Alan Greenspan: A capital city that is made for capital

From a speech by the chairman of the US Federal Reserve at the opening of the Treasury's new building in London

The ties between the Bank of England and the Federal Reserve were cemented in the 1920s in that extraordinary relationship between Benjamin Strong, the president of the New York Federal Reserve Bank, and Montague Norman, the Bank of England governor.

Those ties endure to this day. Today's remarkably sophisticated international financial system took root several centuries ago within hailing distance of Her Majesty's Treasury. London, and other British financial centres, had developed by World War I into the dominant lender to the world, accounting for half the world's trade financing, and London remains, with New York, at the top of the world's financial pyramid.

The City has a long tradition of leading the world in foreign-exchange trading and currently conducts twice the volume of New York. London has stayed on top in the provision of financial services despite the emergence of the euro, which some expected would divert a significant share of foreign-exchange trading to a single centre on the Continent.

Although financial sector activity in Frankfurt has increased substantially in the past few years, largely reflecting the growing importance of the euro, trading volumes there are still well below those of London and New York.

Another potential challenge to the City's prominence in the provision of financial services has been the telecommunications revolution, which presumably should diminish the need for physical proximity to conduct transactions. However, history, together with London's long, should I say sterling, reputation as a place to do business, seems to have spurred market participants to continue to trade through London.