Cooperation or competition? What Brexit means for London’s links with the Big Apple

 
Catherine McGuinness
US-WEATHER-SNOW
No other city in the EU is able to compete on the same level as London, and New York is well aware of this (Source: Getty)

I am fresh back from a visit to the United States where I met a number of senior representatives from the US Treasury, House of Representatives Financial Services Committee, the International Monetary Fund, and leading financial firms and organisations based across the pond.

The visit to New York and Washington was timely. The UK is faced with its imminent departure from the EU, while the US is looking at a host of financial policy changes under President Donald Trump.

It was also an opportune moment to test the temperature in a city that is London’s most significant competitor in terms of its function as a global financial centre: New York.

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As you’d imagine, Brexit was top of the agenda, closely followed by financial reform.

It is always interesting to discuss Brexit with international peers. There are some inevitable similarities – such as wanting to see the issue resolved as soon as possible, and the need for clarification on how the nation might continue trading with the UK – but there are also some distinct differences.

For many countries, Brexit poses difficult questions. It is often seen as a problem, rather than an opportunity. Conversely, the US stands the most to gain.

More than any other city, New York has the opportunity to lure many firms that have settled here in the UK. The Big Apple has the technological innovations, financial infrastructure, regulatory frameworks, and the ability to attract international talent.

A recent study ranked the city the second most attractive financial centre in the world – hot on the heels of London, which has held the title for the last couple of years.

No other city in the EU is able to compete on the same level, and New York is well aware of this.

But it wasn’t just Brexit that was a major talking point. Regulatory reform in both the UK and the US was central to many of the discussions. As leading global financial centres, London and New York were important in reforming the sector following the financial crash, now a decade behind us.

As a result of the crisis, both countries have taken great strides to strengthen the resilience of their financial institutions.

Banks were tasked with holding more capital; investment banking was separated from consumer services to protect customers; tests to establish banks’ resilience were made more strenuous; and performance-based remuneration was slashed to ensure that risk did not equal reward.

President Trump, just 10 months into his role, has many priorities – one of which is the proposed “haircut” to Dodd-Frank, America’s Wall Street reforms post-financial crash.

There is real appetite from US firms and regulators to see these implemented. For the sector, though, these reforms serve to fully retain the fundamentals of stringent regulation, but remove what is seen as unnecessary and burdensome processes that don’t add any real benefit.

These reforms are likely to increase New York’s appeal.

My visit to the US highlighted two main issues for me.

First, that New York is our closest comparator, and could well be the main beneficiary of a Brexit.

Second, that continued cooperation on global standards is crucial, to ensure the sector's integrity is upheld.

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City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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