The film is called "What If?" and the Bank of England shows it to visitors to convey how the 300-year-old institution quietly shields the British economy from crises. The video includes a section in which Governor Mervyn King proudly explains the work of his central bankers.
There's just one slight shortcoming. It was filmed long before the current financial meltdown. To visitors who followed how the banking system came close to collapse over the last two years, the little advertising movie must seem like a satire. After all, the Bank of England failed to ward off this crisis.
London's financial district - memories of the near-crash are fading fast.Foto: REUTERS
The bank admits the film should probably be replaced at some stage. But it doesn't appear to be in much of a hurry. The movie may even outlast this crisis -- like many other aspects of the City of London. There are increasing signs that the world's largest financial center is returning to its old ways.
Share prices are rising, the banks are reporting respectable profits and as memories of the big Lehman Brothers shock last September fade, so does the reforming zeal of the financial district around the grand dome of St. Paul's Cathedral. "We're just drifting back into business as usual, as if nothing happened," said the finance policy spokesman and deputy leader of the opposition Liberal Democrats, Vince Cable.
At summer parties in the City, the talk is of bonuses, just a few months after the whole sector had to be bailed out by taxpayers.
"Bonuses Are Back"
The British press has invented a new buzzword: "BAB," short for "bonuses are back." Even the government is playing along. The new head of the Royal Bank of Scotland, which has been de facto nationalized, is to receive a double-digit million sum if the share price rises above 70 pence (80 euro cents) under his leadership.
The 5,400 investment bankers of Goldman Sachs in London have been promised hefty payouts because the Wall Street-based bank expects a record year. The government bond business is booming and thanks to the collapse of so many of its rivals, Goldman has risen to become banker to indebted governments.
Other banks that are doing well in the crisis such as Barclays Capital, the bank's investment arm, are busy poaching staff from their competitors. Adair Turner, the head of the Financial Services Authority, said recently there was "aggressive" hiring of bankers. Barclays has hired some 300 extra investment bankers this year by dangling attractive terms. The CEO of Barclays Capital, Bob Diamond, says he wants to turn BarCap into the world's leading investment bank in the coming years.
The Resurrection of Lehman
Even US investment bank Lehman Brothers, whose collapse in September brought the global financial system to a standstill, is experiencing a rapid resurrection under new ownership. Its US business is being continued by BarCap and its European operations went to Japan's Nomura Bank. The Financial Times reported on Tuesday that Nomura wants to become the top broker on the London Stock Exchange by the end of the year -- like Lehman used to be.
And reports say that on the old Lehman trading floor in London's Canary Wharf there are signs with the sentence: "That Was Then, This is Now." The bank will soon move to new offices to complete the break with its troubled recent past.
It seems that the former masters of the universe are gradually regaining their confidence. True, the Bank of England said in its latest Financial Stability Report that the sector continues to face major risks. But the general tension is easing.
"We are like goldfish," the Observer newspaper quoted Jon Macintosh, a Mayfair hedge-fund manager, as saying. "We swim once around our bowl and when we complete the circle everything looks new."
"The Arrogant and Greedy Bankers Have Gone"
Lord Digby Jones, the former head of the Confederation of British Industry, told the BBC the "arrogant and greedy" had long since left the City. The hard working bankers remained, he said, "and London needs them."
So is everything back to square one now? Politicians and financial market supervisors are alarmed and fear the wrath of the people. That's why there's no shortage of bankers warning against hubris.
"Society will be shocked if banks pay large bonuses for neglecting their commitments," the government's financial services secretary, Paul Myners, told the annual conference of the British Bankers Association.
The finance policy spokesman of the opposition Conservative Party, George Osborne, has also urged bankers to show restraint. Bonus payments would be a "big mistake," he said. Instead all banks, not just those under state ownership, should use their profits to strengthen their capital base, he said.
Darling's Cautious Fight Against 'Kamikaze Bankers'
Finance Minister Alistair Darling presented his proposals for banking reform on Wednesday which included tougher rules on executive pay and new powers for the FSA. "We need to learn lessons from the financial crisis in which banks behaved in a kamikaze manner and the regulatory system failed," he wrote in the Sunday tabloid News of the World.
But the reform isn't all that radical. The British government has switched its focus towards shielding the country's financial center from outside interference. The City remains an "immense asset" to Britain, Darling told VIP guests at the annual dinner hosted by the Lord Mayor of the City of London in the mighty marble hall of Mansion House.
The main focus now is the fight against the common enemy in Brussels, a trend that triggered an outburst by Germany's easily excitable Finance Minister, Peer Steinbrück,last week. "At times," Steinbrück told the German DGB trade union federation last week, "I see a great deal of resistance to regulatory measures whenever they matter to the City of London and the British government."
It's true that City lobby groups have been campaigning against the regulatory reforms. The International Swaps and Derivatives Association warned against "demonizing" derivatives which remained a "useful instrument of risk management."
Suspicion of Franco-German Plot
And the annual conference of Securities and Investment Institute was abuzz with talk that Paris and Berlin are pushing for greater international regulation in order to shrink the City down to their own levels.
Angela Knight, chief executive of the British Bankers Association, said last week it was essential that London "is not impaired by insufficient attention or prejudice." The banking industry would be pro-active in Europe, she promised. It sounded like a threat.
The London establishment is also resisting the European Commission's draft guidelines on hedge funds. The plans call for greater transparency and controls of hedge funds, and government minister Myners has pledged to fight them "tooth and nail." The planned directive is seen as a pure anti-London law given that 80 percent of all European hedge funds are based in the British capital.
The major hedge funds, such as Brevan Howards, the No. 1 in Europe, have threatened they will move to Hong Kong or Singapore. A London delegation travelled to Washington last week in a bid to forge an Anglo-Saxon alliance against Brussels. The rebellion is already having an effect: Swedish Finance Minister Anders Borg, whose country has the rotating EU presidency since July 1, has already cautioned against "overzealous regulation."
The mood is quite different from a few months ago when no one dared to critize the reform proposals of FSA chief Turner. Turner and Bank of England Governor King are now warning that the reforms may end up being less radical than necessary.
"There is a real danger we don't seize the opportunities of this crisis," Turner recently told parliament.