Why the special relationship is still important
AHEAD of this week’s Conservative Party conference, it is perhaps a good time to recollect the wise words of one of the party’s and country’s most celebrated leaders. In response to a crisis far graver than the one we have just experienced, Winston Churchill coined the phrase “special relationship” to describe the
close connection between the UK and the US.
When it comes to financial services, the two countries are more closely intertwined than ever. With our common heritage and values, we have a joint interest to create a global financial system that works both for us and for other financial centres, including those in Asia.
During my current visit to North America, I have seen first-hand the strength of feeling that banking failures have aroused, comparable levels to back home. The scale of US federal bailouts ran into trillions and the concern – as job losses rise – is, if anything, more intense than in the UK.
Serious mistakes have been made on both sides of the Atlantic. But we now need to work together to ensure that past failings are not repeated.
Improved levels of transparency, accountability and risk management are all essential to restoring confidence in the financial system.
However, with a UK general election fast approaching and a new American administration keen to assert its authority we must ensure that regulatory reform does not become a source of political point-scoring. Any new legislation must be rigorously assessed, carefully targeted and globally coordinated.
Take, for example, suggestions that banks should hold more capital. Such a measure will reduce systemic risk and the likelihood of asset bubbles emerging.
This would not affect our competitiveness provided it is harmonised and international, with no exemptions. But it will mean less lending, and it could plausibly cause another downward spiral in property prices due to a lack of mortgage funding.
Far from being “socially useless”, as FSA boss Lord Turner suggests, banks provide vitally important credit to consumers and businesses which helps to transform lives.
Later this week I will be travelling to San Francisco and Los Angeles – two cities that stand as gateways to fast-growing markets such as China. The Golden Gate Bridge and the Port of Los Angeles both open out towards Asia, which is an increasingly important trading partner for the US.
Nevertheless, the ongoing exchange of talent, funding and ideas between the UK and the US will ensure we continue to have close business ties as the face of global finance changes. Churchill – himself half American, half British – was ahead of his time in recognising this over 60 years ago. His words remain just as relevant today as ever before.
Ian Luder is Lord Mayor of Canada