ONLY a few months ago, talk of a special relationship between the US and the UK would have provoked some quizzical looks among many in the City.
A number of British banks – Standard Chartered, HSBC and Barclays among them – had faced a summer of discontent as they were subject to accusations of wrongdoing by US regulators and politicians. There was even talk within some circles of “the London problem”, with one Democrat representative claiming that “every big trading disaster happens in London”.
These incidents damaged the City’s reputation and frayed transatlantic relations. The approach and the inflammatory language used by small sections of the US regulatory and political community was clearly unhelpful given the importance of international coordination in such cases.
However, having just returned from New York it is clear to me that US policymakers recognise the partnership as crucial to addressing current and future regulatory reform.
In this light, it is important to acknowledge that recent problems affecting the global financial services industry – and banking in particular – are not confined to London or Britain. The Libor issue, for example, dates back several years and involves institutions from a number of different countries.
As the two leading global financial centres, New York and London have a shared interest in working together to ensure that regulatory reforms in both jurisdictions are carefully coordinated, thoughtfully targeted, and effectively enforced. We have the most to lose from the potentially damaging impact of regulatory fragmentation and arbitrage.
Dialogue between the these two financial centres on key developments – including capital requirements, the Dodd-Frank rules including Volcker, the swaps market and resolution authority, and the proposed European Banking Union, to name just a few – is therefore vital to establish the clarity and certainty required on both sides of the Atlantic. After all, two sets of rules in the US and EU means two sets of compliance costs for institutions.
If we fail to get this relationship right, other financial centres will take advantage of it and attempt to take a lead on setting the rules. The City understands the need for – and supports – regulatory reform. But defining the detail is of upmost importance. That is why, on this issue, there must be more international coordination in order to achieve a level playing field.
International problems need international solutions – and the genuinely special relationship between London and New York is essential to driving this reform agenda.
Mark Boleat is policy chairman at the City of London Corporation.