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London risks losing its status as world’s top financial centre.
August2012
London risks losing its status as world’s top financial centre.
By Tarunkumar Singhal, Raman Jokhakar, Chartered Accountants
Reading Time 2 mins
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London risks losing its status as the world’s top financial centre as the INRNaN-trillion interest-rate fixing probe follows a series of market abuses by banks that eroded trust in a city already shrinking faster than rivals. JPMorgan Chase & Co’s trading loss of at least INRNaN billion, the alleged INRNaN billion fraud at UBS and the investigation of at least a dozen banks including Barclays for rigging global interest rates all happened in London in the last year. The effect is taking a toll on the capital of a country enduring its first double-dip recession since the 1970s, which fired more financial-services workers than any other country in 2011 and again this year.
“My heart sinks every time there is a scandal and the perpetrators are in London, even if it is not always the UK’s responsibility, it is under our noses,”
Sharon Bowles, chairwoman of the European Parliament’s economic and monetary affairs committee, said in an interview.
“There is an effect on the UK’s reputation, and it reinforces the view that even after all the apologies there is much to do.”
London, ranked as the world’s number one financial centre by research firm Z/Yen Group, was where American International Group and Lehman Brothers Holdings booked transactions that helped lead to their downfall. This week saw Bank of England and UK government officials tied to the interest-rate fixing scandal that cost Robert Diamond, London’s best-known banker, his job at Barclays. With the European debt crisis on its doorstep, London now faces calls to cull its bonus culture, rein in risk-taking and beef up a light-touch regulatory system that fuelled a decade long boom.
The danger for London is that Europe is preparing to set up its own regulator for banks, which may exclude the UK or disadvantage firms based in the city. Domestically, the industry is losing longstanding political support from both Conservative and Labour parties — as well as the public. Home to about 250 foreign banks, London is the world’s biggest centre for foreign-exchange trading and cross-border bank lending and trades INRNaN trillion of interest derivatives daily, according to the Bank for International Settlements.
