After LIBOR scandal, London fears losing financial crown
Clouds gather over high-rise buildings in the financial district of the Canary Wharf area of East London on Oct. 28 2008, in London, England. While Wall Street had been bogged down by regulations and scandal, London took the crown for leading global financial center. Now, with the Barclays and LIBOR-rigging investigation, the British city could find itself being regulated as well.
Sarah Gardner: While we're talking interest rates, the British Parliament has voted to set up an inquiry into the ethics of the British finance industry. That was prompted by the banking scandal involving Barclays. Barclays was fined $450 million and its three top executives quit after regulators found that Barclays staff rigged a key interest rate called LIBOR.
Some Brits fear that London could now lose its crown as the world's top financial center to -- dear God, not Wall Street! From the British capital, Marketplace's Stephen Beard reports.
Stephen Beard: You can always tell when the Brits are rattled. This happens in Parliament:
The House erupts. Insults fly.
Not surprising really. One of the world's most crucial interest rates -- the benchmark for trillions of dollars worth of financial transactions -- has been rigged. And it happened here in London.
Stuart Fraser speaks for the city's financial center, and he's certainly rattled.
Stuart Fraser: This is very, very damaging on an international basis. And this is why we need to get this sorted out quickly and deal with it quickly, because if it's allowed to fester, it will do permanent damage to our reputation.
And London had been doing so well. The city had leapt ahead of New York as the leading financial center. Wall Street was hamstrung with regulations, like Sarbanes-Oxley and Dodd-Frank. London was free and easy.
But Ed Miliband says that's how we got into this mess. He's the leader of the Opposition Labour Party.
Ed Miliband: There's been a tendency in this country towards deregulation, light-touch regulation. It was wrong. It was wrong. And it's got to change for the future.
Tighter regulation could now be on its way from the European Union. Economist Andrew Hilton says Britain's European partners have been trying to rein in London for years.
Andrew Hilton: There are lots of people in Frankfurt and in Brussels who want to nail the Brits, who believe that the British approach to financial innovation is dangerous and should be controlled.
He says the rate-rigging scandal could now prompt overregulation, which will harm London even further.
Hilton: I think it is damaging. I think it will hurt the city.
And Wall Street may well edge ahead once again. Ironic, really -- at heart of the rate-rigging scandal lies a highly aggressive, trading culture. I wonder where that came from?
In London, I'm Stephen Beard for Marketplace.