TWO YEARS AGO Jimmy Cayne, then chairman of Bear Stearns and riding high on Wall Street, sat in my office and said London was “a nanosecond” from overtaking New York as a world financial centre. It was a generous comment (which we put on our front page) from a veteran of the capital markets and it helped to change perception of London’s role.

Some months later, when Lloyd Blankfein had been appointed chairman and chief executive of Goldman Sachs, he invited a small group of newspaper editors and business journalists to breakfast. One of the first questions he was asked was Goldman’s perception of London. Blankfein was glowing in his praise.

If we take the capital’s success for granted, though, it will be its doing. And at this very moment its dominant role is being threatened by a loss of self-confidence among its leading players in financial services. At the same time some of the big moneymakers at Lehman Brothers, Morgan Stanley and Goldman are also being quietly shuffled to hotter markets in the Middle East and Asia. In the process London’s star has dimmed.

As you will have read on page one, London’s mayor Boris Johnson has now set up a group of senior City figures to ensure London retains a leading role in the global economy. The initiative is to be applauded. We must do everything possible to ensure our capital stays at the forefront of global money markets. Who cares if we are not No 1? What we must do is be in the top tier. In equities and debt markets we must sit alongside New York, Tokyo, Singapore and Shanghai.

In alternative asset management we must sit alongside Zurich, Luxembourg and Dublin, and in insurance we must stop the leakage to Bermuda.

Johnson has given a voice to this collection of interests and we must let it be heard.

The tax tinkering by the government on nondomiciled residents and overseas earnings has breached trust with business. Bob Wigley, chairman of Merrill Lynch in Europe, the Middle East and Africa, has drawn from a wide collection of individuals to ensure it adequately reflects all areas of finance.

Cayne’s career may be over, but his recognition of our capital’s importance was on the money.

London is Britain’s greatest financial asset - and if its potential is harnessed it will define the nation’s role in a globalised economy.

RBS must deliver

The biggest investors in Royal Bank of Scotland have sent a letter to the bank’s board which draws a line under the recent past. The investors are unhappy with the £12 billion rights issue, the destruction of value, and they don’t like the bonus payments paid out last year. But they are prepared to put those to one side.

The letter spells out three things. That Sir Tom McKillop and his chief executive Sir Fred Goodwin will be given the breathing space to run the bank and deliver everything they have promised.

That a proper succession plan must be put in place to plan for life after Fred, although no timescale has been set. That the same plan must also be in place for other members of the executive team.

The third point is that bonuses can only be paid for stellar performance. The investors also like the fact McKillop is bringing in three new non executives an American, an Asian and a Britain with a deep knowledge of financial services.

The shareholders at Royal Bank of Scotland are right to put their grievances to one side. The British banking industry is faced with a very challenging 24 months, and this is not a time to have a board and its big shareholders at loggerheads. McKillop has taken the criticism about his stewardship very personally. He has taken counsel from a number of his industry peers, but that does not numb his frustration.

He and Goodwin must now deliver the future. This means both in profits and showing the benefits of its purchase of ABN Amro. However, the board cannot afford to ignore the fact that it remains “on watch”.

Building on value

SHARES are going to get cheaper, but that doesn’t mean they are not cheap already. There are signs that some of the big North American value investors are already starting to nibble away at some of our companies. Take Kingfisher, which owns B&Q, the DIY chain. The share price has now fallen 50% in the past year, valuing the company at £2.7 billion but on the way down a clutch of big American fund managers have been building up stakes.

These investors now account for 49% of the company, with Franklin Templeton owning 10.6% of the company, Capital with 7% and Brandes - which made a fortune out of investing in Marks & Spencer - has amassed a 3.4% stake.

The American investors know a thing or two about DIY. Their country is home to Lowe’s and Home Depot, but Kingfisher offers an international dimension with its operations in France and China.

Kingfisher’s shares may not have reached the bottom, but they are getting close and some of the panic selling has been overdone. One indicator of this is a £250m bond that matures in 2014. This bond is trading at 79p in the pound and the current redemption yield is 10.3%.

Kingfisher is still profitable and does not have an issue with debt repayments, yet its bond is trading at a big discount. Ian Cheshire, Kingfisher’s new chief executive, knows he has it all to do but the company is not facing Armageddon.

It is still too early to say when this market will turn, but the value is slowly starting to surface.

Times Recommends

• Food prices rise 8.3% on soaring fish and meat
• Car sales crash as economy hits skids
• House prices fall but Bank leaves rates on hold