Remember all the talk about New York losing out to London as a financial center? Well, it has not turned out that way recently, according to analysis in today’s Financial Times — Northern Rock woes take toll on City’s reputation. The article points out that in the first half of 2008, the number of shares traded in New York went up while the number when down in London. And New York leads in a number of other areas (London does lead in the number of new foreign listings).
The reason? A regulatory system that promotes trust and security — building a reputation as a good place to do business:
“The brand of London has taken a hammering because of Northern Rock,” says Tim Linacre, chief executive of Panmure Gordon, a London stockbroker that also has a large US presence. “I don’t think it is terminal, but London needs to be absolutely on its toes.”
Meanwhile, New Yorkers are trying not to say “I told you so” now that financial woes have spread worldwide. They also are touting the benefits of tight regulation, saying that, with volatile markets, many investors value watchful regulators, tight listing standards and the right to sue.
“What Northern Rock demonstrates is that a business-friendly regulatory system may have its disadvantages as well,” says Kathryn Wylde, president of the Partnership for New York City, a business group.
So, as we work on the issue of revamping financial regulations (which probably needs to be done), lets be sure of what we are doing. Reputation is a critical intangible asset – especially in financial markets. Once it is lost, it is very hard to get back.