London, NY reputations hit by credit crisis-survey

LONDON, Sept 25 (Reuters) - The reputations of London and New York as financial centres have been damaged by the credit crunch compared with smaller rivals such as Singapore, Zurich and Dubai, a global survey of financial professionals showed on Thursday.

The survey by the City of London Corporation was conducted before the fall of U.S. investment bank Lehman Brothers (LEHMQ.PK), a proposed $700 billion U.S. bailout of Wall Street firms, and a ban on short-selling of UK and U.S. financial stocks.

It showed London, followed by New York, was still the world's top financial centre.

But the twice yearly Global Financial Centres Index (GFCI) report also showed both cities -- London especially -- had lost some cachet compared with the previous six months period due to a perceived failing in regulatory supervision.

Both saw a drop in their GFCI ratings, in contrast to nearest rivals Singapore, Hong Kong and Zurich.

The report surveyed 1,406 bankers, fund managers, and other financial professionals across several European, Asian, North American and offshore locations between February and July.

An unnamed London-based senior investment banker quoted by the survey cited the case of Northern Rock, a mortgage bank bailed out by the UK government this year after a run on its savings accounts.

"So we all thought we were doing so well and had a great regulatory set-up," he said. "The damage to our reputation done by Northern Rock will take years to repair." London's perceived competitiveness had also been dented by the proposed tax treatment of non-domiciled residents of the UK, the survey said.

Dubai, ranked 23, topped the list of centres where respondents said they expected to open new offices in the next few years, followed by Geneva.

"Just watch out for Dubai over the next five years -- huge amounts of capital and a real willingness to do what it takes to become a global centre," a New York-based asset manager was quoted as saying.

Stuart Fraser, policy chairman at the City of London Corporation, told Reuters he expected industry opinion towards London and New York to continue to sag in the next year as financial regulations were tightened and employment prospects fell.

"The gap between them and Shanghai, Dubai and other areas will (continue to) contract somewhat," he said. (Additional reporting by Olesya Dmitracova; editing by Sue Thomas)

(See www.reutersrealestate.com for the global service for real estate professionals from Reuters).