham conceived the Royal Exchange -- today home to high-end boutiques and restaurants -- during the 16th century as London's first trading venue for stocks and other goods. As far back as 1695, Londoners complained that the business practices of the traders and brokers was loud, rude and unscrupulous.
From then on, they were required to obtain a license, but back then, as after the most recent financial crisis, the industry adapted, changed and kept going. The traders soon began meeting in the coffee houses surrounding the Royal Exchange.
"It was in 1698 in Jonathan's Coffee House that John Castaing first published share prices on a regular basis," says Nikhil Rathi, director of international development at the London Stock Exchange (LSE), making him something of a conceptual successor to Castaing. Today, there's no longer even a trading room at the London Stock Exchange at Paternoster Square. But its global ambitions is made clear by a giant screen in the atrium, on which trading is visualized by stars in space that flash up and disappear with surges of activity. Like London itself, the LSE has made internationalization a principle. "Open access is at the core of our strategy," Rathi says. Companies from more than 80 countries have listed their shares in London. No other stock exchange attracts more foreign companies, in part because those companies want to be accessible to the international investors who are here as well. Just under £7 trillion in assets are managed from London.
That kind of global networking is one of the reasons that Deutsche Börse, Germany's stock exchange, is merging with LSE -- in a deal announced in February -- and planning to base the headquarters of their joint holding company in London. If the fusion isn't derailed by a vote in favor of Brexit, many also expect it to give London a further boost as a financial capital.
The most important financial centers by competitiveness in 2015
London's success as a financial hub has roots that go back to the Industrial Revolution, which began in Britain. It facilitated an early democratization and a level of societal openness that wasn't as developed in the rest of Europe. Given its advantageous geographical position between the east and the west and the fact it was supplied by a colonial empire built on the back of slavery, London became a massive hub for goods very early on. The financial industry simply established itself on top of those foundations.
But with the decline of British industry in the 1970s, London's rise as a financial center also appeared to have come to an end.
Margaret Thatcher set the financial sector's rebirth in motion. With her neoliberal policies, she may never have restored British industry to its former glory, but she did help create the financial revolution in Britain with the sudden "Big Bang" series of reforms liberalizing the financial sector. Thatcher provided foreign financial companies with access to the London stock exchange, loosened trading rules and embraced free markets. Some within the conservative London financial elite even thought the reforms went too far. They feared the country's Americanization.
The Americans did come, and so did the Germans and other Continental Europeans. Along with them came the victory march of the shareholder value doctrine -- the alignment of seemingly all business activities in the interests of shareholders.
London opened itself up to this culture to a greater degree than anywhere else -- aggressive investment banking, anything-goes hedge funds -- and thus became the dominant capital market in Europe.
But the "Big Bang" also brought London what people in the city dub the "Wimbledon effect" -- meaning that people there play hosts to the biggest and best competition, but seldom get top billing themselves. After "Big Bang," financial institutions from the United States, Germany and Switzerland acquired numerous British commercial banks.
"The Big Bang has forced the City to become global," says Allan Yarrow, who himself brings together both new and old London. Yarrow is an old-school banker who wears suspenders beneath his powder blue suit and amber-colored cufflinks. He comes from a family of shipbuilders and worked for a long time for Kleinwort Benson, one of the old, established London banks. Last year, he held the prestigious position of the Lord Mayor of London, the city's chief ambassador and lobbyist. During his tenure, he traveled to 28 countries to promote the British capital city, Yarrow says.
London never sat idly by waiting for the money to come in on its own. The city viewed its own financial expertise to be an exportable product. Still, London lagged behind New York as a distant No. 2 up until the end of the last century. But reactions to the Sept. 11, 2001 terrorist attacks helped London leap ahead of New York for the first time. The US tightened up its immigration rules and raised the hurdles for foreigners seeking to do business in America.
London, for its part, did the opposite, opening itself up and fostering a laissez-faire culture.
Then, though, the financial crisis of 2008 deeply shook faith in loose regulations. Banks like Northern Rock and the Royal Bank of Scotland collapsed and had to be rescued. The scandal surrounding manipulation of the Libor interest rates also exposed ties between regulators and banks that were far too tight and also became a global symbol of avarice and unscrupulousness in the industry.
London also responded pragmatically during the financial crisis, reforming the supervisory system and promoting new competition in order to break the oligopoly of the few banks that had come to dominate the market for British private customers.
One gets an impression of how the culture and balance of power in London has shifted once again when taking the Docklands Light Railway (DLR), leaving the City and heading east.
Fintech and Start-Up Incubators
As it winds its way into the office district of Canary Wharf, the elevated railway has all the twists and turns of a roller coaster. One of London's very first skyscrapers is located at 1 Canada Square. Here, on the 39th floor, what is intended to be the financial city's future is taking shape. Around 200 financial technology companies, so-called Fintechs, are working on tomorrow's products and business models in a start-up incubator called Level39. They're developing robotic advisors, electronic payment systems, cyber security software, banking account apps and much more.
"Canary Wharf no longer belongs to the banks alone," says a self-confident Asif Faruque. The Level39 marketing chief peers from the incubator's coffee bar out over the established competition in the City. Each day at 3 p.m., a "Cookie Bell" rings to convene a meeting of young entrepreneurs for cookies and brainstorming -- a ritual in the start-up scene.
In many respects, Level39 is attempting to apply the recipes for success of previous generations of the London finance scene, only this time to the future. It is seeking to attract entrepreneurs, money and expertise from all over the world and is offering the full weight of London's attractive infrastructure in order to do so. One-third of the firms and employees at Level39 come from outside of Britain -- from Poland to Iran, all the way to Oceania.
Investors, mentors and training experts drop by for weekly visits to the 39th floor, the government Financial Conduct Authority (FCA) has an office in the same building and the established banking competition is also pressing its way into the immediate vicinity in order to seek its own slice of the pie.
"The government has understood that the financial services industry and its further development are crucial for London," says Faruque. The government is assisting start-ups with tax breaks on their initial funding. And the supervisory authority FCA has also created a "regulatory sandbox" in which young financial firms can test new products and business models without being subjected to the usual conditions and constraints. Soon, University College London will also be moving into the floor just below Level39, where it will house a new management school.
Whether the Fintech firms will one day come to control the finance industry in the same way Google does the Internet or Amazon does commerce is questionable. But the start-ups have already stimulated the economy. In 2015, £524 million flowed into British financial industry start-ups, with 61,000 people employed in the London Fintech scene -- far more than in New York.
That alone, though, is insufficient to explain why London has remained the world's financial capital despite the financial crisis.
Back in the City, on Portsoken Street, an inconspicuous road located near the Tower of London, is where Saker Nusseibeh, head of Hermes Investment Management, has his office. The asset management company directly oversees £24 billion and provides consulting to its customers on further investments totaling £170 billion. "After the financial crisis, the loose monetary policies of leading central banks created a lot of new wealth, especially in the emerging markets. A lot of this money eventually flowed to London," Nusseibeh explains.
Investment managers and hedge funds tended to profit most handsomely from that trend. During the past eight years, the British funds industry has nearly doubled the amount of assets it manages. This leadership role on capital markets has shifted from the banks to asset management firms. Investors like the American industry leader Blackrock and Hermes, or hedge funds like TCI, exert their influence from London. They are the most important customers and at the same time major shareholders in almost all global banks, and they also determine the destinies of countless industrial corporations -- even in Germany. VW and Deutsche Bank were the most recent to feel it. In both cases investors openly pressed for significant changes in corporate governance. London rules.
That's not the only reason these new forces in London have been the subject of criticism. They have also been scrutinized over the origins of their money. "It may be going too far to say that London's success is built on dirty money," says Robert Barrington, the head of Transparency International in the UK. "But because of this success, together with the clean money comes the dirty money as well."
Britain's National Crime Agency estimates that money laundering to the tune of hundreds of billions of pounds occurs each year. And Barrington believes that a significant proportion of that dirty money inevitably flows into hedge funds.
Ever since the British financial regulatory authority put the banks on a short leash in the wake of the financial crisis, hundreds of new such laxly regulated funds have popped up. The greatest density of hedge funds in the world is to be found in the area around Berkeley Square in Mayfair.
The hedge funds are even trying to make money off the threat of Brexit. Some plan to commission their own exit polls during the vote this Thursday in order to gain an information advantage and then turn around and make bets on the financial markets about the outcome of the referendum.
But few in the London finance scene share the joyful anticipation of these gamblers and those seeking to profit from crises. Brexit could throw into question a lot of what makes the financial hub hum and endanger its dominant position. According to former Lord Mayor Yarrow, 84 percent of the representatives of the City of London are against breaking away from the EU. "Part of the money would go elsewhere if we were to leave the EU," he warns.
Currency trading in euros currently still takes place predominantly in London. But, warns funds manager Nusseibeh, a passionate supporter of remaining in the EU, "I can't see how trade in the euro can continue here if the British snub the European Union in that way."
Around one-quarter of the financial transactions currently processed in London are related to the EU. Following a Brexit, though, the financial sector would no longer profit from the European "single passport," which allows unlimited financial services to be offered across the EU.
Numerous banks and financial institutions may even relocate parts of their business to other cities like Dublin, Frankfurt, Paris or Luxembourg. Deutsche Bank, large American financial institutions and even British banks have long since modelled such scenarios.
Nusseibeh believes that if Britain votes to leave the EU, it could mark the beginning of a slow decline of London as the global financial capital. "A vote for Brexit comes close to self-harming."
Success, it turns out, can be fleeting -- even for the Madonna of the financial markets.