march 2009 en the global financial centres index 5
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THE GLOBALFINANCIAL
CENTRES INDEX
Marc h 2009en
5
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The Globa l Financial Centres Index is published by the City of
Lond on. The authors of the rep ort a re Ma rk Yea ndle, Jeremy
Horne, Nic k Danev, and Alexander Knapp of the Z/ Yen
Group . This rep ort is intend ed as a basis fo r disc ussion o nly.
Whilst e very effort has be en m ad e to ensure the ac c urac y
and c om plete ness of the ma terial in this repo rt, the a uthors,
the Z/ Yen Group and the City of Lond on, give no w arranty in
that rega rd and ac c ep t no liab ility for any loss or da ma ge
inc urred through the use o f, or relianc e up on, this rep ort or
the information c onta ined herein.
The G loba l Financ ial Centres Ind ex (GFCI) is upda ted eve ry
six mo nths in March and Sep temb er. This report is the fifth
ed ition , with ana lysis and deta iled d isc ussion of c entresco mp etitive d ynamics. The ne xt p eriod ic upd ate will be
pub lished in Sep temb er 2009.
Please participate in the GFCI by rating the financial centres
you are familiar with at: www.cityoflondon.gov.uk/ GFCI
Ma rc h 2009
City of London
PO Box 270, Guildha ll
London
EC2P 2EJ
www.cityoflondon.gov.uk/ economicresearch
http://www.cityoflondon.gov.uk/GFCIhttp://www.cityoflondon.gov.uk/economicresearchhttp://www.cityoflondon.gov.uk/economicresearchhttp://www.cityoflondon.gov.uk/GFCI -
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1
The Glob a l Financ ia l Centres Index
The Globa l
FinancialCentres Ind exMa rc h 2009
Contents
Foreword 2
1. Exec utive Summary 6
2. Bac kg round 9
3. The Globa l Financ ia l Centres Index (GFCI) 11
4. Ind ustry Sec tors a nd Area s of Comp etitiveness 21
5. Assessments in More Deta il 24
6. Instrumenta l Fac tors 31
7. Forec asting 34
8. Conc lusions 38
Append ix A Methodology 40
Append ix B The Online Questionna ire 44Append ix C The Instrumenta l Fac tors 46
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2
Foreword
The Glob a l Fina nc ial Centres Ind ex
Stua rt Fraser
Cha irman, Polic y a nd Resources Comm ittee, City of Lond on
This late st Glob a l Financ ial Centres Ind ex
is the fifth, co ntinuing the tw ice -yearly
series p roduc ed b y the Z/ Yen G roup Ltd
for the C ity of Lon d on . This inde x
mo nitors the p erspe c tives of m a rket
prac titioners and reg ulato rs loca ted
ac ross the w orld o n the p osition o f their
own a nd ot her international financ ialc entres. The rep ort uses a c om bina tion
of q uestionna ire resp onses and
underpinning d ata to m onitor and
ana lyse the wa y that pe rc ep tions of
financ ial centres are shap ed ,
sp ec ific ally help ing to illuminate t he
extent to w hic h the recent p eriod of
striking globa l ec onom ic turbulenc e ha s
imp ac ted on the fundam ental long-
term fac tors driving the performa nc e of
financial centres.
Given the rap id slowd own in the glob al
ec ono my, it is unsurprising t ha t th e
findings of t he c urrent survey d iffer
dram atic ally from those o f eve n six
mo nths ag o. The six-mont h p eriod
surveyed up to the e nd of Dec emb er,
has bee n unpreced ented. It has
include d m a ssive inte rvent ion by
go vernments, designed to mitiga te the
po tentially d isastrous conta gion e ffec ts
on the rest of their ec onom ies asfinanc ial institutions try to d ea l with
asset d eva luation, the nee d fo r
rec ap italisation and d eleveraging of
lending . Event s in the p eriod surveyed
inc luded the c ollap se of Lehma n and
the e ffect ive na tionalisation b y the US
government of the mortga ge b od ies
Fannie Ma e and Fred die Ma c .
The GFCI results reflec t the severe loss of
c onfide nc e a c ross all ce ntres. There ha s
bee n a significa nt fa ll in sc ores for all 62
c entres rated here, reflec ting a m ore
negative perception of the performanc e
of financ ial servic es ge nerally and the
effec t of the severe d ownturn in some
financ ial sec to rs, in pa rtic ular ininvestment ba nks and hed ge funds.
There is also a muc h higher de gree of
unce rtainty abo ut the future a mo ngst
financ ial service s profe ssiona ls,
dem onstrated by a greater degree o f
vo latility in the ir questionna ire resp onses
reg arding c urrent a nd future
c om pet itiveness and suc c ess this is a
glob al c risis with a w idesprea d ne ga tive
effec t on predicta bility.
There a re som e no ta ble p at terns,
howe ver, that eme rge am id this
unc ertainty. In ge neral, the to p-ranked
c entres have shown a muc h greater
de gree o f resilienc e a nd a sma ller drop
in sc ores tha n tho se low er do wn th e
ran kings, reflec ting pe rhap s a g rea ter
c onfide nce in the ab ility of
longesta blished c entres to w ea ther the
g lob a l ec onom ic c risis. The top six
c entres rema in uncha nged in the
rankings from G FCI 4, with London andNew York still lea d ing the field in 1st a nd
2nd p lac e resp ec tively. They rema in the
only two truly glob a l ce ntres. The g ap
betwe en 2nd plac e and 3rd p lac ed
Singap ore ha s wide ned . Conve rsely,
ce ntres at the bottom of the tab le a re
showing fa lls in sc ores four times grea te r
than those a t the top.
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3
The Glob a l Financ ia l Centres Index
It is impo rta nt to rec og nise tha t the
c urrent e c ono mic c risis is of c onc ern to
all ce ntres, of c ourse, a nd it must b e a
priority for financ ial ce ntres to wo rk
tog ethe r in partnership to a d dress
shortc om ings an d stimulate rec ove ry in
the globa l ec onom y. A partic ular
responsibility fa lls to long estab lishedc en tres, suc h as New York and London ,
to w ork with o ther c entres to he lp restore
a sta ble g loba l financ ial servic es
architecture.
No ec ono my in the wo rld has be en left
unaffec ted by the c urrent seve re
dow nturn. A glob a l crisis requ ires a g loba l
response. Experienc e show s tha t a retreat
into protec tionism wo uld ma ke the
situat ion wo rse a nd p rolong a recession.
The financ ial and relate d professional
and business servic es ind ustry ha s an
impo rtant role to play in stimulat ing
ec onomic rec overy and g rowth.
Stua rt Fraser
City of Lond on
Ma rc h 2009
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4346 23
49
48
38
39 30
58
59
60
1
193224
403755 61
62
3118
1012
13
4757
33
1429
42
8
56
ixvi
44
ii
iv
20
The Glob a l Fina nc ial Centres Ind ex
Chart 1
The GFCI World
Rising 1
Static 3
Falling 5
Financial Centre
GFCI 5
Rank
Change in Rank
since GFCI 4
GFCI 5
Rating
Change in Rating
since GFCI 4
4
London 1 3 0 781 5 -10
New York 2 3 0 768 5 -6
Singapore 3 3 0 687 5 -14
Hong Kong 4 3 0 684 5 -16
Zuric h 5 3 0 659 5 -17
Geneva 6 3 0 638 5 -7
Chic ago 71
1 6385
-3Frankfurt 8 1 1 633 5 -3
Boston 9 1 2 618 5 -7
Dub lin 10 1 3 618 5 -4
Toronto 11 1 1 615 5 -9
Guernsey 12 1 4 615 5 -7
Jersey 13 1 1 613 5 -9
Luxembourg 14 1 1 612 5 -10
Tokyo 15 5 -8 611 5 -31
Sydney 16 5 -6 610 5 -20
San Franc isc o 17 3 0 609 5 -11
Isle of Man 18 1 1 601 5 -10
Pa ris 19 1 1 600 5 -7
Ed inburgh 20 5 -2 600 5 -14
Wa shing ton D.C. 21 1 1 596 5 -4
Cayman Islands 22 5 -1 591 5 -11
Duba i 23 3 0 580 5 -17
Amsterdam 24 3 0 575 5 -15
Vanc ouver 25 1 5 569 5 -11
Montrea l 26 1 5 568 5 -11
Hamilton 27 5 -1 564 5 -22
Melbourne 28 5 -1 562 5 -24
Munic h 29 1 3 558 5 -20
Stoc kholm 30 1 3 556 5 -13
Glasgow 31 5 -3 554 5 -32
Brussels 32 1 4 552 5 -7Gib ra lta r 33 5 -8 549 5 -40
British Virgin Islands 34 5 -5 549 5 -35
Shangha i 35 5 -1 538 5 -30
Bahamas 36 5 -1 537 5 -26
Monac o 37 3 0 533 5 -19
Copenhagen 38 3 0 532 5 -16
Oslo 39 1 2 523 5 -11
Milan 40 5 -1 521 5 -20
Ta ipei 41 New 518 New
Vienna 42 3 0 513 5 -17
Bahra in 43 3 0 513 5 -16
Helsinki 44 5 -4 512 5 -22
Kua la Lumpur 45 New 510 New
Qata r 46 5 -1 507 5 -18
Madrid 47 5 -1 506 5 -19
Johannesburg 48 5 -4 503 5 -22
Mumba i 49 3 0 485 5 -12
Bangkok 50 New 480 New
Beijing 51 5 -4 478 5 -31
Osaka 52 5 -2 469 5 -24
Seoul 53 5 -5 462 5 -40
Sao Paulo 54 5 -2 440 5 -31
Rome 55 5 -2 439 5 -28
Welling ton 56 5 -5 432 5 -41
Lisbon 57 5 -2 409 5 -21Prague 58 5 -4 396 5 -48
Warsaw 59 5 -3 381 5 -43
Mosc ow 60 5 -3 363 5 -51
Athens 61 5 -3 335 5 -44
Budapest 62 5 -3 306 5 -68
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iii
v
25
17
711
269
221
27
36
34
54
22
5
The Glob a l Financ ia l Centres Index
Shenzhen i 25 628 188
Malta ii 41 588 166
Buenos Aires iii 51 541 227
Mauritius iv 39 521 187
Rio de Jan eiro v 47 515 220
Ta llinn vi 74 509 271
Jakarta vii 80 498 219
Manila viii 74 447 198
St. Pete rsburg ix 87 434 220
Number of
Assessments
Average
Assessment
Standard Deviation
of AssessmentsFinancial Centre
i
vii
viii
v35
51
52
5315
3
28
16
41
56
4
Chart 1b
Centres with insufficien t num ber of a ssessme nts to be ranked in GFCI
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The G lob al Financ ial Centres Index (GFCI)
wa s first p rod uc ed by the Z/ Yen Group for
the City of Lond on in Ma rch 2007. The
GFCI provid es rating s for 62 financ ial
ce ntres ca lculated b y a fac tor
assessme nt mod el . This p roc ess c om b ines
instrumenta l fac tors (external indic es) w ith
financ ial centre assessme nts (fromresponses to an online q uestionnaire). The
GFCI mo del thus offers an insight into
c hang ing perc ep tions of financ ial
c entres c om pe titiveness over time a nd
how the se relate to the und erlying d ata .
The me thod olog y reflec ts c ha nge s in
pe riod s of relative sta bility and grow th, as
we ll as in the c urrent c ond itions of c risis
and c ontrac tion.
The use of instrumenta l fac tors provides
an insight to the funda menta l
underpinnings of c om petitiveness of the
c entres, relat ing to d ata a c ross five key
aspec ts: Peop le; Business Environment ;
Ma rket Ac c ess; Infrastructure; Ge neral
Co mp et itiveness. Fifty-seven instrume nta l
fac tors a re used in GFCI 5 to m ea sure
these (see Ap pe nd ix C). A continuously
running on line q uestionna ire p rovides
financ ial centre assessme nts from
financ ial services professiona ls, giving a
ba rom eter of p ercep tions within thefinanc ial services industry. GFCI 5
inco rporate s 308 new respo ndents since
GFCI 4, giving a n overa ll to ta l of 26,629
c entre a ssessme nts, weighte d tow ards
the mo st rec ent.
GFCI 5 shows tha t the re is no sa fe port in
the c urrent financ ial storm. Ra tings of a ll
financial ce ntres have d ropp ed (by an
averag e o f ove r 20 po ints), reflec ting
overall neg ativity ab out the c urrent a nd
future state of the sec to r. This is a
signific an t c hange from G FCI 4, where
only ten c entres dropp ed in the ratings.
Overa ll, centres tow ards the lower end o f
the rankings have see n the ir ra tings drop
mo re than the to p -ranking c entres. The
top ten c entres in GFCI 5 have fa llen b y
an a verage of und er 9 po ints in the
ratings, com pa red with an ave rag e fall of
over 40 points for the b otto m ten c entres.
It wo uld a pp ea r that the re is a g enuine
flight to safety with peo ple in financ ialservices putting their faith in the q ua lity of
we ll esta blished financ ial ce ntres.
Ano ther of the ma in theme s of GFCI 5 is
unc ertainty there is a high d eg ree of
volat ility in the ra tings, reflec ting
unce rtainty am ong financ ial servic es
professiona ls. There is unc erta inty about
ma rkets, assets and , of pa rtic ular interest
here, ab out w hic h financial c entres will
prospe r in the future. In th is c lima te,
responses to the G FCI que stionnaire
indicate a m ood of greater loyalty
tow ards one s hom e c entre. There is a
slight ly stronge r element o f ho me b ias
respond ents rating their hom e c entre
highe r than o thers rate that c entre (suc h
bia s is ac c ounted for in the G FCI mod el).
Of the 62 ce ntres in GFCI 5, 18 have risen
in the rankings, 28 ha ve fallen, 13 rem a in
unchang ed a nd there are three new
entrants.
Lond on a nd New York rema in the only
truly globa l financ ial c entres, a lthough
bo th c entres rating s have fa llen, by 10
and 6 po ints respec tively, since GFCI 4
(pub lished in Sep temb er 2008). Whilst
London is just a hea d of New York in the
GFCI, it should be note d tha t New York
ha s a slight ly higher averag e a ssessme nt
(807) than Lond on (801) overall, a lthough
averag e a ssessme nts for Lond on and
New York, during the past six mo nths, are
virtua lly ide ntic a l; New York (799) is one
po int ahe ad of Lond on (798).
6
1. Exec utive Summa ry
The Glob a l Fina nc ial Centres Ind ex
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The Glob a l Financ ia l Centres Index
Table 1
the Top Ten GFCI 5 Ce ntres (GFCI 4 Ranks and Rating s in Brac kets)
London 1(1) 781 (791) London remains in the top p lace , c lose ly fo llowed by New York, separa ted by 13 po in ts,
do wn from 17 po ints in GFCI 4. In spite o f the c urrent e cono mic c lima te, Lond on is ag ain
in the to p qua rtile of nea rly a ll instrumenta l fac tors as well as the ove rall GFCI. Lond on
still lead s New York in all area s of c om pe titivene ss, and in four of the five industry sec tor
sub-indic es, although respo nde nts expressed c ontinuing c onc erns ab out the likelihoo d
of increased regulato ry b urden, a nd a less predicta ble ta x-regime.
New York 2(2) 768(774) New York remains in second p lace , and dropped on ly 6 po in ts since GFCI 4 in sp ite of a
host of financ ial turmoil: gove rnment supp ort of Fannie Ma e a nd Fred die Ma c ,ba nkruptc y filings for Lehm an Brothers, the sale of M errill Lync h to Bank o f Am eric a and
the US Fed eral Reserve b ailout of A IG. New York move d m arginally ahe ad of Lond on in
the Banking sec tor sub-index.
Singapore 3(3) 687(701) Singapore has dropped 14 po in ts, bu t re ta ins the number 3 ranking over Hong Kong
that it ga ined in GFCI 4. It is now 81 points be hind New York. It rema ins a solid c entre, as
evide nc ed in its continuing high performa nc e in all industry sec tor sub-indic es and in all
area s of c om pe titiveness, taking 3rd o r 4th plac e ac ross the b oa rd.
Hong Kong 4(4) 684(700) Hong Kong remains a strong financia l centre and is in 3rd or 4th p lace in a ll industry
sec tor sub-indic es, except Insuranc e, and in a ll area s of c om pe titivene ss. With only a
few excep tions, most Asian ba nks c ontinue to be ab le to financ e loa ns with de po sits,
insulating Hong Kong from som e o f the d irec t impa c t of the c urrent financ ial crisis.
Zu rich 5(5) 659(676) Zurich he ld steady a t 5th p lace in GFCI 5 due bo th t o it s deep -rooted m arke t niche in
the p rivate ba nking and a sset ma nag em ent sec tors, and the e arly moves by Swiss
ba nks to c ut ba ck on expo sure prior to, and e arly in, the c urrent financ ial crisis.
Geneva 6(6) 638*(645) Geneva has rema ined a t 6th p lace as investors m ove to find f irm g round am idst the
tum ult. This has help ed the c ity s score in the Business Environm ent sub-index move up 5
points.
Chicago 7(8) 638* (641) Slipp ing only th ree po in ts from GFCI 4, Ch icago remained re la t ively stab le in a marke t
that saw m ost othe r centres suffer far mo re. Chicag o rema ined in 6th in the Ge neral
Com pe titivene ss sub-inde x.
Frankfurt 8(9) 633(636) Frankfurt is in 8th p lace, up one rank f rom GFCI 4. The f inancia l system in Germany has
be en more stab le tha n in Lond on or New York ove r the p ast six months. Frankfurt a lso
did very we ll in ce rtain industry sub-sec tors, rising five p lac es to 7th a mong G ove rnment& Regulato ry respo nde nts, and three p lac es to 9th am ong Professional Services
respondents.
Boston 9(11) 618*(625) Boston has historica lly move d in and out of the GFCI top 10, and is ranked 9th in GFCI 5.
It show ed a strong increase in ave rage assessments among respo nde nts, rising from 628
in GFCI 4 to 699 now. It was hit by a falling pe rformanc e in som e o f the instrumenta l
fac tors, how eve r.
Dub lin 10(13) 618* (622) Dub lin has benefited from the Irish government s investment over the past decade
whic h has ma de Ireland a c ost efficient loc at ion for banking op erations. Dublin is also
an a ttrac tive destination for investment a nd c orporate ta x residence . Dublin has
c limb ed three plac es in the rankings de spite rec ent worries ab out the Irish ec ono my as
a w hole.
* Ratings are rounded to the nea rest whole numb er for clarity but are ca lculated to several dec imal place s
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The d ifference in ratings be twee n the top
two c entres and third plac e has
increased since GFCI 4 the ga p
be twee n New York and 3rd p lace d
Singa pore is now 81 po ints, co mp ared
with 73 points p reviously. Singa pore s
ra ting ha s fallen by 14 po ints, and Hong
Kong (4th in the rankings) has fallen b y16 po ints.
Whilst the top six c entres have rem a ined
in the same position in GFCI 5, Tokyo ha s
dropp ed 8 plac es to 15th and Sydney ha s
fa llen six p lac es to 16th. Som e strong
sec ond ary or regiona l c entres fea ture in
the top ten Chica go and Frankfurt have
risen o ne rank ap iece to 7th a nd 8th
plac e respec tively, and Boston (9th) and
Dublin (10th) have entered the top ten.
A summa ry of the top t en financ ial
c entres in GFCI 5 is g iven in Table 1 o n
pag e 7.
GFCI respond ents believe tha t the ma in
threats to London a nd New York are
currently:
I Pote ntial reg ulato ry knee-jerk rea c tions
to the c redit crunch, which ma y have
unintended consequences;
I Rec ession New York and Londonanticipa te signific ant ec onom ic losses
from the c red it c runch, due to their
heavy depe ndenc e on revenues
de rived from financ ial sec tor
pe rforma nce , but will also b e hurt by
na tiona l rec essions.
The m od el used to c reate GFCI is a lso
used to c reate sub-ind ices for industry
sec tors and a rea s of c om pe titivene ss (see
Cha p ter 4). Lond on, New York, Singa pore
and Hong Kong all rem ained in the top
four plac es of t hese sub-ind ice s (with the
single exce pt ion of Hong Kong in 5th
p lac e in the Insuranc e sib-ind ex).
Other ce ntres displayed a greate r rang e
of move me nts in comp arison to GFCI 4.
This see ms to reflec t the overa ll c onfusion
in the sec tor and unc ertainty ab out
whic h ce ntres will ultima tely prove to b e
mo st suc c essful.
Respond ents to the GFCI 5 questionnaireco rrobo rated da ta showing that the
lead ing spe c ialist c entres (for examp le
Zuric h for private ba nking a nd C hic ag o
for com mo dities trad ing) a nd some off-
shore ce ntres have wea thered the
financ ial turmoil com pa ratively well thus
far. Respo ndents con tinue to ident ify
Dubai a s llikely to b ec om e m ore
signific ant in the next two to th ree yea rs,
with Singa po re a nd Shanghai a lso
mentioned as c entres where new
offic es are mo st likely to be op ened
in the next few yea rs. As in previous
ed itions of GFCI, respond ents a lso
ove rwhe lmingly identified the Business
Environm ent as the single grea test fac tor
of c om pet itiveness. Business environme nt
in this c onte xt inc ludes the reg ulato ry
environment, the rule of law, trust
and taxation.
Please participate in the GFCI by rating
the financial centres you are familiar with
at: www.cityoflondon.gov.uk/GFCI
8
The Glob a l Fina nc ial Centres Ind ex
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The Glob a l Financ ia l Centres Index
The Glob a l Financ ial Ce ntres Ind ex (GFCI)
wa s prod uc ed by the Z/ Yen Group fo r the
City of Lond on in Ma rc h 2007. It rate d
and ranked ma jor financ ial c entres of the
wo rld in terms of c om pe titiveness. Since
then, the increa se in the numb er of
respo ndents and ad ditional d ata in
suc c essive ed itions has highlighted the
c hang ing priorities and c onc erns of
financ e p rofessiona ls.
A c ont inuously running o nline
que stionnaire provides financ ial c entre
assessments from f inanc ial servic esprofe ssiona ls. GFCI 5 uses 26,629
assessments from 1,455 respond en ts of
who m 308 have respo nde d since GFCI 4.
This rep ort is the 5th in t he series.
GFCI 5 provid es ra tings and rankings for
62 financ ial c entres c alc ulated b y a
fa c tor a ssessme nt m od el (full de tails
c an b e found in Ap pe ndix A). This
p roc ess c om b ines assessme nts of
financ ial ce ntres from respo nses to a n
online questionna ire with instrumenta l
fac to rs (externa l indic es).
2 Bac kground & Introduct ion
Table 2
the G FCI Series Published Total Respondents Total Assessments
GFCI 1 Marc h, 2007 491 3,992
GFCI 2 September, 2007 825 11,685
GFCI 3 Marc h, 2008 1,236 18,878
GFCI 4 Sep tember 2008 1,406 24,014
GFCI 5 March 2009 1,455 26,629
I Financial centre assessments provide
an up to d ate ba rometer of
pe rc ep tions within the financ ial servic es
industry. The assessments are g iven by
respo nses to a c om prehensive ong oing
online q uestionnaire c omp leted by
internationa l financ ial servic es
professiona ls (who assess financ ialc entres with which they a re p ersona lly
familia r). The online questionna ire (see
Ap pend ix B) runs c ont inuously to keep
the GFCI up-to-date with peop le s
c ha ng ing assessme nts. Sinc e G FCI 4,
308 ad ditional respo nde nts have filled
in the o nline que stionnaire, thereb y
providing 5,814 new financ ial ce ntre
assessments from fina nc ial servic es
professiona ls ac ross the w orld.
A to ta l of 26,629 financ ial ce ntre
assessments from 1,455 financ ial
servic es profe ssiona ls a re used to
c om pute GFCI 5.
I Instrumental factors offer an insight to
the fund am enta ls of c om pe titivene ss of
the c entres. They fo rm a set o f ob jective
evide nc e of com pe titivene ss provided
by a wide va riety of com pa rab le
sources. For examp le, evide nc e a bo ut
the infrastructure co mp etitivene ss of a
financ ial ce ntre is draw n from a surveyof property and a n index of occ upanc y
c osts. Evidenc e a bo ut a fair and just
business env ironm ent is d rawn from a
c orruption percep tion inde x and a n
op ac ity ind ex. Fifty-seve n instrumenta l
fac tors are used in the GFCI 5 mod el
(see A ppend ix C fo r deta ils). Of these
57, two new indices are included to
rep lac e tw o less relate d to financ ial
service s. A further 22 ind ice s ha ve be en
upd ate d since G FCI 4. Not a ll financ ial
c ent res are rep resented in a ll the
externa l sourc es, and the statistica l
mod el takes ac c ount of these g ap s.
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One of the streng ths of t he GFCI is the
diversity of respo nde nts and the b rea dt h
of their experienc e a nd perspe ctive on
the financ ial servic es ind ustry. In GFCI 5,
the respo nde nts rep resente d the typ es of
industries, organisa tions, and ge og rap hic
reg ions shown in Tab les 3 to 5.
The instrumenta l fac tors and financ ial
c ent re assessme nts are co mb ined using
sta tistica l techn iques to b uild a pred ictive
mod el of financ ial c entre c omp etitiveness
using supp ort vec tor machine
ma them at ics. The p red ictive model isused to answe r questions suc h a s:
If an investme nt ba nker gives
Singap ore a nd Sydne y c ertain
assessme nts, the n, ba sed on
the instrumenta l fac tors for
Singa po re, Sydney and Paris, how
wou ld t ha t p erson assess Paris?
The G FCI prov ide s sub -indic es derived
from respo nde nts in five spe c ific financ ial
servic es industry sec to rs, na mely: Asset
Mana gem ent, Banking, Gove rnment &
Reg ulato ry, Insuranc e, and Professiona l
Service s. These a re based up on five key
aspe c ts of c om pe titivene ss: Peo ple,
Business Environm ent (inc lud ing
reg ulation and taxa tion), Ma rket Ac c ess,
Infrastruc ture, a nd Gene ral
Co mp et itiveness. These sub -indic es a re
d isc ussed in Cha p ter 4.
10
The Glob a l Fina nc ial Centres Ind ex
Table 3
Respond ents by
Industry Sec to r
Table 4
Respond ents bySize of
Organisation
Sector Number of Responses
Banking 309 21%
Asset Management 259 18%
Insuranc e 118 8%
Professiona l Servic es 279 19%
Regula tory & Government 95 7%
Other 395 27%
TOTAL 1,455 100%
Table 5
Respond ents by
Location
Location Number of Responses
Europe* 707 49%
North Americ a ** 144 10%
Asia 126 9%
Off-shore 370 25%
Multip le or Other 108 7%
TOTAL 1,455 100%
*Of these 707 respond ent s, 454 werefrom Lond on
**Of t hese 144 responde nts, 69 were
from Ne w York
Number of Employees Number ofWorldwide Responses
Fewer than 100 432 30%
100 to 500 237 16%
500 to 1,000 106 7%
1,000 to 2,000 56 4%
2,000 to 5,000 90 6%
More than 5,000 420 29%
Unspec ified 114 8%
TOTAL 1,455 100%
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The Glob a l Financ ia l Centres Index
One of the m ain theme s of c urrent
financ ial c ond itions, reflec ted strong ly in
GFCI 5, is unc erta inty. As Olivier
Blanc ha rd, Chief Ec ono mist of the IMF
rec ently said:
From the Vix inde x of stoc kma rket
vola tility, to the d ispersion of
growth foreca sts, even to the
freq uency of the w ord unc ertain
in the p ress, all the ind ica to rs
of unc ertainty are at or nea r all-
time highs.
GFCI 5 shows signific ant vola tility in the
rat ings reflec ting unc ertainty amo ng
financ ial servic es professiona ls. There is
unc ertainty ab out ma rkets, assets and, o f
pa rticular interest here, ab out w hich
financ ial ce ntres will p rosper in the future.
This unc erta inly is exhibited in a fligh t t o
sa fety in the GFCI rankings. Financ ial
c ent res further dow n the G FCI ranking s
suffered grea te r vola tility to the
assessme nts they rec eived tha n cent res
tow ards the to p of the rankings. Althoug h
a ll c entres lost po ints in the G FCI ra ting s,
those a t the top of the GFCI lost
sub sta ntially less ground tha n the c ent res
at the bo ttom . The to p te n c entres in
GFCI 5 fell by a n ave rag e o f unde r 9
po ints in the rat ings c om pa red with an
ave rag e fa ll of o ver 40 po ints for the
botto m ten ce ntres.
There are 62 c en tres rated in GFCI 5.
Seve nty-one c entres were include d in the
online q uestionnaire, b ut nine w ere not
ranked in the GFCI as they d id not
receive the minimum 100 assessme nts
nee ded for inclusion. The rankings of the
62 ce ntres in GFCI 5, show tha t 18 cent res
ha ve risen, 28 have fa llen, 13 rem a in
uncha nged and there are three new
entrants.
11
3. The GFCI
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12
The Glob a l Fina nc ial Centres Ind ex
Table 6
GFCI 5 Ranking s
and Ratings
Financial Centre Rank Change in Rank Rating Change in rating
London 1 - 781 -10New York 2 - 768 -6
Singapore 3 - 687 -14
Hong Kong 4 - 684 -16
Zuric h 5 - 659 -17
Geneva 6 - 638 -7
Chic ago 7 1 638 -3
Frankfurt 8 1 633 -3
Boston 9 2 618 -7
Dub lin 10 3 618 -4
Toronto 11 1 615 -9
Guernsey 12 4 615 -7
Jersey 13 1 613 -9
Luxembourg 14 1 612 -10
Tokyo 15 -8 611 -31
Sydney 16 -6 610 -20
San Franc isc o 17 - 609 -11
Isle of Man 18 1 601 -10
Pa ris 19 1 600 -7
Ed inburgh 20 -2 600 -14
Washington D.C. 21 1 596 -4
Cayman Islands 22 -1 591 -11
Duba i 23 - 580 -17
Amsterdam 24 - 575 -15
Vanc ouver 25 5 569 -11
Montrea l 26 5 568 -11
Hamilton 27 -1 564 -22
Melbourne 28 -1 562 -24
Munic h 29 3 558 -20
Stoc kholm 30 3 556 -13
Glasgow 31 -3 554 -32
Brussels 32 4 552 -7
Gibra lta r 33 -8 549 -40
British Virg in Islands 34 -5 549 -35
Shangha i 35 -1 538 -30
Bahamas 36 -1 537 -26
Monac o 37 - 533 -19
Copenhagen 38 - 532 -16
Oslo 39 2 523 -11
Milan 40 -1 521 -20
Ta ipei 41 New 518 New
Vienna 42 - 513 -17
Bahra in 43 - 513 -16
Helsinki 44 -4 512 -22
Kua la Lumpur 45 New 510 New
Qatar 46 -1 507 -18
Madrid 47 -1 506 -19
Johannesburg 48 -4 503 -22
Mumbai 49 - 485 -12
Bangkok 50 New 480 New
Beijing 51 -4 478 -31
Osaka 52 -2 469 -24
Seoul 53 -5 462 -40
Sao Paulo 54 -2 440 -31
Rome 55 -2 439 -28
Welling ton 56 -5 432 -41
Lisbon 57 -2 409 -21
Prague 58 -4 396 -48
Warsaw 59 -3 381 -43
Mosc ow 60 -3 363 -51
Athens 61 -3 335 -44
Budapest 62 -3 306 -68
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The Glob a l Financ ia l Centres Index
The Glob a l Centres
London and New Yorkrema in in 1st a nd
2nd p lac es respec tively. Both c entres have
arguab ly bee n ep ice ntres of the globa l
financ ial c risis in 2007 and 2008. Londons
lea d ove r New York has drop pe d from 17
points in GFCI 4 to 13 po ints now. The inde x
is on a sca le of 1,000, and this 13 point
d ifferenc e is relat ively sma ll.
The tw o lead ing c entres rema in closely
matc hed a nd are comp lementary to
ea ch othe r as we ll as c ompe titive. New
Yorks averag e a ssessme nt (f rom
respo ndent ratings) is slightly higher thanLondo ns, but the ad dition o f da ta from
instrumental fac tors and the ana lytics of
the p redic tion engine result in its ove rall
rat ing be ing lower in the final inde x.
Financial Centre Assessments
Financ ial cent re assessments are g iven b y
respond ents to the o nline q uestionna ire. It
should b e no ted that overall New York has
a slight ly higher average a ssessme nt (807)
tha n Lond on (801). Table 14, in Chapter 5,
show s tha t a verag e assessme nts for
Lond on and New York, during the past six
mo nths, are virtually ident ica l (New York
(799) is one po int ahead o f Lond on (798).
Shown below in Cha rt 2 are three mo nth
rolling averag e assessme nts given to
Lond on a nd New York betw een July 2007(the sta rt of the c urrent c risis) and the e nd
of Dec em be r 2008, when the a ssessme nts
for GFCI 5 were c ollec ted .
13
Chart 2
Average
Assessme nts for
Lond on and
New York
740
760
780
800
820
840
860
880
Nov 08Sep 08Jul 08May 08Ma r 08Jan 08Nov 07Sep 07Jul 07
New York
New York
London
London
Date >
GFCIAssessment>
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The Glob a l Financ ia l Centres Index
New York low er than mo st other
respo nde nts, but give an ave rag e
assessme nt very similar to the overa ll
average when the New York hom e
responses are remo ved. New Yorkers assess
Lond on substantially lower than ma ny
other respond ents. This might be d ue to the
high profile c overag e o f financ ial services
in the two c entres whic h is som etime s
po rtrayed in the p ress as a b attle for
suprema cy. It might also reflec t a greate r
loya lty to one s home c entre during
turbulent times. It app ea rs from comments
rec eived from respo nde nts to the G FCIsurvey tha t most observers see the two
ce ntres as bo th co mp etitive a nd yet
co mp lementa ry and that the succ ess of
one c entre is not a failure o f the other. The
two ce ntres have reac hed a c ritic al-ma ss
that d oes muc h to sec ure their c o-
lea de rship in the financ ial sec tor glob ally.
This leadership he lps to insula te them from
anything b ut c ata strophic cha nges in a ny
of the compe titiveness fac tors.
Other Studies on London and New York
A rec ent study c haired by Bob Wigley
(Merrill Lync hs Cha irma n fo r Europe , the
Midd le East, and Africa ) on Lond on:
Winning in a Changing World 1 ba cks up
many GFCI find ings. The resea rch
identified four key e lements underpinning
Londo ns ad vantag e in the global
ma rketp lac e. These elements are d irec tly
c ompa rab le to the GFCIs areas of
competitiveness.
The resea rch p aper also d iscusses severa l
threa ts to Lond on s do minanc e:
I a dete rioration in Lond on s historic
strengths and a ttrac tiveness through
increa sed EU-ba sed reg ulation and a
numb er of cha nges to UK po lic ies
(relating, for example, to corporate tax,
non-domic iled tax sta tus, living c osts,
and skills gaps);
I the intensifying c ompe tition from o ther
financ ial centres in Europe and
elsewhere, som e of which a re
agg ressively targeting sub-sec tors of the
financ ial services industry;
I the financ ial c risis itself threa tens the
c ollap se of key compa nies in the c ity (aswitnessed by the experienc es of
c om panies suc h as Lehm an Brothers and
Northern Roc k);
I the risk of reac tionary new regulation
de crea sing the c itys com pe titiveness.
These threa ts must b e taken seriously.
The cont ributions of a suc c essful financ ial
ce ntre to a c ountrys overall eco nomic
hea lth ca n be very imp ortant. The
Financ ial Services (FS) sec to r ma kes a large
contribution to the UK pub lic financ es.
A recent study (2009) unde rtaken by
Pricew aterhouseCoopers for the City of
London e stima tes the Tota l Tax
Contribution of the sec tor in the Financ ial
Yea r to 31 March 2007 as 67.8bn or 13.9%
of to tal g overnment rece ipts for all taxes.
Corporat ion ta x (CT) is the largest o f the
taxes bo rne by UK com pa nies and the FS
sec tor as a whole p rovided 27.5% of to tal
go vernment CT receipts in the Financ ial
Yea r to 31 Ma rch 2007. The UK financ ialservices sec tors cont ribution ha s grow n
stea dily in rec ent years, making up a lmost
15
Table 7
Wigley Key
Elements
Mapped to
GFCI Area s of
Competitiveness
Cha nge s sinc e
GFCI 3
Wigley Report Key Elements
Supp ortive tax, lega l, and regulato ry c onte xt
Attrac tiveness as a loc ation for
corporate hea dqua rters
Effec tive system s and supp ort servic es
(including tec hnology, media, and
pro fessiona l services)
Deep talent poo l and welcoming c ulture
GFCI Areas of Competitiveness
Business Environm ent (this inc lude s ta xation
and the regulatory environment)
Ge neral Comp etitiveness and
Market Acc ess
Market Access, Infrastructure
People, General Competitiveness
1 http://www.london.gov.uk/
mayor/economy/
london-winning.jsp
http://www.london.gov.uk/mayor/economy/london-winning.jsphttp://www.london.gov.uk/mayor/economy/london-winning.jsphttp://www.london.gov.uk/mayor/economy/london-winning.jsphttp://www.london.gov.uk/mayor/economy/london-winning.jsp -
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8% of the UKs gross va lue ad ded . More
tha n just ta x reve nue, suc cessful financ ial
centres are large ec onom ic eng ines in
ge neral for the UK 38.8 bn o f net exports
were ge nerated in 2007 at a time when the
UK had a d eficit on trad e a s a w hole of
46.6bn.2
New York fared p articularly we ll in a rec ent
ana lysis by Pricew aterhouseCo op ers
(PwC) entitled Cities of Op po rtunity 3
ranking 1st out of tw enty g loba l cent res.
Lond on w as plac ed 3rd (behind Paris in
2nd). It should ho we ver, be no ted tha tCities of Opportunity looks a t c ities in a
wide r co ntext tha n just financ ial servic es.
Whilst London ranks in 1st p lac e in wha t
PwC refer to a s Financ ial Clout , New York
ranks 1st in Intellectua l Cap ital a nd
Tec hnolog y IQ a nd Innova tion, a s we ll as
Lifestyle Assets ( the qua lity o f life a nd
we ll-being p ote ntial eac h c ity offers its
reside nts and visitors ).
Anothe r study loo king a t the tw o c entres in
som e deta il is Ma sterCard s Centres of
Comm erce Inde x 4 which c lassifies 75
world c ities acc ording to the ir significa nce
in internat ional co mm erce using seven
dimensions. In this inde x London c om es 1st
just a hea d of New York with Tokyo in 3rd .
Lond on sc ores highest in the financ ial
flow d imension as we ll as in the
knowledg e creation and information
flow dime nsion. Lond on also ranked
2nd in the business c enter d imension.
Lond on d id no t fa re as well in livab ilityor e c ono mic stab ility. New York
be nefits from go od po sitions in the two
d imensions tha t mea sure country-leve l
da ta legal and po litic al fram ewo rk
and e c ono mic stab ility, while also
sc oring highly in know ledg e c rea tion
and informa tion Flow .
The Main Threats to the Two Leaders
revealed by the GFCI
GFCI respondents identified severa l
threats to the two glob al c entres. With the
ever-inc reasing g loba lisa tion of financ e
and business, and in spite of the e qua lly
pe rvasive spread of broad ba nd
c onnec tivity, prac tica l hurdles suc h as
visas and other regu lato ry ba rriers to
building an internationa l workforc e
c ontinue to draw fire from GFCI
respo ndents. A goo d e xamp le of this:
The ea se w ith whic h emp loyers
c an ob tain w ork visas for
prospe c tive foreign e mp loyees is
often o verloo ked. There ap pe ars
to b e a mini-stamp ed e of c ity folk
hea ding o ut East to esc ap e
wo eful co nd itions in Lond on.
Cities suc h a s Singa pore w hichare very ope n to foreign talent w ill
be nefit hugely.
London ba sed pension fund m anag er
Short-term e ase of travel is key to financ ial
cent re growth as we ll. In the
Pricew aterhouseCoo pe rs stud y Cities of
Oppo rtunity , the c entres ranked highe st
for Ease o f Entry inc lude:
One G FCI 5 respond ent p ut it suc c inctly:
Where its a ha ssle to fly in quickly
to have a key fac e-to-fac e
meeting, I do nt wa nt to do
business.
Chica go ba sed senior consultant
Visa a nd travel diffic ulties are problem at ic
and the other issues me ntioned b y Wigley
are rea l. Howeve r, the main threa ts to
Lond on a nd New York current ly are:
I Reg ulato ry knee-jerk rea c tions to the
c redit c risis tha t increa se regu lation may
have unintended co nsequenc es.
16
The Glob a l Fina nc ial Centres Ind ex
Table 8
Numb er of c ountries with visa -free
trave l to the c entre
Financial Centre Rank
London 1st
Singapore 2nd
Hong Kong 3rd
Toronto 4th
Seoul 5th
2 The Gua rdia n, From Big
Bang to Whimper:
Welcom e to the New City,
11 January 2009 -
http://www.guardian.co.uk/b
usiness/2009/ jan/ 11/
changing-square-mile
3 Cities of Opp ortunity,
PricewaterhouseCoopers
and Partnership forNew York City, 2008
http:/ /www.pwc.com/
cities/
4 http://www.mastercard.com/
us/company/en/insights/
index.html
http://www.guardian.co.uk/business/2009/jan/11/changing-square-milehttp://www.guardian.co.uk/business/2009/jan/11/changing-square-milehttp://www.guardian.co.uk/business/2009/jan/11/changing-square-milehttp://www.pwc.com/cities/http://www.mastercard.com/us/company/en/insights/index.htmlhttp://www.mastercard.com/us/company/en/insights/index.htmlhttp://www.mastercard.com/us/company/en/insights/index.htmlhttp://www.mastercard.com/us/company/en/insights/index.htmlhttp://www.pwc.com/cities/http://www.guardian.co.uk/business/2009/jan/11/changing-square-mile -
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17
The Glob a l Financ ia l Centres Index
Eurod ollar ma rkets grew swiftly in the
1960s whe n US tax rule c hanges mea nt
multinationa ls found it attrac tive to leave
dollars outside the cont rol of US
autho rities. Sarbanes-Oxley req uirements
afte r 2000 inc rea sed the attrac tiveness
of Lond on a s a p rinciples ba sed
reg ulato ry environment a nd inc rea sed
listings on AIM a t the expense of NYSE;
I Rec ession: New York and London
antic ipate significant ec onom ic losses
from the c redit c risis, due to their heavy
de pend ence on revenues de rived from
financ ial sec tor performance, but willa lso b e hurt by na tiona l rec essions.
Lond on is more e xposed to the c red it
c risis tha n New York as interna tiona l
who lesa le financ ial services counts for a
larger sha re of GDP. New York a lso ha s a
large hinterland d om estic USA
ec onomy tha t ge nerates a b ase level of
financ ial services ac tivity.
It is ea sy to foc us on the p otential
weaknesses of a financ ial centre b ut there
is c an b e do ubt tha t Lond on and New York
are bo th very c omp etitive financ ial
c ent res. Lond on in pa rtic ular still has an
exce llent rep utation one representa tive
quotation from a G FCI respo ndent is:
Yes, Lond on ha s its d isadvanta ge s
and frustrations, but the c ity know s
tha t it runs on financ ial services,
and ea rns high m arks for effo rts to
rema in the lead ing c entre. Dubai
and others are investing ma dly, butyou can t buy what Londons
alread y g ot
A Ge neva-ba sed investment b anking
executive
Other Leading Centres
Amo ngst o ther lea ding c entres,
Singa pore remains in 3rd p lac e in GFCI 5,
having overtaken Hong Kong in GFCI 4.
Hong Kong rem ains in 4th p lac e o verall.
Hong Kong also d rop pe d o ne plac e (from
3rd to 4th) in bo th the Asset Ma nag eme nt
sub-ind ex and the Peo p le sub-ind ex of
competitiveness.
Singapore ha s d rop pe d 14 po ints since
GFCI 4, but reta ins 3rd p lac e in the GFCI
rankings. It is now 81 po ints behind New
York in 2nd p lac e. It rem ains a solid c entre,
as evide nc ed in its c ont inuing high
pe rforma nc e in a ll industry sec tor sub -
indice s and in a ll area s of
c om pe titivene ss, sitting in 3rd or 4th p lac e
in these rankings ac ross the bo ard.
Hong Kong is c urrently wrestling w ith a
reg ulato ry c hang e tha t is c ausing
c onflic t a mong loca l firms in the financ ial
services industry.
Under Hong Kong s stoc k-
excha nge rules, listed c om pa nies
need to repo rt results twice a yea r
and have an inordinate ly long time
to d isc lose them three m onths
afte r the end of the p eriod for the
ha lf-yea r rep ort, four months for the
yea r-end . In co ntrast, Ame rica n
financ ial results, whic h a re rep orted
qua rterly, must b e d isc losed within
40 da ys of a qua rter-end and 60
da ys of a year-end .5
The rules in Hong Kong a re being
cha nged although full imp lementa tion o f
this new rule ha s been d elaye d until 1st
Ap ril 2009. The c losing o f this particula r
loopho le ma y ca use c hang es in Hong
Kong s ra ting later in the yea r.
In the Go vernme nt & Reg ulato ry sub-
inde x (which inc lude s issues relating toc hanges like this), Hong Kong rem a ined in
4th plac e b ut d rop pe d by 19 points. It will
be interesting to see if inc reasing
transparenc y like this and b ringing the
reg ulato ry p rac tic e m ore in line with
c om pe ting c entres stand ards will help
Hong Kong rise in the rankings aga in.
GFCI respo ndents have ta ken note ,
commenting:
Its ca using pa in, but tightening
Hong Kong s rep orting
requirem ents is long o verdue and
an ab solute ne c essity for tha t
5 The Eco nomist,
Indefensible,
08 Janua ry 2009 -
http://www.economist.com/
finance/displaystory.cfm?
story_id=12903066
http://www.economist.com/finance/displaystory.cfm?story_id=12903066http://www.economist.com/finance/displaystory.cfm?story_id=12903066http://www.economist.com/finance/displaystory.cfm?story_id=12903066http://www.economist.com/finance/displaystory.cfm?story_id=12903066 -
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ma rket to keep business
in the c risis.
A senior investmen t a dvisor in Frankfurt
Tokyo has fa llen e ight p lac es to 15th in
GFCI 5 and is now outside the top ten fo r
the first t ime. This fa ll in the rankings wa s
caused by a de c line of 31 points the
largest a mongst the top 25 c entres.
Japans banks are suffering less from toxic-
deb t problems than ma ny of the other
lead ing c ent res in the GFCI. Tokyo s
dec line is ca used by m ore co mp lex
ma cro-econo mic issues. In recent ye ars,Japa ns high export-driven income,
pa rticularly in the electronic, tec hnology,
and auto motive sec tors, has ma de it
vulnerab le to the g lob al ec onomic slow-
do wn, as consumers red uce spe nding.
Instrumenta l fac tors in the GFCI mod el
show tha t c onsumer confidence has
drop ped , and the Nikkei s 225-share
ave rag e ha s rea c hed a 26-yea r low. The
Bank of Jap an ha s cut interest rates from
0.5% to 0.3%, and announc ed a fisc al
stimulus pac kag e of a pproximately 1.4% of
GDP. There is a lso a large rise in corporate
and pe rsona l tax rates.
Respo ndents to the GFCI que stionna ire
complain abo ut restrictions (bo th
lega l and c ultural) on ac cess to
internat iona l sta ff:
C ultural acc eptanc e of
foreigne rs is very imp orta nt to
the ea se o f d oing business in a
c oun try. Tokyo fares poorly
in this rega rd.
New York based investment ba nker
Cha rt 4 shows tha t Tokyo suffe rs from
nega tive p erce ptions am ong Europ ean,UK and off -shore respondents. It is
pe rc eived po sitively in North Americ a, a nd
very strong ly amo ng Asian respond ents.
18
The Glob a l Fina nc ial Centres Ind ex
6 The GFCI mo de l co ntrols
for responses ab out o nes
home city to better
represent a truly glob al
perspec tive on the Index.
Acc ordingly, Torontos
increa se in this ca se (a s in
oth er city s assessme nt
values) was also
statistica lly significan t a nd
based upon a globally
diverse set o f
respo nd ents. For m ore
information o n the
proce ss used to c omp ile
assessments and rankings,
please see Ap pend ix A.
Chart 4
Average
Assessme nts by
Respondent
Loc ation
Tokyo
-75 -50 -25 0 25 50 75 100 125
Asia
Europe
London
New York
Offshore
Other
Other North America
Oth er UK
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19
The Glob a l Financ ia l Centres Index
The rec ent glob al financ ial turmoil raises
a question a bout the g loba l
ac ce ptanc e of the Western mod el of
fina nc e. It is ap p arent tha t Asian
go vernm ent s a nd b usinesses ha ve
vested interests in glob al financ ial
rec ove ry (pa rticularly since m uc h of their
GDP is exp ort-driven). These
go vernments have an o pp ortunity to
c om pe te m ore strongly with esta blished
c en tres. GFCI resp ond ent s reinforce d th e
potent ial in the ir positions.
Hong Kong is b est on the rang e ofservic es a vailab le, qua lity o f
servic e, a nd ta x; Singap ore is
a lso improving; Lond on is fa lling
in c om p etitiveness
Syd ney ba sed fina nc ial service s
consultant
Toronto d id w ell in GFCI 5, ea rning the 3rd
highe st increa se in ave rag e a ssessme nts
from questionn a ire responses6 with a
p ositive c ha nge of just ove r 100 po ints
(ou t o f a p ossible 1,000.) While this on ly
translated into a o ne-ra nk ga in in the
GFCI, it is an impo rtant a d va nc e fo r a
regiona l c entre tha t has b ee n investing
in its c ap ac ity and rep utation as a g loba l
c entre for financ e.
Despite a strong inc rea se in a verag e
a ssessme nts, Toront o s rating dec lined by
nine p oints. This wa s d ue to a ma rked
d ec line in ce rta in instrumenta l fac tors.
GFCI 5 uses a new me a sure of c orpo ra teta x ra tes and this show s a significa nt
inc rease fo r Toront o. In add ition , the
ma in me asures of Ma rket Ac c ess
(ca pitalisation of the stoc k exc hang e,
an d leve ls of trad ing) have all fa llen
significantly.
Toronto ha s, howe ver, bee n a n impo rta nt
financ ial centre in North Ame ric a for
ma ny yea rs a nd ha s fared relatively well
in the c urren t financ ial crisis. It c on tinues
to be an engine for the Canad ian
ec ono my. Toronto also p erforms we ll
in the industry and c om pe titivene ss
sub -ind ice s (see C ha p te r 4).
Boston show ed a n increase in its a verag eassessme nt o f 71 points but fell in the
GFCI ra ting d ue to c han ge s in
instrume nta l fac to rs suc h a s PwC s
mea sure of c orporate ta xation that
shows a sha rp inc rease. Ta x inc om e a s a
perc ent age o f GDP ha s a lso risen b y 7%.
Sydney is ano ther centre that has
pe rformed po orly in GFCI 5. It ha s
de c lined six pla c es from 10th to 16th.
Examining the c entre s sc ore am ong
instrume nta l fac to rs, the c ost of living
inde x rose b y almost twice the a verag e
and there w as also a signific ant c hang e
in the level of both share and bo nd
trad ing. This wa s ac c omp anied by a
large fa ll in the c a pita lisa tion of its stoc k
exchange.
Off-shore Centres
It is interesting to note the p erforma nc e
of the Offshore c entres in the c urrent
c lima te, given that c onc erns ab out taxeva sion ha ve highlighte d issues
assoc iate d with their ta x sta tus. GFCI
results sug gest tha t som e off-sho re
Table 9
Top five
Off-shore
Centres
Off-shore Centre GFCI 5 Rank GFCI 5 Rating
(change since GFCI 4) (change since GFCI 4)
Guernsey 12th (+4) 615 (-7)
Jersey 13th (+1) 613 (-9)
Isle of Man 18th (+1) 601 (-10)
Cayman Islands 22nd (-1) 591 (-11)
Hamilton 27th (-1) 564 (-22)
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c entres, led here by Guernsey and
Jersey, may have a co mpe tit ive
ad vantage in the rec ent eco nomic
turmo il. There a re five o ff-sho re c ent res in
the top 30 of GFCI 5.
Whilst the se o ff-shore c en tres ha ve a ll
suffered dec lines in the ir rating s, these
d ec rea ses are ge nerally low er than the
ave rag e d ec line o f all centres in the
GFCI. Jersey show ed a rise o f 40 po ints in
the a verag e a ssessme nts it ac hieved b ut
still fell by nine points in the GFCI rating s.
Fa lls in instrume nta l fa c to rs me asuringc orruption p ercep tions, globa l
c omp etitiveness and ec onom ic
sentiment c ontribute d to this
performance.
The ratings of off-sho re c en tres a lso
reflec t the flight to safe ty. Whilst the top
c entres in Tab le 9 ha ve p erforme d w ell,
off-shore c entres further d ow n the GFCI
rankings ha ve suffe red la rge fa lls.
Gibraltar d rop pe d 40 points in GFCI 5
whilst the British V irg in Island s (-35 po ints)
a nd the Baha ma s ( -26 po ints) a lso
pe rformed po orly.
Other Centres
Centres at the b ottom of GFCI 5 have all
suffered a signific ant d ec line in ratings
since GFCI 4. The bot to m ten c en tres in
GFCI 5 have fallen b y an a verage of ove r
40 p oints in the rat ings (co mp ared with
an a verage fa ll of unde r 9 for the top ten
c en tres). These d ec lines a re, in pa rt dueto c ha nge s in instrumenta l fac tors but
they seem to have be en affected by the
unc erta inly felt b y GFCI resp ond ent s. It
would a pp ea r that there is a g enuine
flight to safety with peo ple in financ ial
servic es put ting the ir faith in the qu ality of
we ll esta blished financ ial ce ntres. Of the
ten c entres whic h suffered t he large st
rating s fa lls in GFCI 5, eight a re in the
b otto m q ua rter of the GFCI ra tings ta ble.
Of the se Bud ap est, Mosc ow , Prague and
Athe ns show ed the la rge st d ec lines.
20
The Glob a l Fina nc ial Centres Ind ex
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21
The Glob a l Financ ia l Centres Index
The GFCI da ta c an b e mo de led to
provid e a numb er of sub -ind ice s. Five of
these sub-ind ice s a re for spec ific industry
sec tors. These a re Asset Ma na ge me nt,
Banking, Go vernment & Reg ulatory,
Insuranc e a nd Professiona l Servic es. Eac h
sub -ind ex reflec ts the views of
respond ents from one sec to r a lone. It is
the refore po ssible to c ont rast the v iews of
pa rticular sec tors ab out financ ial ce ntres.
The Five Key Industry Sectors
Tab le 10 below show s the t op ten ranked
financ ial ce ntres in the industry sec to rsub -ind ice s. These ind ice s a re c reated by
bu ild ing the GFCI sta tistica l model using
only the questionna ire responses from
respond ents wo rking in the releva nt
industry sec to rs. The figures in brac kets
show how t he c entre has mo ved in these
sub -indic es sinc e GFCI 4:
It is not ice ab le tha t the se G FCI sub -
ind ices display a de gree of stab ility
despite the p revailing m ood of
unc erta inty. The top spec ialists in eac h
sec tor rema ining high p ositions; the ir
rat ings ma y ha ve suffered but their ranks
have not. In the Asset Ma nag em ent sub-
ind ex, Singap ore rose o ne p lac e to 3rd,
Gene va ove rtoo k Guernsey and
Luxemb ourg a dva nce d three plac es to
10th. It is no t a grea t surprise to see the
spec ialist c ent res Zuric h, Geneva ,
Guernsey a nd Jersey a ll in the top ten fo r
Asset Ma nag em ent which is whe re their
rea l streng th c ont inues to lie.
In the Banking sub-ind ex, New York
ed ge d o ut Lond on into 1st p lac e. Strong
banking c ent res suc h as Singa pore, Hong
Kong , Chica go , Frankfurt and Toronto a ll
fea ture in the to p 10. Boston rose fo ur
p lac es to 9th p lac e in this sub -ind ex.
The Go vernm ent & Reg ulato ry sub -ind ex
show s Lond on and New York switc hing
p lac es since GFCI 4, with Lond on
rega ining first p lac e. Tokyo c limb s two
p lac es to 6th, and Frankfurt rises five
plac es to 7th.
Rankings in the Insuranc e sub-ind ex
4. Foc us: Ind ustry Sec tors and
Area s of Competitivene ss
Table 10
Industry Sec to r
Sub-Ind ice s
(changes
aga inst GFCI 4 in
brackets)
Rank Asset Banking Government & Insurance Professional
Management Regulatory Services
1 London (-) New York (+1) London (+1) London (-) London (-)
2 New York (-) London (-1) New York (-1) New York (-) New York (-)
3 Singapore (+1) Singapore (-) Singapore (-) Zuric h (-) Hong Kong (-)
4 Hong Kong (-1) Hong Kong (-) Hong Kong (-) Singapore (-) Singapore (-)
5 Zuric h (-) Chic ago (+1) Chic ago (-) Hong Kong (-) Zuric h (-)
6 Jersey (-) Zuric h (-1) Tokyo (+2) Dub lin (+2) Geneva (+3)
7 Geneva (+1) Geneva (-) Frankfurt (+5) Tokyo (-1) Jersey (-1)
8 Guernsey (-1) Frankfurt (-) Pa ris (-1) Hamilton (+1) Guernsey (-1)
9 Dub lin (+1) Boston (+4) Zuric h (-3) Munic h (-2) Frankfurt (+3)
10 Luxembourg (+3) Toronto (+2) Toronto (-1) Geneva (+1) Chic ago (-)
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rem ained fairly sta ble w ith the top five
c entres rem aining the sam e, a nd Dublin,
Ham ilton, a nd Gene va improving. The
rating s a re a lso unsurprising w ith the
ma jor insuranc e c ent res a ll fea turing
strongly.
Similarly, the t op five in Professiona l
Servic es rem ained stab le, but Gene va
and Frankfurt b oth rose t hree plac es to
6th and 9th respe c tively.
The Five Key Areas of Competitiveness
There a re five sub-ind ice s based up on thefive key a reas of c om petitivene ss. The
Instrumenta l fac tors used in the GFCI
mod el are g roupe d in the five key areas
of c om pe titivene ss:
I People involves the a vailability of g oo d
personnel, the flexibility of the lab our
ma rket, business ed uc ation a nd the
development of human ca pital .
I Business Environment covers
regula tion, ta x ra tes, levels of
co rruption, ec onom ic freed om a nd the
ea se of d oing business. Reg ulation, a
ma jor c om po nent of the b usiness
env ironm ent , is c ited b y que stionna ire
respo nde nts as a d ec isive fac tor in the
c om pe titivene ss of Lond on a nd New
York.
I Market Access c ove rs the levels of
sec uritisation, volume and value of
trad ing in equities and bo nds, as we ll asthe c lustering effect of ha ving m any
firms involved in the financ ial services
sec tor toget her in one c entre.
I Infrastructure ma inly co nc erns the c ost
and ava ilab ility of b uildings and office
spa c e, althoug h it also include s othe r
infrastructure fa c to rs suc h a s transport.
I General Competitiveness c ove rs the
ove rall c om petitivene ss of c ent res in
terms of mo re ge neral ec ono mic
fac to rs suc h as p ric e leve ls, econo mic
sentiment a nd ho w c entres are
pe rc eived as plac es to live in.
The G FCI que stionna ire a sks abou t the
mo st impo rta nt fac tors ofc om pe titivene ss. The numb er of times
that ea ch a rea w as mentioned is
summa rised in Table 11.
Clea rly the Business Environm ent is
viewe d a s a key area with over twice a s
ma ny mentions as the sec ond fac tor,
People. Business Environment is
me ntioned almo st a s ma ny times as all
other a reas co mb ined . This is c lea rly a
response to t he c urrent c redit c risis but
reflect s spe c ific c onc erns ove r taxation,
the rule o f law a nd the level of t rust in an
env ironm ent . Respond ents c urrent ly
seem to p artic ularly value a fair and just
business environm ent. One c om me nt
sum s th is up :
As a foreigne r ba sed in Lond on
wha t I rea lly ap prec iate is be ing
trea ted fa irly in business .
London b ased co mmercial banker
In order to g enerate the five sub-indices
by a rea of c om pe titiveness, the GFCI
fac to r assessme nt m od el is run with one
22
The Glob a l Fina nc ial Centres Ind ex
Table 11
Ma in Areas of
Competitiveness
Area of Competitiveness Number of mentions Main concerns raised
by respondents
Business Environment 73
Peop le 34
Infrastruc ture 32
Market Ac c ess 12
Genera l Competitiveness 8
Reg ulatory environmen t; rule of law ;
trust and taxa tion
Qua lity a nd ava ilab ility of sta ff; lifestyle
Transport links and airpo rts
Cluste r of p rofessiona l advisors; ac c ess
to international m arkets
Reputa tion and ma rketing
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23
The Glob a l Financ ia l Centres Index
set o f instrume nta l fac tors at a time a nd
the results are c om pa red to ide ntify
which fa c tors influence which c entres.
Mo st o f the resulting sub-ind ice s a re fa irly
c losely c orrelate d to the m ain GFCI.
Inde ed , in the top ten there are very few
surprises. This ind ica tes tha t to b e a
lead ing financ ial ce ntre, strength in all
a rea s is nec essary. London is top in a ll
a rea s, New York is a ve ry c lose 2nd , whilst
Hong Kong and Singa po re share 3rd and
4th plac es throug hout.
Tab le 12 show s the top ten ranked
c entres in eac h sub-index (ag ain the
figures in brac kets show how the c entre
has moved in the sub-index rankings
c om pa red with GFCI 4):
The m ost no ta b le cha nges since GFCI 4are in the Infrastructure sub-ind ex whe re
Frankfurt and Boston ea c h rise three
plac es to 5th a nd 6th respe c tively, and
Paris rises seve n p lac es into the top ten to
7th plac e.
The Ge neral Co mp etitivene ss sub -ind ex is
the m ost sta ble o f the five sub-ind ice s,
with no c hang es to the to p seven, but
Boston ha s joined the top ten , rising three
p lac es from 13th in GFCI 4. The sta b ility of
this sub -inde x is no grea t surp rise it is
c losely co rrelate d to the ma in GFCI and
the top rankings in GFCI 5 are also
rem arkab ly c onsistent.
Rank People Business Market Access Infrastructure General
Environment Competitiveness
1 London (-) London (-) London (-) London (-) London (-)
2 New York (-) New York (-) New York (-) New York (-) New York (-)
3 Singapore (+1) Singapore (-) Hong Kong (-) Hong Kong (-) Hong Kong (-)
4 Hong Kong (-1) Hong Kong (-) Singapore (-) Singapore (-) Singapore (-)
5 Zuric h (-) Zuric h (+1) Chic ago (+1) Frankfurt (+3) Zuric h (-)
6 Frankfurt (+1) Chic ago (-1) Zuric h (-1) Boston (+3) Chic ago (-)
7 Chic ago (-1) Geneva (-) Frankfurt (+1) Pa ris (+7) Geneva (-)
8 Geneva (-) Dub lin (+2) Boston (+1) Chic ago (-1) Dub lin (+2)
9 Boston (+1) Toronto (-) San Franc isc o (+1) Zuric h (-4) Frankfurt (+2)
10 San Franc isc o (-1) Frankfurt (+1) Jersey (+1) Dub lin (+3) Boston (+3)
Table 12
Sub-Ind ice s
by Area s of
Competitiveness
(changes
aga inst G FCI 4
in brac kets)
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The GFCI is based up on a to ta l of 26,629
financ ial centre assessme nts p rovided b y
1,455 financ ial servic es profe ssiona ls from
an online questionna ire. These
assessme nts a re weighted log arithm ica lly
to g ive mo re p rominence to the m ost
rec ent respo nses (see A ppend ix A).
By c om bining these financ ial centre
assessments with 57 ad d itiona l sou rce s of
da ta o n co mp etitiveness fac tors (the
instrumenta l fac to rs), the G FCI trac ks
glob a l rankings as we ll as identifying
mo re spe c ific trend s.
A summ ary o f the assessme nts g iven to
the 62 ce ntres in the GFCI is shown in
Tab le 13 below :
24
5. Assessments in More Deta il
The Glob a l Fina nc ial Centres Ind ex
Table 13
Assessments ofthe GFCI Centres
Financial Centre
London 1 1,289 801 164
New York 2 976 807 171
Singapore 3 677 738 188
Hong Kong 4 811 723 191
Zuric h 5 755 702 192
Geneva 6 721 668 197
Chic ago 7 525 671 210
Frankfurt 8 659 658 198
Boston 9 468 642 208
Dub lin 10 795 640 185
Toronto 11 459 663 206
Guernsey 12 584 652 218
Jersey 13 646 650 230
Luxembourg 14 658 641 205
Tokyo 15 518 660 218
Sydney 16 411 660 219
San Franc isc o 17 406 639 211
Isle of Man 18 522 638 213
Paris 19 685 614 193
Ed inburgh 20 603 627 215
Washing ton D.C. 21 382 596 229Cayman Islands 22 495 625 220
Duba i 23 581 622 211
Amsterdam 24 538 605 201
Vanc ouver 25 304 583 239
Montrea l 26 319 562 222
Hamilton 27 408 597 224
Melbourne 28 270 563 229
Munic h 29 403 607 250
Stoc kholm 30 373 556 224
Glasgow 31 207 563 215
GFCI 5 Rank Number of
Assessments
Average
Assessment
Standard
Deviation ofAssessments
continued
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25
The Glob a l Financ ia l Centres Index
Financial Centre
Brussels 32 516 564 203
Gib ra lta r 33 245 588 213
British Virg in Islands 34 243 600 209
Shangha i 35 390 603 213
Bahamas 36 182 585 200
Monac o 37 191 583 208
Copenhagen 38 332 506 235
Oslo 39 279 485 239
Milan 40 408 532 209
Ta ipei 41 113 615 152
Vienna 42 340 520 212
Bahra in 43 299 541 220
Helsinki 44 284 490 234
Kua la Lumpur 45 137 588 200
Qata r 46 255 525 231
Madrid 47 405 511 193
Johannesburg 48 305 524 215
Mumbai 49 339 523 222
Bangkok 50 137 539 207
Beijing 51 322 513 215
Osaka 52 200 472 231Seoul 53 240 499 240
Sao Paulo 54 219 496 240
Rome 55 341 458 203
Welling ton 56 204 472 252
Lisbon 57 275 410 218
Prague 58 278 449 227
Warsaw 59 263 422 221
Mosc ow 60 358 403 221
Athens 61 298 364 206
Budapest 62 265 395 226
GFCI 5 Rank Number of
Assessments
Average
Assessment
Standard
Deviation ofAssessments
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Tab le 15 show s tha t w ithin the top 30
GFCI c ent res, North Ame ric an c ent res
(with the exc ep tion of New York) have
fa ired we ll sinc e G FCI 4. Two of f-sho re
c ent res, the Ca yma n Island s and the Isle
of Ma n, also saw g oo d inc reases in
average assessments.
Tab le 16 show s the nine c ent res includ ed
in the GFCI questionna ire tha t we re not
rat ed in the GFCI as they rece ived few er
tha n 100 assessme nts ea c h (the minimum
numb er need ed for inc lusion in the
GFCI inde x).
26
The Glob a l Fina nc ial Centres Ind ex
Table 14
Top 20 Average
Assessments of
GFCI Centres
sinc e G FCI 4
Centre Number of Assessments Average Assessment
New York 214 799
London 274 798
Singapore 137 763
Toronto 84 745
Hong Kong 177 731
Chic ago 109 726
Zuric h 152 721
Geneva 160 712
Sydney 91 705
Cayman Islands 94 704
Boston 94 699
San Franc isc o 79 696Isle of Man 122 694
Tokyo 105 692
Frankfurt 141 686
Jersey 137 682
Vanc ouver 56 673
Dub lin 183 666
Guernsey 138 666
Shangha i 73 663
Table 15
Centres from the
top 30 with the
highe st inc rease
in averag e
assessments
since
City Code Up to GFCI 4 Since GFCI 4 Change
Vanc ouver 563 673 111
Montrea l 539 648 108
Toronto 644 745 101
Cayman Islands 606 704 98
Melbourne 546 625 79
Washing ton D.C. 581 658 77
Isle of Man 620 694 74
Boston 628 699 71
San Franc isc o 625 696 71
Chic ago 657 726 68
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27
The Glob a l Financ ia l Centres Index
Among st these c ent res, Shenzhen is
interesting in tha t it rec eived a relatively
high a verage assessme nt. There w ere
how ever, only a sma ll numb er of
assessme nts g iven to Shenzhen a nd it will
be interesting to see how this c ity
performs when a greater number of
assessme nts have be en ob tained .
Seve ral respond ents d id ide ntify
Shenzhen a s bo th likely to b ec om e m ore
significa nt a nd a s a loc ation whe re their
firm is likely to op en a n office in the next
2 to 3 yea rs .
In add ition to a ssessme nts, na rra tive
responses to spec ific questions in the
GFCI questionna ire he lp to shed ligh t on
c hang es from one ed ition o f the GFCI to
the next. Among these que stions, the
GFCI que stionna ire asks whic h c ent res
respo nde nts think are likely to b ec om e
mo re signific ant in the next few years:
Duba i top pe d this list for GFCI 5 and as
one respond ent says:
It w ill be very interesting to see
how Duba i goes in the next
yea r or two . If there is a reg ulato ry
knee -jerk b y the USA a nd UK
go vernments, Duba i is now idea lly
plac ed to bene fit.
A Zurich b ased asset m ana ge r
Shang hai a nd Singa po re a re in 2nd a nd
3rd p lac es respec tively in terms of
likelihood of b ec om ing mo re significa nt in
the ne xt few ye ars. As one respo nde nt
puts it:
The d evelopme nt of financ ial
c ent res in Midd le East a nd Asia
should not b e und erestima ted by
policy m akers in the West
Geneva ba sed asset ma nager
Table 16
Centres with
Insufficient
Number of
Assessments to
be ranked in
GFCI
Financial Centre GFCI 5 Rank Number of Average Standard Deviation
Assessments Assessment of Assessments
Shenzhen - 25 628 188
Malta - 41 588 166
Buenos Aires - 51 541 227
Mauritius - 39 521 187
Rio de Janeiro - 47 515 220
Ta llinn - 74 509 271
Jakarta - 80 498 219
Manila - 74 447 198
St. Petersburg - 87 434 220
Table 17
Ce ntres Likely to
Bec ome More
Significant
Financial Centre Number of
times mentioned
Dubai 26
Shangha i 23
Singapore 13
Mumbai 12
Beijing 8
Abu Dhab i 8
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There is an inc reasing na rra tive fo c us on
em erging c entres in the Midd le East a nd
Asia ac co mpa nied by a perception that
the ec ono mic c risis is of t he West s
ma king. Cha rt 5 howe ver co nfirms that
whilst de velop ing ce ntres have m ad e
prog ress in the GFCI ratings, the y ha ve
also b een a ffec ted by the financ ial crisis
as show n b y the GFCI 5 ra tings:
The GFCI questionna ire a lso asks
respond ents whe re their orga nisa tions
are m ost likely to op en o ffic es ove r the
next few yea rs, shown in Tab le 18.
28
The Glob a l Fina nc ial Centres Ind ex
Chart 5
Prog ress of
Ce ntres Likely
to Bec omeMore Significa nt
400
450
500
550
600
650
700
750
GFCI 5Rating
GFCI 4Rating
GFCI 3Rating
GFCI 2Rating
GFCI 1Rating
Singa po re
Dubai
Shang hai
Qatar
MumbaiBejing
Singa p ore
Shang haiDubai
Bejing
Mumbai
Qatar
Date >
GFCIrating>
Table 18
Centres Where
New Offices will
be Opened
Financial Centre Number of
times mentioned
Singapore 14
Duba i 13
Shangha i 10
Hong Kong 8
Beijing 5
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29
The Glob a l Financ ia l Centres Index
Singap ore ha s do ne w ell in the ove rall
GFCI, respond ing to respond ents
priorities. The c ent re rose to 3rd p lac e
ab ove Hong Kong in GFCI 4 and reta ined
the position in this ed ition of t he Index. In
GFCI 5, Singa pore a lso rose to 3rd p lac e
ab ove Hong Kong a mo ng respo nde nts in
the Asset Ma nag em ent sub-index and
the Peo p le sub-ind ex.
Aga in, Asian c entres seem to b e the
foc us of g row th, even in turbulent times,
though Duba i continues to a ttrac t
interest. As one respond ent put it:
New York, Lond on, and Duba i are
fa irly aggressive in business
deve lop ment. Hong Kong has
also b een e ffective at it and will
bene fit no ma tter how or what
Sha ngha i or Beijing doe s.
Hong Kong b ased investment b anker
Other respo nses me ntion the pe rc ep tion
of Lond on s ag ing infrastruc ture, and
d iminishing fo c us on fostering a
c om petitive business environment . A
rep resenta tive exam p le is:
Lond on rema ins an imp ortant
c ap ital but I have serious
co nce rns ab out ta x regulatory
c reep , poo r transpo rt
infrastructure and slow p lanning
decision-making
Lond on b ased retail banking
executive
While Lond on doe s receive its sha re o f
c riticism from respond ents, it is not able
tha t the c ent re co nsistently reta ins its
po sition a t the to p o f nine out o f ten GFCI
sub -ind ice s. Lond on a lso ha s both the
histo ry and volume o f financ ial ind ustries,
and a suffic iently d iverse num be r of
streng ths to off-set short-term neg a tive
rea c tion within the industry.
Reg ulatory burde n co ntinues to a ttrac t
at ten tion from GFCI respond ents, with
numerous c om me nts c riticising the
co ntinued unc ertainty abo ut cha nges in
reg ulation a nd ta x law s not just w ithin the
UK but in many d eve loped c ountries.
Inde ed seve ral respo nde nts blam e
reg ulators in many lea ding financ ial
c entres for som e o f the c urrent p rob lems.
One a rgum ent p ut forwa rd is that the
reg ulatory autho rities have failed to
ma intain ad eq uate c omp etition in the
market plac e a nd c ompa nies have
bec ome too big a nd too powe rful to fai l.
If a c om pa ny is too b ig to fail then the
reg ulator loo ses po we r over that
com pa ny the comp any has bec ome
too big to regulate .
There is a lso c ritic ism tha t som e o f the
internat ional reg ulations are p ro-c yclica l
and ac t to e xag gerate the business
cycle:
Banks are b eing told o n the one
hand to extend mo re c redit, and
on the othe r hand the Basel II and
IFRS regulat ions a re enc ourag ing
ba nks not to lend a s they ha ve to
ma intain and streng then their
c ap ital ratios.
Zuric h ba sed risk ma na ge r
The foc us on the imp ortanc e of
reg ulatory cha nge s and restrictions
am ong respo nde nts to G FCI has
heightene d d ram at ica lly in light of the
glob a l fina nc ial crisis with a trend in
co mme nts pointing o ut that the best
regula tions eve n in turbulent t imes
are those g enerated b y governmentin coo pe rat ion with lea de rs in the
financial sector.
There a re, of course, other fac to rs tha t
c ontribute to the suc c ess and failure o f
financ ial ce ntres, som e o f which are
unde r the c ontrol of the sec tor and
go vernments tha t wish to enc ourag e it,
and many of which a re not:
The Eng lish lang ua ge and
time-zone fac tors c ontinue to
favo ur Lond on. The w ea ker
po und m ay he lp. Fisc al
and monetary policy m ay
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improve with a c hange of
government.
Jersey b ased private ba nker
Respo nses to the G FCI give a strong
indica tion of co nnectivity how w ell
co nnecte d a financ ial c entre is with
other ce ntres. Respond ents a re asked t o
rat e o nly those c entres with which they
are fa milia r. It follows tha t the numb er of
assessme nts given to a c entre b y p eo ple
not b ased there, indica te how well that
c ent re is known b y (and possibly visited
by) non-residents at least those infinanc ial service s. Chart 6 below show s
the percentag e of p eople not ba sed in a
ce ntre who rated it:
As might be expec ted , the two globa l
c entres Lond on and New York are mo re
familia r to fo reigners tha n othe r c ent res.
There are howe ver, a fe w surprises lower
dow n the rankings. Dublin is in 4th p lac e,
Paris is in 7th and Dub a i is in 13th. The se
centres ap pea r better connec ted than
the ir GFCI ra ting w ould suggest. Pa rt of
this effect m ay b e explained by
ge og rap hica l proximity to ce ntres whe re
large numb ers of respo nde nts are b ased ,
but c onne c tivity is c learly imp ortant a nd
these results p roba bly bo de we ll for the
well c onnec ted ce ntres and we w ill trac kthe ir futu re progress with inte rest.
30
The Glob a l Fina nc ial Centres Ind ex
Chart 6
Top 20 Centres
most rate d b y
Respondents
not b ased there
GFCI rating >
City>
0.0 0.2 0.4 0.6 0.8 1.0
Isle of M an
Cayman Islands
Guernsey
Tokyo
Brussels
Chicago
Amsterdam
Dubai
Edinburgh
Jersey
Frankfurt
Luxembourg
Singapore
Paris
Geneva
Zuric h
Dublin
Hong Kong
New York
London
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31
The Glob a l Financ ia l Centres Index
Of the 57 instrumenta l fac to rs used in the
GFCI 5 mo del the top 20 in terms of
correlation7 with the final index are:
This list is fa irly similar to p revio us versions
of the GFCI. This similarity ind ica tes tha t
the key me asures of c om pe titivene ss
have rem a ined fa irly co nsisten t. The m ore
ge neral me asures of we ll pe rforming
c ities (e.g . The World Com petitivene ss
Sc orebo ard, The Globa l Com pe titiveness
Inde x, The Com pe titive AlternativesSurvey and the Business Environm ent
me asure) a re c losely co rrelate d t o the
GFCI as might b e exp ec ted suc c essful
c ities tend to b e strong o n mo st
measures.
It is interesting t o e xam ine p a tte rns in
c hang es to instrume nta l fac tors
(rem em be ring tha t mo st fac tors are
upd ated annually and that only 22 of the
57 fac tors have bee n upd ated since
GFCI 4).
In suc h turbulent c ond itions, the b igg est
c hang es in the instrume nta l fac tors
values are tho se d irec tly relate to t rad ing.
Examining the c ap italization of Stoc k
Excha nge s, the ave rag e d ec line for the
excha nge s mo nitored by the World
Fed eration of Excha nge s (and loca ted
within G FCI c en tres) is in excess o f 47%. It
is unsurprising tha t sinc e GFCI 4 m ost
ma rkets ha ve shown large losses. Theb iggest losses are in Europe an m arkets
out o f the te n wo rst d rop s in
c ap italiza tion, six a re in Europea n b ased
stoc k exc hang es.
The vo lumes for sha re trad ing, investment
funds and bo nds have a ll increased
(ma ny quite sha rply) whic h is fa irly typ ica l
in times of vo latility. The va lues of b oth
share trad ing a nd b ond trad ing ha ve
a lso inc reased signific antly in ab solute
terms. How eve r, when a d justed for the
increa se in volume, the va lue of sha re
trad ing ha s d ropp ed by almost 27%. The
value of b ond trad ing ha s increased by
6. Instrumenta l Fac tors
Table 19
Top 20
Instrumental
Fac to rs by
Correlation
with GFCI 5
Instrumental Factor R2 with GFCI 5
World Competitiveness Sc oreboa rd 0.555
Globa l Competitiveness Index 0.547
Financ ia l Ma rkets Index 0.534
Competitive Alterna tives Survey 0.524
Priva te Equity Environment 0.521
Business Environm en t 0.480
Cap ita l Ac c ess Index 0.452
Index of Ec onomic Freedom 0.449Ec ono mic Freed om of the World 0.423
Globa l Offic e Oc c upanc y Costs 0.405
European Cities Monitor 0.401
The Ac c ess Opportunities Index Business 0.396
E-Read iness Sc ore 0.381
Ease of Doing Business Inde x 0.374
City Brands Index 0.369
Exec utive MBA Globa l Rankings 0.367
Corrup tion Perc ep tion Index 0.362
Opac ity Index 0.332
Super Growth Companies 0.321
JLL Rea l Esta te Transparenc y Index 0.297
7 R2, a co mmonly used
measure of correlation, is
used h ere. It should b e
noted that co rrelation is
not a reflection of
weighting - no weighting
of instrumental factors isused in the GFCI model.
Correlation is a measure
of the extent to which the
GFCI rankings are
explained by eac h
instrumental factor.
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ove r 20%, pe rhap s show ing a transfer
awa y from e quity to bond s that a re
perc eive d as less risky.
Ano the r instrumenta l fac to r show ing
signific ant c ha ng es since GFCI 4 is
Ec ono mic Sentiment, an inde x com piled
by the Europ ea n Com mission to g aug e
the leve l of b usiness and c onsumer
c onfid enc e w ithin the EU. When GFCI 4
fac tors we re up da ted in mid 2008 there
wa s still a lot o f ta lk in the me dia that
Europ e c ould a void a d ee p rec ession.
Since GFCI 4 there ha s bee n a sha rpdec line in Europe (more tha n 25% on
av erag e). This reflec ts the g loom y outloo k
for Europe s ec ono my it is now being
pred icted tha t Europ e is hea ding fo r a
de ep er and longer rec ession than ma ny
othe r pa rts of the wo rld.
There ha s be en a wide sprea d increase in
Op erat iona l Risk as me asured b y the
Ec ono mist Intelligenc e Unit. Amo ng st the
ma rkets whe re op erat iona l risk has
inc rea sed by m ore than 10% are ma ny
Europea n c ount ries. Finland and Ireland
ha ve shown t he la rgest rises in this
me asure o f risk but c oun tries suc h a s
Portug a l, Belgium, the Ne the rland s,
Swe den, Denma rk and Switzerland ha ve
also shown sub sta ntia l rises. Outside
Europe, Austra lia and Sout h Korea a re
am ong the c ountries where the risk rat ing
has inc rea sed signific ant ly. Op erational
Risk for Cana da and the USA ha s
rem ained relatively sta ble.
There ha s bee n a n increa se in leve ls of
co rruption ac c ording to the Co rruption
Perc ep tions Inde x. Interestingly, the UKs
sc ore ha s increa sed the m ost in ab solute
terms althoug h it should b e no ted tha t
the UK is in 16th p lac e o vera ll out of 180,
ahe ad of the USA a nd Japa n (joint 18th),
and a numbe r of other lead ing c ountries.
Perceived c orrup tion ha s a lso inc reased
ma rkedly in Norway (no w 14th). Other
sign ific ant inc rea ses are in Russia (147th),
the Philipp ines (141st) a nd Italy (55th).
Countries where things have c hang ed for
the b ett er are Indo nesia (126th), Sout h
Korea (40th), Poland (58th), Qa ta r (28th),
and Bahrain (43
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