New York replaced London as the world's leading financial center for the first time, after the City was rocked by a series of scandals and questions over the U.K.'s place in the European Union.
New York holds the top spot in the latest Global Financial Centres Index with a "shaky, statistically insignificant" two- point lead, according to Michael Mainelli, chairman of Z/Yen Group Ltd., which compiles the index. Hong Kong and Singapore, the two leading Asian centers, have narrowed the gap between them and the top two to fewer than 30 points on a scale of 1,000, the index shows.
Scandals including banks abusing their clients by selling unneeded insurance, manipulation of financial benchmarks and trading losses, have combined to damage the City's reputation for probity, just as plans for a referendum on EU membership cast doubt on the terms of its access to that market. While New York has challenged London for the pedestal since the inception of the index, a seven-point rise in its rating gained it the top spot after the U.K. capital suffered a 10-point decline, the largest of any center in the top 50.
"London needs a reputation that everyone who comes will be treated fairly and can compete fairly," according to Mainelli. "Without the large domestic economies behind New York and Hong Kong, London needs to act more like a Singaporean city state or have the backing of a European Union domestic economy."
The index, which is updated every six months and is in its 15th edition, is compiled from replies to an online survey. It also uses external gauges including rankings for specific areas such as telecommunications. The index, which was first published in 2007, takes into account broad areas including the business environment, finance, infrastructure, human capital and reputation.
The U.K. government "is determined to build a banking sector that boosts the economy and supports consumers and businesses," the Treasury said in a statement. "It is creating a framework that promotes a responsible and sustainable financial services industry, tackling the issues of competition and risk in the banking sector."
More than 3,000 finance professionals responded to the survey with 25,441 assessments of the various centers in the 24 months to December last year, according to Z/Yen.