If two cities could ever be described as siblings, it would be London and New York; two truly global cities, alive with culture, and both co-operating and competing as the world’s two largest international financial centres.
And like all siblings, we often engage in friendly rivalry, jostling to be the best at theatre, art, fashion, finance and technology. Just last week, London was designated the best place to live and work by the Boston Consulting Group, beating New York into second place. Skim beneath the surface, however, and you find two quite different cities.
As City of London research into building modern financial centres explores, the few truly world-leading centres stand out because they have international reach, reputation, and connections, along with wide-ranging expertise: qualities built up over years of development as centres of trade and commerce. New York and London share this heritage. But while New York is predominantly a centre for the US’s huge domestic economy, London, with its role as the gateway to Europe, is more international. This is partly by necessity; the UK, of course, is a much smaller economy. Around 250 banks from across the world now operate in the UK – taking advantage of its location in the middle of the trading timezone, as well as the many advantageous business opportunities it offers.
Many of these international banks are American – which shows not a deficiency of opportunity in New York, but the benefits of having a physical presence in the European market. We compete at the margin for some business, of course, but mostly London and New York complement each other. We both benefit from an expansion in global trade and output and the globalisation of the economy.
This is why business has its own transatlantic “special relationship”, exemplified last week by the Honorary Knighthood given to former New York mayor Mike Bloomberg, who typifies the best of that city. Our business connections are fundamental to our continued growth – and good communication is part of that. This is why I visit New York twice a year, to strengthen our relationships with officials, business leaders and regulators.
The difficulty in finding an appropriate legislative and regulatory response to the global financial crisis inevitably caused tensions, as the US and Europe diverged in their opinions on what to do. This was perhaps inevitable, reflecting the very different political structures in the two large economic blocs.
However, my visit to New York last week, and discussions in the margins of the IMF/World Bank annual meeting, suggest that the situation has improved during the year. With the new leadership at the Commodities and Futures Trading Commission in Washington and in the EU – where Lord Hill has just been confirmed as a financial services commissioner – and a clear understanding of the consequences of regulatory divergence, we can expect further progress in providing the global finance industry with an appropriate regulatory structure.
And naturally, London and New York, as two of the world’s leading financial centres, will play a major part in this – together creating a more stable and effective regulatory environment.