LONDON could overtake New York as the financial capital of the world, according to one of Wall Street’s most respected bankers.

James “Jimmy” Cayne, chairman of Bear Stearns, makes the prediction in today’s Sunday Times.

“London is no longer the second city. Right now it is up there with New York,” he said. “Could it overtake New York as the financial centre of the world? It has a shot.”

Bear Stearns’ international revenues — the vast majority of which are generated in London — have almost doubled over the past two years, increasing from £501m to £970m.

“The numbers speak for themselves. The last two years were sensational,” said Cayne, a Wall Street veteran.

He argues that London has stolen a march on other European rivals. “There are many, many successful people in this town. Nobody minds getting on a plane to London these days. It’s exciting and the restaurants are great.”

His comments come as the London Stock Exchange is fending off bid interest from New York. On Friday it rejected a £2.4 billion bid from the Nasdaq exchange, which valued it at 950p a share. The New York Stock Exchange, Nasdaq’s rival, is expected to launch a counter-bid.

London is rated ahead of New York in a recent survey of market participants, and outscores the Big Apple in turnover in many markets, including foreign exchange. New York’s strength mainly rests on domestic US equity and bond trading, but that is being eroded. Treasury officials hinted that Gordon Brown, who made a speech in the City last month, would be bringing forward measures in his March 22 budget to ensure London’s continued rise and that it benefits from the growing importance of China, India and Middle East oil wealth.

Meanwhile, one of America’s principal providers of cash settlements to victims of last year’s devastating hurricane Katrina in New Orleans is floating in London later this year.

Peachtree Settlement Funding, which awards lump-sum payments to clients in exchange for a share of their expected future cashflows, is understood to have appointed Bear Stearns and Collins Stewart to lead an initial public offering on the Alternative Investment Market. The float is expected to value the firm at up to £400m.

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