Financial centres set aside rivalry

New York and London on Friday set aside their fierce rivalry as Michael Bloomberg, New York city mayor, hosted talks with City of London officials and Treasury secretary Hank Paulson on how to reduce regulatory barriers between the two financial centres.
The development is a sign that, even as the two cities are competing for financial services, they have quietly started a dialogue to help the world’s largest financial groups do business more efficiently in both places.
That is being driven by a recognition that the top financial firms in both cities are the same large investment banks, and that they want the cost of doing business cut by reducing regulatory differences on both sides of the Atlantic.
It comes as there is increasing recognition by regulators such as the Securities and Exchange Commission and the Financial Services Authority on the need to work more closely together to streamline regulatory standards to cut transaction costs.
Michael Snyder, the City of London Corporation’s policy chairman, attended the meeting at Gracie Mansion, Mr Bloomberg’s official residence .
He said: “’London versus New York’ is often how the show is billed - but the real game is ’efficiency versus economic drag’. Both cities share the same interest in seeing market-friendly solutions adopted worldwide.
“It’s not a zero-sum game, either, and both London and New York will benefit from cooperation on key matters. After all, some of the biggest employers in the City are US-owned - so our interests are closely linked when it comes to jobs,” Mr Snyder said.
The dialogue is also being driven by a belief that the two markets must iron out regulatory differences to deepen overall liquidity ahead of the emergence of large capital markets in Asia – especially India and China.
“Clearly if we are to get deeply liquid markets, we need to be as joined up as possible and that will help in engaging with and indeed helping the markets in Mumbai, Shanghai or Hong Kong,” Mr Snyder told the Financial Times.
A series of high level reports – including one by consultancy McKinsey and backed by Mr Bloomberg – have warned that New York risks falling behind London in financial services if the US does not tackle a range of problems.
They include a culture of “excessive” liability and securities litigation, a stifling “rules-based” financial regulatory structure and inflexible visa policies. The SEC recently started discussing a regime of “mutual recognition” of standards with other foreign regulators.
Friday’s talks included ways of extending mutual recognition for UK and US, as well as US and European Union regulators. This included the need for International Accounting Standards to be accepted in the US, alongside the US standards – an issue that the SEC is working towards.
Mr Paulson told WABC radio: ”I do believe New York is the financial capital of the world, that the strongest capital markets in the world are in New York, and they benefit our whole country. But I also believe having strong capital markets in London benefits all of us.”
The two cities examined “ways to increase liquidity in both the London and New York markets”, Mr Snyder said, “to make the world’s top two finance centres work better”.
That included a need to improve transport links in and out of their respective international airports, airport security and immigration facilities in both countries.
”We also discussed … mutual ways in which the two cities can better tackle the threat of terrorism, and of economic crime, including money laundering,” he said.
Mr Paulson’s involvement in the talks yesterday is significant because he is pushing a project at the Treasury to produce a “blueprint” for US financial regulatory reform.
He has said that if the US were to start designing its system of financial regulation from scratch it would not pick the current system which is “fragmented” between multiple regulators.
This month, the Treasury issued a set of 30 questions for public comment, including one that asked whether the UK’s “principles-based” regulatory style was worth adopting.
Mr Bloomberg acknowledged on Friday that the two cities were competing for business, but said they are exchanging ideas on tackling transportation problems, fighting terrorism and crime, and making financial regulation more understandable and transparent.
But he added: ”I’ve always thought New York had a better hand to play.”