NEW YORK: New York Mayor Michael Bloomberg has released a report that says the city could lose its status as the world’s financial capital within 10 years.

The report suggests that the US may be able to obviate that possibility by changing its stringent corporate disclosure rules. It also advocates easing of immigration policies that prevent skilled foreign bankers and maths wizards from working on Wall Street.

Several studies have expressed concern that the US is falling behind because of a tough legal and regulatory environment. But the McKinsey report drives home the point that US financial services firms are unable to attract and retain many of the highly skilled professionals they need because of unrealistic H1B visa caps.

“A skilled workforce is essential for the US to remain dominant in financial services,” Bloomberg said in a preamble to the report. “[We] must address US immigration restrictions, which are shutting out highly skilled workers, who are ready to work but find other markets more inviting.”

The report said New York’s lead over London may be closing as “US immigration polices are making it harder for non-US citizens to move to the country for education and employment”.

It noted the “disparate outcomes” resulting from caps on H1B work visas, and the lag between expiring student visas and work visa start-dates. The factors, the report said, were “all encouraging talented people” to turn elsewhere. “The free movement of people within the EU is enabling the best people to concentrate on other financial centres — particularly London — where immigration practices are more accommodating,” the report said.  

The South Asian Professional Network told DNA it hoped the report would nudge US policy-makers to increase H1B visas for countries like India, which have banking talent. The H1B visa programme is currently capped at 65,000 annually, but efforts are underway to expand it to 115,000. A new bill touching on H1B visas is expected to be introduced again in Congress.

The report showed the pace of job creation in London had outstripped that of New York from 2002 to 2005, with London's financial services workforce growing by 4.3 per cent to 318,000. In the same period, the workforce in New York shrank 0.7 per cent to 328,400 jobs. The report said that in 2002, London was home to only three of the largest 50 hedge funds, compared with 12 today. Now, 18 of the largest 50 hedge funds are headquartered in New York, compared with 28 in 2002.

“As liquidity and safety become more prevalent in the world's financial markets, the competitive arena for financial services is shifting toward a new set of factors — like availability of skilled people and a balanced and effective legal and regulatory environment — where the US is moving in the wrong direction,” the report said.

Over the first 10 months of 2006, US stock exchanges attracted 16 per cent of the global stock-offering volume, exceeding $1 billion, compared with 57 per cent in 2001. But European exchanges increased market share by 30 per cent and Asia doubled its share. The US financial market with New York at its centre is still the world's largest, measured by “financial stock” — equities, private debt, government debt and bank deposits — of $51 trillion in 2005.