New York Gains, London Slips as Favored Destination for Financial Companies

A recent report released by the City of London Corporation has ranked New York as the top destination for financial companies. The top spot was held by London six months ago, but New York scored the joint highest rating in the latest study.

The increased interest among financial companies in choosing New York for conducting business has come as the UK has promised stricter regulations in the wake of the financial crisis. Asian financial hubs like Hong Kong, Singapore, and Shanghai also improved their ratings, apparently at the expense of London. The prospect of a bonus tax for financial executives and more restrictions on financial businesses has clearly not gone down well with the industry.

The report said that unless the UK government removed unfavorable regulations against the financial industry, New York could extend its gains. Top decision makers of financial companies have also repeatedly warned that they could move to a different location to run their business.

Large investment banks, hedge funds, private equity firms, and other financial companies are used to working in an environment where their moves do not always come under the regulatory scanner. Many people blame this for the near collapse of the industry in 2008 and it seems the powerful financial lobby is all set to get its way once again.

In both New York and London, every time there has been talk of more regulation or caps on the salaries and bonuses of financial executives, there have been warnings from the industry that the companies would simply move abroad. In a way, this is nothing more than blackmailing the government with threats that the cities would lose their competitiveness if any moves to check the actions of these companies are introduced.

The problem is not an easy one to deal with, because when large financial companies move to a different location, they also take many jobs with them. An effective solution could be coordinated action from major financial centers like New York, London, Hong Kong, and Singapore to get tough on on these companies.

There were some efforts initially to bring in such measures, at least among the G-20 countries, but as the economy has improved, most governments seem to have buckled under the pressure from the financial sector. The policymakers no longer seem concerned about the prospect that a crisis even bigger than the last one could develop if preventive measures are not put in place.

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