March 28 (Bloomberg) -- London has overtaken New York as the biggest international financial center, and measures introduced last week will widen that gulf, U.K. Treasury minister Ed Balls said today.

``London is the world's leading international financial center, and as a result it stands in a strong position to benefit from the opportunities presented by continuing global economic growth and integration,'' Balls, 40, said in a speech in London, according to remarks released by his office.

Balls, who advised Chancellor of the Exchequer Gordon Brown from 1994 until he became a lawmaker in 2005, rejected criticism that regulations in London are too lax. He dismissed comments from Roel Campos, commissioner from the U.S. Securities and Exchange Commission who dubbed London Stock Exchange's Alternative Investment Market a ``casino.''

A study by New York consulting firm McKinsey & Co., commissioned by New York Mayor Michael Bloomberg and Senator Charles Schumer, concluded that the U.S. would lose its place as the leading global financial center in the next decade without legal and regulatory changes. Other reports have also suggested New York is already losing ground to London.

Hal Scott, a Harvard University law professor who headed a committee that made recommendations for rolling back U.S. regulations, disagreed with Balls' assessment. Data showing that the market value of NYSE Group Inc. is three times more than that of London Stock Exchange Plc indicate that New York City still is the leader, he said.

Prophetic Statement

``However, if we fail to reform our regulatory, litigation and shareholder rights rules soon, Balls will be prophetic,'' Scott said in an e-mail.

A study by Napier Scott Executive Search Ltd. showed London traders are getting salaries and bonuses as much as 50 percent higher than their counterparts in the U.S. British traders' earnings increased as much as 22 percent, while U.S. salaries and bonuses rose as much as 15 percent last year, according to the survey published by the London recruitment firm on March 26.

Luxury-home values in London, meanwhile, will probably increase 20 percent this year as wealthy buyers compete for a shrinking number of properties, the estate agent Savills said yesterday.

Today, Balls said that measures proposed by Brown on March 21 will help spur London's standing. Balls said simplified business taxes, including a reduction in corporation tax to 28 percent from 30 percent, ``will further strengthen London's pre- eminence.''

Extend City's Reach

``We want to extend the City's global reach even further and bring more investment into London,'' Balls said.

The budget also included plans for changes in the tax system on offshore funds, improvements to tax rules on insurance and new regulations for taxing funds that invest in property, Balls said.

Balls defended London's AIM market today against accusations that regulators aren't being tough enough, rejecting the criticism as ``unwarranted and inaccurate.'' Balls said the government plans to maintain its current ``light touch'' stance to regulations, according to the excerpts from his office.

``People need to accept that modern, dynamic economies depend on entrepreneurial risk,'' Balls said. ``AIM exists to fill a niche of the market. Typically it provides capital for small, growing companies that have outgrown the venture capital stage. It has been extremely successful in doing so.''

Bloomberg and Schumer ordered the study, published in January, after New York lost 2,000 jobs, or 0.7 percent of the financial workforce, from 2002 to 2005, a period when London's headcount rose by 4.3 percent, according to McKinsey. Bloomberg is the founder and majority owner of Bloomberg LP, the parent of Bloomberg News.

To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net.

Last Updated: March 28, 2007 17:09 EDT