GLOBAL FINANCIAL CENTRES 7

GLOBALFINANCIAL CENTRES 7

en

Global Financial Centres

This is the seventh biannual GlobalFinancial Centres report, commissionedand published by the City of London fromZ/Yen Group Ltd since March 2007. It hasagain taken the pulse and assessed thechanging perspectives of marketpractitioners and regulators on whatattracts them to locate in differentinternational financial centres across theworld. This report also adopts a newapproach to profiling different types ofcentres along new dimensions ofcompetitiveness that reflect how well-connected they are in the globalfinancial architecture, and howdiversified their financial services are.

The reports provide a valuable basis fornew work to be commissioned by the Cityof London to look more deeply at thefactors driving the connectedness ofestablished and emerging globalfinancial centres.

Our job is to establish evidence forpolicies that will lead the City forwardand we will be building on the valuableinsights that this area of research hasgiven us so far to look much more closelyin future at the details of the competitiveand cooperative factors.

What exactly affects the success ofestablished and rapidly emerging majorfinancial centres is a key question forLondon and the wider UK-based financialservices industry and we are especiallyinterested in how the leading centres willrespond to the new challenges - forexample the growing importance of Asiaand the changes in internationalsupervision designed to minimise theeffect of future crises. Whilst this willtherefore be the last GFC report that wepublish, we will be shortly announcing anew research programme that takes the

issues forward by examining them ingreater depth.

It is important to note that responses forthe current GFC report relate to theperiod to end 2009, a time of greatvolatility for the global economy as itbegan to emerge from deep recession. Itis not surprising therefore to see theimprovement in respondents’ optimismcompared with the views of respondentssix months and particularly one yearbefore. Their optimism is still muted by theprospect of the challenges to be facedover the next few years in reaction to thefinancial crisis and any reading of relativerankings needs to take account of a verylarge uncertainty factor.

That said, the top-ranking centres haveshown a much greater degree of stabilityin their perceived competitiveness topractitioners and are responding morerobustly to the economic recovery.Respondents have assessed the twoleading global centres of London andNew York as level on ratings for the firsttime – a fact which bears out our viewthat these two are the ‘twin sister-cities ofworld finance’. The evidence of thesurvey points to the continued highratings for these two leading globalcentres and reflects the multi-facettednature of their competitive advantage.They both have rich institutional andcommunication linkages across theworld. Respondents continue to believethat these two leading centres benefitfrom good levels of mutual co-operation -and as Chairman of Policy I see this in ourgood working relationships with New York.

There are particular challenges for us toaddress this year and they are illuminatedby this latest report. For the first time infour years, London has had more

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Foreword


Stuart Fraser

Chairman, Policy and Resources Committee, City of London

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questions raised by respondents inrelation to the quality of its businessenvironment, its access to skilled peopleand its infrastructure, than have beenraised for New York. We cannot becomplacent about this. Evidence fromother commissioned research is that thecomparative tax and regulation ‘offer’ ofLondon as the leading global financialcentre in Europe needs to be carefullyconsidered by policymakers in the UKand in the EU. Proposed measures toaddress fiscal deficits and to put in placenew frameworks for regulation andsupervision of financial services need tobe transparent and commensurate withthe objectives sought. There areimportant questions for us to explore withpolicymakers to ensure that a progressivereduction in fiscal deficits retains theconfidence in the UK economy as acompetitive location for an internationalfinancial services sector that last yearcontributed £60billion in taxes, 12% of thetotal UK tax take.

Retaining a fair, consistent andpredictable tax policy and supervisoryenvironment is critical to retainingLondon’s role as a global centre for alarge range of financial services and thisalso requires our retaining open marketsfor the UK and our encouraging themglobally. It is significant in this connectionthat Hong Kong and Singapore retaintheir ratings as the leading financialcentres in Asia in the current report, butthat there is continuing uncertainty aboutsecond-tier Asian centres.

The research underpinning the GFCreports has provided a unique record ofpractitioner perspectives through theglobal boom and the finance-ledeconomic crisis. Z/Yen have monitoredthe perspectives of practitioners acrossthe globe as the effects of unsustainableglobal capital-imbalances and thepursuit of risk taking by many, if not all,global integrated investment banks ledto a reliance on sophisticated productsdesigned to distribute risk that turned outin the end to have mediated systemicfinancial collapse.

We have seen concerted central bankinterventions and government stimulusprogrammes of unprecedented scale.Their success in preventing a plunge intoeconomic depression is a testament tothe importance of internationalinstitutions and of intergovernmentalcooperation. There is an equal challengefor the recovery phase. To resist thoseprotectionist sentiments that would makethe problem of global recovery muchworse, we need to see an establishedimprovement in the economies of Europeand the US to meet the stronger recoveryin Asia. We need to secure trust in theoperation of financial institutions, andestablish the appropriate taxation,regulation and supervision to bothencourage recovery and to protectagainst future crises.

Stuart FraserLondon

March 2010

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The City of London’s Global FinancialCentres Index (GFCI) was first produced bythe Z/Yen Group in March 2007, to examinethe major financial centres globally in termsof competitiveness, using a set of ratingsand rankings. The GFCI has subsequentlybeen updated every six months and theincrease in the number of respondents andadditional data in successive editions hasenabled us to highlight the changingpriorities and concerns of financeprofessionals across a period of greateconomic instability.

This report - Global Financial Centres 7 (GFC 7) - builds on the approach adoptedin GFCI 6, with its increased emphasis on the inter-connectedness of centres, to allowa more in-depth examination of theunderpinnings of competitiveness. Whilst theratings element is retained, there is a newapproach to profiling major centres in termsof their linkages within the global financialarchitecture and the extent and quality ofthe services that they offer. This combinedapproach is reflected in the change ofname to ‘Global Financial Centres’.

Background

The GFC approach provides profiles,ratings and rankings for 75 financialcentres, drawing on two separate sourcesof data – instrumental factors (externalindices) and responses to an online survey.

■ Instrumental factors: Previous researchindicates that there are many factorsthat combine to make a financial centrecompetitive. These can be grouped intofive over-arching ‘areas ofcompetitiveness’ – People, BusinessEnvironment, Infrastructure, Market Access and GeneralCompetitiveness. Evidence of a centre’sperformance in these areas is drawnfrom a range of external measures. Forexample, evidence about a fair and justbusiness environment is drawn from acorruption perception index and anopacity index. Sixty-four factors havebeen used in GFC 7, of which 24 havebeen updated since GFCI 6.

■ Financial centre assessments: These areprovided by responses to an ongoingonline questionnaire completed byinternational financial servicesprofessionals. Respondents are asked to

rate those centres with which they arefamiliar and to answer a number ofquestions relating to their perceptions ofcompetitiveness. Since GFCI 6, a total of507 new respondents have filled in thequestionnaire, providing 7,161 newassessments from financial servicesrespondents globally across the periodJuly 2009 to December 2009. Overall,32,170 financial centre assessments from1,690 financial services professionalswere used to compute GFC 7, with olderassessments discounted according toage.

Full details of the methodology behind GFC 7 can be found atwww.cityoflondon.gov.uk/gfci. The ratingsand rankings are, as previously, calculatedusing a ‘factor assessment model’, whichcombines the instrumental factors andquestionnaire assessments. The full list ofthe 75 financial centres rated and profiledin GFC 7 is shown on page 28.

The ratings and rankings approach hasbeen used to track financial servicescompetitiveness over time, both in termsof individual centres’ performance, and

Introduction


the wider issues of concern toprofessionals in the field. In the light of therecent economic turmoil globally, theextensive data collected over the lastthree years allows for a deeper analysis ofthe aspects that make centrescompetitive in different markets, fromglobal leaders to local specialists.

The data now held includes over 51,000assessments from more than 3,000respondents. The dataset used to modelGFC 7 includes over 8.5 million data-points.

This allows us to create financial centreprofiles. Generating a taxonomy is oftenlikely to be a difficult and contentiousendeavour. There are many alternativemethods and many possible ways ofdefining different profiles of financialcentres. The key requirement here was tobase the profiling on hard data from theresearch rather than introduce our ownsubjective opinions.

Starting with clustering and correlationanalysis of the different factors we haveidentified three key measures (axes) thatdetermine a financial centre’s profilealong different dimensions ofcompetitiveness:

■ ‘Connectivity’ – this represents how wellknown a centre is around the world andhow connected it is to other financialcentres. The measure draws on thequestionnaire data, wherebyrespondents are asked to assess onlythose centres with which they arepersonally familiar. A centre’sconnectivity is assessed using acombination of ‘inbound’ assessmentlocations (the number of locations fromwhich a particular centre receivesassessments) and ‘outbound’ assessmentlocations (the number of other centreswhich respondents from a particularcentre assess). A 2/3 weighting was givento inbound assessments. If the weightedratings for a centre were provided byover 75% of other centres, the centre was

deemed to be ‘Global’. If the ratingswere over 50%, this centre was deemedto be ‘Transnational’.

■ ‘Diversity’– the breadth of industrysectors that flourish in a financial centre.We consider this ‘richness’ of the businessenvironment to be similar to biodiversityand use a combination of biodiversityindices (calculated on the 64 instrumentalfactors for each centre) to measure this. A high score on this measure means thata centre is well diversified; conversely alow score reflects a less rich financialservices diversity.

■ ‘Speciality’– the quality and depth ofcertain industry sectors in a centre, suchas asset management, investmentbanking and insurance. A centre’sperformance on this dimension iscalculated from the difference betweenthe GFCI rating and the industry sectorratings. If a centre is well above its overallGFCI rating in the industry sectors, it isprofiled as a specialist.

Here, ‘Diversity’ (Breadth) and ‘Speciality’(Depth) are combined on one axis tocreate a two dimensional table offinancial centre profiles. The 75 centresare each assigned to a profile on the basisof a set of rules for the three measures:how well connected a centre is, howbroad its services are, and howspecialised it is. The rating for each centreand the range for each profile categoryare given in brackets for reference.

This profile ‘map’ shows the eight ‘GlobalLeaders’ (in the top left of the table)which have both broad and deepfinancial services activities and areconnected with many other financialcentres. This list includes London, NewYork, Hong Kong and Singapore, centresthat have been identified as the leadingglobal financial centres in previouseditions of the GFCI. Paris and SanFrancisco are ‘Global Diversified’ centresas they are equally well connected butdo not exhibit the same depth in different

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Table 1Financial CentreProfiles

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Broad & Deep

Global LeadersGFC 7 Range:

775 - 660

Chicago (678)Frankfurt (660)Hong Kong (739)London (775)New York (775)Singapore (733)Toronto (667)Zurich (677)

Established Established TransnationalGFC 7 Range:

692 - 595

Boston (652)Edinburgh (615)Melbourne (617)Stockholm (595)Sydney (670)Tokyo (692)Vancouver (623)

Established PlayersGFC 7 Range:

647 - 566

Johannesburg (566)Washington D.C. (647)

Relatively Broad

Global Diversified GFC 7 Range:

651 - 642

Paris (642)San Francisco (651)

Transnational TransnationalDiversifiedGFC 7 Range:

617 - 579

Amsterdam (604)Copenhagen (587)Dublin (612)Madrid (581)Milan (579)Montreal (617)Munich (610)Seoul (615)Vienna (583)

Local DiversifiedGFC 7 Range:

606 - 480

Athens (480)Brussels (591)Helsinki (573)Lisbon (529)Mexico City (563)Osaka (606)Oslo (581)Sao Paulo (590)Warsaw (520)

Relatively Deep

Global SpecialistsGFC 7 Range:

671 - 643

Geneva (671)Luxembourg (643)

Transnational TransnationalSpecialistsGFC 7 Range:

670 - 568

Bahrain (587)British Virgin Islands (596)Cayman Islands (615)Gibraltar (568)Guernsey (632)Hamilton (612)Isle of Man (618)Jersey (643)Shenzhen (670)Taipei (638)

Local NodesGFC 7 Range:

600 - 535

Bahamas (557)Buenos Aires (535)Jakarta (535)Malta (565)Manila (527)Mauritius (552)Monaco (578)Qatar (600)Rio de Janeiro (566)Wellington (582

Emerging

Global ContendersGFC 7 Range:

668 - 516

Beijing (651)Dubai (618)Moscow (516)Shanghai (668)

Transnational TransnationalContendersGFC 7 Range:

571 - 549

Bangkok (549)Kuala Lumpur (571)Mumbai (562)

Evolving CentresGFC 7 Range:

574 - 447

Budapest (481)Glasgow (570)Istanbul (470)Prague (543)Reykjavik (447)Riyadh (507)Rome (574)St. Petersburg (501)Tallinn (488)

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activities to be considered ‘GlobalLeaders’. Similarly, Geneva andLuxembourg are ‘Global Specialists’(specialising primarily in AssetManagement) but do not havesufficiently broad ranges of financialservices activities to be ‘Global Leaders’.The four ‘Global Contenders’ of Beijing,Dubai, Moscow and Shanghai areprofiled as global because there iswidespread awareness of their activities,but their financial services are notcurrently sufficiently broad and deep tobe considered leaders. Chart 1 shows theprofiles mapped against the GFC 7ranges.

The profiles shown in Table 1 are used in our geographical analyses later in this report.

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Chart 1FinancialCentre ProfilesMappedagainst GFC 7Ranges

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The full set of GFC 7 ratings and rankingsare shown in Table 11. We believe thatthe financial centre profiles are a veryimportant addition to the GFC 7 report.However, the changes in individualcentre ratings remain important andallow us to identify certain headlinechanges: ■ Greater confidence amongst financialservices professionals, shown by a rise inassessments;■ London and New York are now level inthe ratings for the first time. Respondentscontinue to believe that these centresexhibit good levels of co-operation; ■ London has dropped 15 points in theratings, from 790 to 775 points - thesecond largest drop in scores. New Yorkhas overtaken London in three of the sub-indices: Business Environment, Peopleand Infrastructure;■ Hong Kong and Singapore still lead inAsia but there is continuing uncertaintyabout secondary Asian centres.

GFC 7 shows that of the 75 centres rated,71 centres have received higher ratingsand only four have seen decreases intheir ratings. GFCI 5 demonstrated thatthe financial crisis had createduncertainty and a significant reduction inconfidence, with an unprecedented fallin the ratings for every centre. There wasalso a ‘flight to safety’ with the ratings ofthe top centres falling less than those ofthe bottom centres. GFCI 6 saw a rise inmany ratings potentially demonstratingthe start of a return in confidence. Thisseventh report confirms that respondentsto the online survey are more confidentabout the future of financial services thanthey have been for over a year.

Chart 2 demonstrates this particularly well– the three month average assessmentsof the top centres are now at the highestlevels since GFCI started:

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The Main Headlines of GFC 7


Chart 23 Month MovingAverageAssessments forthe Top 25Centres

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GFC 7 shows a general rise in ratings butthis rise is variable, with the change inratings varying from minus 25 points(Shenzhen) to plus 64 (Warsaw), with anaverage movement of plus 23 points. Thelargest rises in ratings were achievedmainly by the centres at the lower end ofthe index with Warsaw, Moscow, Lisbonand Budapest all seeing rises in excess of50 points, to regain lost ground, withdrops in score of 53, 58, 30 and 80 pointsrespectively over the last two editions of GFCI.

For the first time in the GFCI, London andNew York are equal first, both with 775 points on a scale of 1 to 1,000, as aresult of London’s score falling 15 points. The gap between the two centres hasconsistently been narrow, ranging from 5 to 19 points over the previous six editionsof GFCI, and Chart 3 demonstrates theirrecent convergence.

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Chart 3Top FourCentres GFCIRatings OverTime

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New YorkLondon

Chart 3 shows that London and New Yorkstill lead the field although the gapbetween them and the third placedcentre has been steadily cut from 81 points a year ago and 45 points sixmonths ago to just 36 points now. Themain concerns voiced about London’scompetitiveness are the fear of aregulatory backlash that limits thefreedom of financial institutions and thelevels of corporate and personaltaxation that may drive high earnersabroad. New regulatory arrangementsare also a concern in New York, and theloss of skilled personnel to the industry is a

concern of respondents in all the leading centres.

We have long argued that therelationship between London and NewYork is mutually supportive and a gain for one does not mean a loss for theother. Whilst many industry professionalsstill see a great deal of competition,policymakers appear to recognise thatworking together on certain elements ofregulatory reform is likely to enhance thecompetitiveness of both centres.Finance professionals, however, believe that common regulation

between North America and Europe willbe extremely difficult to negotiate.

The GFCI questionnaire asks respondentswhich financial centres they believe aresuffering most as a result of the currentfinancial crisis. New York and Londonhead the list, receiving substantially morementions than any other centre:

This finding backs up the GFCI ratings.Respondents generally feel that the twolong-established global centres havebeen impacted on the most by theeconomic crisis. This is reflected in GFC 7;London has fallen by 15 points in theratings and although New York has seen arating increase of 1 point, this is againstan average increase of 23 points. HongKong received fewer than 20% of the

mentions of New York while Singaporereceived fewer than 10 mentions overall.

Related to this, the GFCI questionnairealso asks what the most significant risks tocompetitiveness posed by the financialcrisis are. The most commonly identifiedrisks are shown in Table 3:


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Table 2The Five CentresBelieved to beSuffering Mostfrom the Crisis

Financial Centre Number of Mentions since GFCI 6

New York 110

London 89

Dubai 51

Reykjavik 37

Cayman Islands 29


Risk Number of Mentions since GFCI 6

Regulatory ‘Kneejerk’ / Backlash 42

Credit Risk for Financial Institutions 29

Recession / Inflation 21

Increased Taxation 19

Unemployment / Loss of Skills & Experience 15

The fear of regulatory overload leads thefield here and is backed up by responsesto a further question in the GFCIquestionnaire about the most importantfactors of competitiveness. The numberof times that each area is mentioned issummarised in Table 4:

Clearly the Business Environment isviewed as a key area - it is actuallymentioned in responses more often thanthe next two areas, People andInfrastructure, combined. This is areflection of the regulatory reaction tothe financial crisis but also reflectsconcerns over taxation. One of thethemes that emerges from the responsesis the need for predictability and stabilityof regulation.

One effect of London’s relative decline incompetitiveness is that other leadingEuropean financial centres are catchingup with London. Frankfurt was 141 pointsbehind London six months ago and is now115 behind while Zurich was 114 pointsbehind and is now just 98 below London.Similarly, London’s lead over Paris andGeneva is less significant than it was sixmonths ago in GFCI 6.

Another story to emerge from GFC 7 is thecontinuing development of the Asianfinancial centres. Overall the rise in scoresof the Asian centres has continued,although it is not as dramatic as the

developments seen in GFCI 6. Hong Kongcontinues to thrive and has risen by 10 points since GFCI 6, maintaining itsposition in 3rd place just ahead ofSingapore. Hong Kong and Singaporecontinue to be firmly established as theleading Asian centres. Tokyo, which, withthe exception of GFCI 5, has alwaysappeared in the top ten, has risen twoplaces to 5th, and is the 3rd highestranked Asian centre. There is somevariability, however, about other Asiancentres. GFCI 6 saw Shenzhen appear inthe top 5 but GFC 7 sees it falling to 9thplace and showing the largest drop inpoints in the survey. Shanghai has fallenone place to 11th although gaining 13 points, whilst Beijing and Seoul makeconsiderable progress up the ranking to 15th and 28th respectively, bothshowing substantial gains in points. It isimportant therefore to pay attention toboth the short term performance of thesecentres and their performance over thelonger term.

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Table 4Main Areas ofCompetitiveness

Area of Competitiveness Number of mentions Main concerns raised

by respondents

Business Environment 67 Regulation, taxation and

ease of doing business

People 44 Quality and availability of staff,

labour market flexibility

Infrastructure 22 Business infrastructure

General Competitiveness 21 General economic factors,

fear of recession

Market Access 15 Dilution of clustering of professionals

and institutions

European financial centres have hadmixed fortunes since GFCI 6. Table 5shows the top 15 European financialcentres, all of which have increased theirratings since GFCI 6 with the exception ofLondon (-15) and Dublin (-1):

Zurich has slipped one place in therankings and Geneva has gained oneplace; both remain in the top ten. Bothcentres remain strong in assetmanagement and private banking andreceive strong support from respondentsin the offshore centres and from London.

All the major European centres display agood degree of consistency across theindustry sub-indices and the area ofcompetitiveness sub-indices. London isthe leading financial centre in Europe butFrankfurt, Zurich and Paris also performwell in all areas – Zurich for exampleaverages 8th place across all sector sub-indices with Frankfurt not far behind(further details of the sub-indices areshown on page 30).

From a profiling perspective, London,Zurich and Frankfurt are seen as ‘GlobalLeaders’. They are well known globally,and have a rich environment of different

types of financial services institutions.Geneva and Luxembourg, whilst beingwell connected, are seen to be highquality specialists in the field of AssetManagement, rather than offering a fullydiversified service, and are henceprofiled as ‘Global Specialists’. Paris is aGlobal Centre and has very stronginternational connections. It does not,however, exhibit sufficient depth infinancial services to be considered aGlobal Leader; we profile it as a GlobalDiversified Centre. Moscow is a ‘GlobalContender’, exhibiting stronginternational connections and manyrespondents (especially from Asia) haveknowledge of the centre. Moscow doesnot yet have sufficient depth or breadthas a financial centre to be considered aspecialist or diversified centre:

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European Financial Centres


Table 5Top 15 EuropeanCentres

Centre GFC 7 Rating GFC 7 Rank Change in Rating Change in Rank

since GFCI 6 since GFCI 6

London 775 1 -15 0

Zurich 677 7 1 -1

Geneva 671 8 11 1

Frankfurt 660 13 11 -1

Luxembourg 643 19 6 -3

Paris 642 20 12 -1

Edinburgh 615 29 10 -2

Dublin 612 31 -1 -9

Munich 610 33 22 -3

Amsterdam 604 35 18 -4

Stockholm 595 38 26 -2

Brussels 591 39 23 -2

Copenhagen 587 =41 27 0

Vienna 583 43 28 3

Madrid 581 =45 21 -5

The remaining centres in the Europeantop 15 are classed as either Established orDiversified Transnational centres. The oneexception to this being Brussels which iscategorised as a ‘Local Diversified’financial centre due to its lowerconnectivity rating that the other leaderssuch as Zurich, Geneva, Frankfurt andParis, although it is close to the boundarybetween Local and Transnational.

Examining the assessments given to eachmajor centre is a useful means ofassessing the relative strength andweakness of their reputations in differentregions. It is important to note that

assessments given to a centre by people based there are excluded fromthe GFC 7 model to eliminate ‘homepreference’.

In the following charts, the differencebetween overall mean assessments by region is shown. The additional vertical line shows the mean if allassessments from the whole of the homeregion are removed.

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Chart 4Profile of European Centres

Broad & Deep Relatively Broad Relatively Deep Emerging

FrankfurtLondonZurich

Paris GenevaLuxembourg

Moscow

EstablishedTransnational

TransnationalDiversified

TransnationalSpecialists

TransnationalContenders

Established Players Local Diversified Local Nodes Evolving Centres

EdinburghStockholm

AmsterdamCopenhagen

DublinMadridMilan

MunichSeoul

Vienna

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– AthensBrusselsHelsinkiLisbon

Warsaw

Monaco BudapestGlasgowIstanbulPrague

ReykjavikRome

St. PetersburgTallinn

Global

Transnational

Local

Global Leaders Global Diversified Global Specialists Global Contenders

London’s overall average assessmentwas 807. The chart on London indicatesthat London is well regarded in Europebut less well rated than average by theoffshore centres; North American andAsian respondents are fairly close to the mean.

Zurich’s overall average assessment was704. Zurich’s assessments show a morepronounced pattern than London withthe Asian based respondents, who havea more negative perception of Zurich.European and North Americanrespondents are positive against the mean.


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Chart 5Assessments by Region –Difference fromthe Mean –London

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Chart 6Assessments by Region –Difference fromthe Mean –Zurich


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Frankfurt’s overall average assessmentwas 679. In a similar pattern to London,Frankfurt is given lower assessments by people based in offshore locationsthan elsewhere.


Chart 7Assessments by Region –Difference fromthe Mean –Frankfurt


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The North American Centres have allperformed reasonably well in GFC 7 andall have increased their ratings from GFCI 6. As reported, New York has beenimpacted on the most by the financialcrisis and has only risen by one point,while the Canadian centres have seen a greater increase in scores than the US centres:

Chicago retains its position in the GFC 7top ten and remains the 2nd NorthAmerican financial centre, after NewYork. Chicago is not just strong inderivatives trading, for which it isprobably best known, but is a real ‘all-rounder’: it is strong in all areas, and in the top ten in all industry and area ofcompetitiveness sub-indices. Chicago israted highly by respondents based in New York but, surprisingly, very fewother respondents in North Americaassessed Chicago.

Toronto has risen 20 points in the GFC 7ratings. It is the 3rd North Americanfinancial centre and the clear leader inCanada. Toronto performs well in thePeople sub-index, where it is in 6th place,and in the Asset Management andProfessional Services sub-indices, where it is 9th place in both categories.Calgary was recently added as a newfinancial centre to our online survey – it did not receive sufficient ratings to beincluded here.

New York, Chicago and Toronto all fit theprofile of Global Leaders – they are welldiversified, well connected and havestrength across the sectors. San Franciscois profiled here as a Global DiversifiedCentre – it is well connected and serves adiversified industry but does not as yetshow sufficient depth in enough sectorsto be classified as a Global Leader.

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North American Financial Centres

Table 6Top NorthAmericanCentres in GFC 7



New York 775 1 1 1

Chicago 678 6 17 2

Toronto 667 12 20 1

Boston 652 14 18 3

San Francisco 651 16 17 2

Washington D.C. 647 17 17 3

Vancouver 623 23 34 6

Montreal 617 26 31 6


Global

Transnational

Local

Boston and Vancouver have both a broadand deep presence in financial services butare less well-connected with other centresaround the world – they are ‘EstablishedTransnational’ centres. Montreal is not yetdeeply enough involved in some industrysectors to be an ‘Established Transnational’centre. Washington is, perhaps surprisingly,an ‘Established Player’; on the measures ofconnectivity used for profiling, Washingtonis seen to be more of a local player than aninternational one, receiving support fromsome parts of North America (and Asia) but

not from London, Europe or New York.

The difference between regionalassessments is again examined here forsome of the major centres, to see in whichregions centres are most favourablyregarded.

The overall average assessment for NewYork is 804. New York benefits from strongNorth American support but the offshorecentres assess the city less positively.Europeans are close to the overall mean.

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Chart 8 Profile of North American Centres

Global Leaders Global Diversified Global Specialists Global ContendersChicagoNew YorkToronto

San Francisco – –






BostonVancouver

Montreal – –

Washington D.C. – – –

Chart 9Assessments by Region –Difference fromthe Mean – New York


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Offshore 19%

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Europe 34%

Asia 35%

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Chicago has an overall averageassessment of 698. Chicago shows asimilar pattern to New York with regard tothe Offshore and North Americanassessments, the former being lower thanaverage, and the latter higher. Chicagois rated highly by respondents based inNew York but surprisingly very few other

North American respondents assessedChicago. A high level of response from Asian respondents is notablealthough the assessments given werelower than average.

Toronto is the only North American centre to receive a higher than averagescore from the offshore centres; it is alsowell regarded by respondents based in London, although less so by the rest of Europe.

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Chart 10Assessments by Region –Difference fromthe Mean –Chicago


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Asia 39%

Mean without region

Chart 11Assessments by Region –Difference fromthe Mean –Toronto

With the exception of Shenzhen, all Asiancentres have shown an improvement inthe GFC 7 ratings, which for many comeson top of a substantial increase in scoresin GFCI 6.

18

Asian Financial Centres


Table 7Asian Centres in GFC 7



Hong Kong 739 3 10 0

Singapore 733 4 14 0

Tokyo 692 5 18 2

Shenzhen 670 =9 -25 -4

Shanghai 668 11 13 -1

Beijing 651 =15 38 8

Taipei 638 21 29 4

Dubai 618 =24 1 -3

Seoul 615 =28 39 7

Osaka 606 34 41 4

Qatar 600 36 42 8

Bahrain 587 =41 29 2

Kuala Lumpur 571 51 14 -6

Mumbai 562 58 20 -5

Riyadh 507 69 50 -1

Both Hong Kong and Singapore havecontinued to show a stable and strongperformance. They are in 3rd and 4th places in all industry sector andcompetitiveness sub-indices, with the oneexception of Singapore’s 5th place in theInsurance sub-index. Tokyo, which, withthe exception of GFCI 5, has alwaysappeared in the top ten, has risen twoplaces to 5th, and is the third highestranked Asian centre. It is a leadingfinancial centre that performs well inmost areas, placing it in the top 10 in all

sub-indices. Shanghai currently sits in 11thplace and Beijing has risen by 38 pointssince GFCI 6 to 15th place. Shanghaidoes particularly well in the Banking,Asset Management and Insurance sub-indices. Beijing does well in theInsurance sub-index where it is in 7thplace. Seoul, with an increase of 39 pointshas risen seven places in the rankings to28th.Other notable improvements arerecorded by Taipei and Osaka.

Global

Transnational

Local

Hong Kong and Singapore have clearprofiles as Global Leaders. Beijing, Dubaiand Shanghai are Global Contenders atpresent, in that they are all well-connected but do not currently havesufficient breadth or depth in theirfinancial services sectors to be GlobalLeaders. Shanghai is currently thestrongest performer of the three. Tokyoprofiles here as an EstablishedTransnational centre, in that it hasbreadth and depth of financial servicesbut does not currently demonstrate therequired global connectivity. Seoul is alsoa well diversified financial centre butcurrently lacks the depth of coverage inmost sectors to be considered a leader.Shenzhen, despite its 9th place in GFC 7,only has a 58% connectivity rating and isthus profiled as a ‘Transnational’ centrerather than a ‘Global’ one.

It is useful to examine the pattern ofassessments by region given to some ofthe major Asian centres, to see wherethey are well-regarded. In general, the

Asian centres are particularly wellsupported by Asian respondents in boththe number of assessments and theaverage assessment given. Outside ofAsia, the North American responses aremore positive than average. The numberof assessments given to Asian centres byAmerican and European basedrespondents is also low, suggesting thatAsian centres are far less well known, and,probably as a consequence, less highlyregarded than from within Asia.Respondents from the offshore centresalso rate them less positively thanaverage. This pattern can be seen in thefollowing charts.

19


Chart 12 Profile of Asian Centres

Global Leaders Global Diversified Global Specialists Global ContendersHong KongSingapore

– – BeijingDubai

Shanghai






Tokyo Seoul BahrainShenzhen

Taipei

BangkokKuala Lumpur

Mumbai

– Osaka JakartaManilaQatar

Riyadh


20



Loc

atio

n >

-200 -150 -100 -50 0 50 100

Offshore 23%

North America 6%

Europe 25%

Asia 46%

Mean without region

Chart 13Assessments by Region –Difference fromthe Mean – Hong Kong


Loc

atio

n >

-200 -150 -100 -50 0 50 100

Offshore 21%

North America 7%

Europe 24%

Asia 47%

Mean without region

Chart 14Assessments by Region –Difference fromthe Mean – Singapore


Loc

atio

n >

-200 -150 -100 -50 0 50 100

Offshore 7%

North America 5%

Europe 19%

Asia 69%

Mean without region

Chart 15Assessments by Region –Difference fromthe Mean – Shanghai

The GFCI questionnaire asks whichcentres are likely to become moresignificant in the next few years. As withGFCI 6, Asia features very strongly and iswhere respondents expect to observethe most significant improvements inperformance, with Seoul entering the topfive here:

21



Loc

atio

n >

-200 -150 -100 -50 0 50 100

Offshore 7%

North America 9%

Europe 28%

Asia 54%

Mean without region

Chart 16Assessments by Region –Difference fromthe Mean – Tokyo


Loc

atio

n >

-200 -150 -100 -50 0 50 100-335

Offshore 2%

North America 1%

Europe 112%

Asia 82%

Mean without region

Chart 17Assessments by Region –Difference fromthe Mean – Shenzhen



Shanghai 111

Shenzhen 51

Seoul 35

Beijing 35

Singapore 31

GFCI respondents have been predictingthe rise to prominence of Shanghai forthe past two years. Shanghai andShenzhen are centres that we willcontinue to monitor closely.

In past editions of the GFCI, Dubai hasbeen repeatedly mentioned as a centreboth likely to become more significantand where new offices will be opened.Here, however, Dubai features in neithercategory perhaps as a result of its recent,widely reported, financial difficulties.

22


Table 9Centres WhereNew Offices willbe Opened


Shanghai 35

Hong Kong 29

Shenzhen 18

Beijing 15

Singapore 14

The offshore centres have come under afair degree of scrutiny during the financialcrisis. Many offshore centres areregarded as ‘tax havens’ and there hasbeen significant pressure applied to thesecentres by many national regulators aswell as international bodies such as theOECD. A key demand of the regulators

has been to increase the transparency ofthe internationally agreed tax standards.The scores of the offshore centres havegenerally risen in GFC 7, but not by asmuch as those of many other centres,while their rankings have, with theexception of the Isle of Man, declined:

Jersey increases its small lead overGuernsey, the two centres having scoredwithin 4 points of each other since GFCI.Jersey is ahead of Guernsey in nine of theten sub-indices; Guernsey is rated justahead of Jersey in the ProfessionalServices sub-index. There continues to besignificant pressure applied to so-called‘tax havens’ and the OECD is regularlyupdating its lists of financial centres thatare complying with their requests.

As shown in GFCI 6, there continues to bea strong correlation between GFCIratings and the OECD status: the offshorecentres which are on the OECD ‘WhiteList’, such as the Channel Islands, havehigher GFCI ratings, whereas centressuch as the Bahamas and Gibraltar (on the OECD ‘Grey List’) are well belowthe White Listed centres.

Offshore Financial Centres

23


Table 10Top OffshoreCentres in GFC 7



Jersey 643 =18 3 -4

Guernsey 632 22 -6 -7

Isle of Man 618 =24 9 0

Cayman Islands 615 =28 7 -2

Hamilton 612 =31 15 -3

British Virgin Islands 596 37 12 -3

Gibraltar 568 53 25 -2

Bahamas 557 59 6 -11

Mauritius 552 60 16 -2


Global

Transnational

Local

As might be expected, the offshorecentres are profiled as eitherInternational Specialists or LocalSpecialists if their internationalconnectedness is lower. They are profiledas specialists because of the quality anddepth of their asset management sector.For most of the offshore centres, asignificant proportion of their assessmentsare coming from other offshore centres.Jersey and Guernsey are near the borderbetween Global and Transnational andwider global awareness would movethem up to the profile of GlobalSpecialists. Both these centres areworking to change perceptions and to‘rise above’ the status of offshorespecialist centres by being seen as morediversified, although the following chartsof average assessment by region suggestthat they still have some way to go withchanging global perceptions.

All the top offshore centres achievehigher than average assessments fromother offshore centres and generallylower responses from elsewhere,particularly with regard to therespondents from Asia. Asian responseswere particularly low for Jersey andGuernsey; for Jersey the average Asianresponse was 157 points lower than themean (515 against 672) and for Guernsey193 points (470 against 663):

24


Chart 18 Profile of Offshore Centres

Global Leaders–

Global Diversified–

Global Specialists–

Global Contenders–





– – British Virgin IslandsCayman Islands

GibraltarGuernseyHamilton

Isle of ManJersey

–

Established Players Local Diversified Local Nodes Evolving Centres– – Bahamas

MaltaMauritius

–

25



Loc

atio

n >

-200 -150 -100 -50 0 50 100

Offshore 59%

North America 2%

Europe 25%

Asia 15%

Mean without region

Chart 19Assessments by Region –Difference fromthe Mean – Jersey


Loc

atio

n >

-200 -150 -100 -50 0 50 100

Mean without region (2nd vertical axis)

Offshore 61%

North America 2%

Europe 24%

Asia 13%

Mean without region

Chart 20Assessments by Region –Difference fromthe Mean – Guernsey


Loc

atio

n >

-200 -150 -100 -50 0 50 100

Offshore 42%

North America 10%

Europe 21%

Asia 27%

Mean without region

Chart 21Assessments by Region –Difference fromthe Mean – Cayman Islands

=15

11

=9 21

=28

=9

8=18=18

22

53

=31

=45

33

4347

35=41

=41

=63

=24

=24

20

=26

34

36

39

=455=45=45=4550

48

56

49

52

44

51

58

60

66

67

66

61

62

65

68

69

7071

72

7473

9

883

9

8

4=1

13

7

=28

38

=54

5

3

4

26


The GFC World

=16

12 14

23

=1517

=63

=26

=28

=31

37

=5440

57

59

75

27


Key

Broad & Deep

Global Leaders

Established Transnational

Established Players

Relatively Broad

Global Diversified

Transnational Diversified

Local Diversified

Relatively Deep

Global Specialists

Transnational Specialists

Local Nodes

Emerging

Global Contenders

Transnational Contenders

Evolving Centres

28


Table 11GFC 7 Ratings1

GFC 7 Rank GFC 7 Rating GFCI 6 Rank GFCI 6 Rating Change Change

in Rank in Rating

London =1 775 1 790 3 0 -15

New York =1 775 2 774 1 1 1

Hong Kong 3 739 3 729 3 0 10

Singapore 4 733 4 719 3 0 14

Tokyo 5 692 7 674 1 2 18

Chicago 6 678 8 661 1 2 17

Zurich 7 677 6 676 5 -1 1

Geneva 8 671 9 660 1 1 11

Shenzhen =9 670 5 695 5 -4 -25

Sydney =9 670 11 651 1 2 19

Shanghai 11 668 10 655 5 -1 13

Toronto 12 667 13 647 1 1 20

Frankfurt 13 660 12 649 5 -1 11

Boston 14 652 17 634 1 3 18

Beijing =15 651 23 613 1 8 38

San Francisco =15 651 18 634 1 3 17

Washington D.C. 17 647 20 630 1 3 17

Jersey =18 643 14 640 5 -4 3

Luxembourg =18 643 16 637 5 -2 6

Paris 20 642 19 630 5 -1 12

Taipei 21 638 25 609 1 4 29

Guernsey 22 632 15 638 5 -7 -6

Vancouver 23 623 29 589 1 6 34

Isle of Man =24 618 24 609 3 0 9

Dubai =24 618 21 617 5 -3 1

Montreal =26 617 32 586 1 6 31

Melbourne =26 617 33 584 1 7 33

Seoul =28 615 35 576 1 7 39

Edinburgh =28 615 27 605 5 -1 10

Cayman Islands =28 615 26 608 5 -2 7

Dublin =31 612 22 613 5 -9 -1

Hamilton =31 612 28 597 5 -3 15

Munich 33 610 30 588 5 -3 22

Osaka 34 606 38 565 1 4 41

Amsterdam 35 604 31 586 5 -4 18

Qatar 36 600 44 558 1 8 42

British Virgin Islands 37 596 34 584 5 -3 12

Stockholm 38 595 36 569 5 -2 26

Brussels 39 591 37 568 5 -2 23

Sao Paulo 40 590 42 560 1 2 30

Copenhagen =41 587 41 560 3 0 27

Bahrain =41 587 43 558 1 2 29

Vienna 43 583 46 555 1 3 28

Wellington 44 582 54 541 1 10 41

Madrid =45 581 40 560 5 -5 21

29


GFC 7 Rank GFC 7 Rating GFCI 6 Rank GFCI 6 Rating Change Change

in Rank in Rating

Oslo =45 581 56 538 1 11 43

Milan 47 579 47 554 3 0 25

Monaco 48 578 39 563 5 -9 15

Rome 49 574 57 537 1 8 37

Helsinki 50 573 59 533 1 9 40

Kuala Lumpur 51 571 45 557 5 -6 14

Glasgow 52 570 49 550 5 -3 20

Gibraltar 53 568 51 543 5 -2 25

Johannesburg =54 566 50 550 5 -4 16

Rio de Janeiro =54 566 61 532 1 7 34

Malta 56 565 52 543 5 -4 22

Mexico City 57 563 55 541 5 -2 22

Mumbai 58 562 53 542 5 -5 20

Bahamas 59 557 48 551 5 -11 6

Mauritius 60 552 58 536 5 -2 16

Bangkok 61 549 60 532 5 -1 17

Prague 62 543 65 492 1 3 51

Jakarta =63 535 62 511 5 -1 24

Buenos Aires =63 535 63 507 3 0 28

Lisbon 65 529 66 477 1 1 52

Manila 66 527 64 494 5 -2 33

Warsaw 67 520 69 456 1 2 64

Moscow 68 516 67 462 5 -1 54

Riyadh 69 507 68 457 5 -1 50

St. Petersburg 70 501 70 453 3 0 48

Tallinn 71 488 71 445 3 0 43

Budapest 72 481 74 425 1 2 56

Athens 73 480 73 433 3 0 47

Istanbul 74 470 72 442 5 -2 28

Reykjavik 75 447 75 415 3 0 32

1 Note: Scores have been rounded to the nearest whole number. Where centreshave tied, this is given as an equal ranking and they are listed in order accordingto their underlying scores,

Industry Sectors

The GFC 7 dataset can be used toproduce separate industry sector sub-indices for the Banking, AssetManagement, Insurance, ProfessionalServices and Government & Regulatorysectors. These indices are created bybuilding the GFC 7 statistical model usingonly the questionnaire responses fromrespondents working in the relevantindustry sectors. For the first time, HongKong appears at the top of one of the sub-indices, rating highest amongstprofessionals in the Insurance sector.Conversely, London’s position at numberthree in the same index is the first time

London has been outside of the top twoplaces in any sub-index. London remains atthe top in the Asset Management andProfessional Services sub-indices, whilstNew York retains the lead for the Bankingsub-index, and has re-taken first place inthe Government & Regulatory field, seenpreviously in GFCI 4.

Table 12 shows the top 10 ranked financialcentres in the industry sector sub-indices.The figures in brackets show how eachcentre has moved in these sub-indicessince GFCI 6:

30


1 London 3 (-) New York 3 (-) New York 1 (+1) Hong Kong 1 (+2) London 3 (-)

2 New York 3 (-) London 3 (-) London 3 (-1) New York 3 (-) New York 3 (-)

3 Hong Kong 3 (-) Hong Kong 3 (-) Singapore 3 (-) London 5 (-2) Singapore 3 (-)

4 Singapore 3 (-) Singapore 3 (-) Hong Kong 3 (-) Shenzhen 1 (+1) Hong Kong 3 (-)

5 Tokyo 3 (-) Tokyo 1 (+1) Tokyo 3 (-) Singapore 5 (-1) Zurich 1 (+2)

6 Chicago 1 (+2) Zurich 1 (+2) Chicago 1 (+2) Shanghai 3 (-) Geneva 1 (+2)

7 Shanghai 1(+10) Shenzhen 5 (-2) Frankfurt 5 (-1) Beijing 1 (+2) Jersey 5 (-1)

8 San Francisco 1 (+4) Shanghai 5 (-1) Toronto 5 (-1) Tokyo 3 (-) Chicago 1 (+1)

9 Toronto 1 (+5) Chicago 3 (-) Geneva 1 (+3) Chicago 1 (+1) Toronto 1 (+1)

10 Zurich 5 (-4) Beijing 1 (+3) Zurich 1 (+1) Taipei 1 (+3) Tokyo 1 (+2)

Asset

Management

Banking Government &

Regulatory

Insurance Professional

Services

Table 12Industry Sector Sub-indices (Changes from GFCI 6 in brackets)

Rank

The top five positions in each of the sub-indices are generally occupied by the fivetop GFC 7 centres. Shenzhen’s 4th position inthe ratings from the Insurance sectorrespondents and Zurich’s 5th in theProfessional Services sub-index are the onlyexceptions. The Asian centres have tendedto perform well in the Insurance sub-indexboth in GFCI 6 and here, with seven of thetop ten spots filled by Asian centres.

Asian centres have also performed well inthe Banking sub-index, filling six of the top tenplaces, with Beijing entering the top ten forthe first time.

Toronto performs strongly in these

sub-indices, entering the top ten in the AssetManagement sub-index for the first time,and appearing in the top ten for threecategories in total, while placing 12th in theoverall GFC 7. Shanghai and San Franciscohave also made significant improvements inthe Asset Management sub-index, rising 10and 4 places respectively.

The Professional Services area remainslargely unchanged from GFCI 6. The Swisscentres of Zurich and Geneva move into 5thand 6th positions respectively, with Guernsey(5th in GFCI 6) moving out of the top ten.Zurich and Geneva have also climbed intothe top ten of the Government & Regulatorysub-index, replacing Paris and Sydney.

The instrumental factors used in the GFC 7model are grouped into five key areas ofcompetitiveness (People, BusinessEnvironment, Market Access,Infrastructure and GeneralCompetitiveness). The GFC 7 factorassessment model is run with one set ofinstrumental factors at a time and the

results are compared to identify whichfactors have the greatest influence onwhich centres. Table 13 shows the top tenranked centres in each sub-index (thefigures in brackets show how the centrehas moved in the sub-index rankingscompared with GFCI 6):

London, which has led the field acrossthese aspects for previous editions ofGFCI, has here been overtaken by NewYork in three areas of competitiveness:People, Business Environment, andInfrastructure. Hong Kong and Singaporeremain in 3rd and 4th place throughoutalthough Singapore moves ahead ofHong Kong into 3rd place in the Peoplesub-index.

Most of the sub-indices are fairly closelycorrelated to the main GFC 7 ranks.Shanghai, 11th in the overall rankings, hashere climbed into the top 10 in all but oneof the areas (Business Environment) andhas made substantial gains since GFCI 6.Toronto, 12th overall, makes threeappearances in the top ten here.

Shenzhen, 9th overall, reveals significantdifferences in performance across theareas of competitiveness. Shenzhen hasgained nine places to enter the top ten in

the General Competitiveness category,but does not feature in the top ten for theother sub-indices, ranking 12th in thePeople sub-index, 13th in BusinessEnvironment, 17th in Market Access and20th in Infrastructure, all of which aresubstantial improvements on GFCI 6; thissuggests that its ratings are volatile andsusceptible to changes in instrumentalfactors.

31


The Five Key Areas of Competitiveness

1 New York 1 (+1) New York 1 (+1) London 3 (-) New York 1 (+1) London 3 (-)

2 London 5 (-1) London 5 (-1) New York 3 (-) London 5 (-1) New York 3 (-)

3 Singapore 1 (+1) Hong Kong 3 (-) Hong Kong 3 (-) Hong Kong 3 (-)Hong Kong 3 (-)

4 Hong Kong 5 (-1) Singapore 3 (-) Singapore 3 (-) Singapore 3 (-) Singapore 3 (-)

5 Tokyo 3 (-) Chicago 3 (-) Tokyo 1 (+2) Chicago 1 (+2) Tokyo 1 (+2)

6 Toronto 1 (+3) Tokyo 1 (+3) Zurich 3 (-) Tokyo 5 (-1) Zurich 3 (-)

7 Chicago 1 (+3) Zurich 5 (-1) Shanghai 1(+19) Zurich 5 (-1) Chicago 5 (-2)

8 Sydney 5 (-2) Sydney 3 (-) Chicago 5 (-3) Sydney 1 (+3) Shanghai 1 (+12)

9 Zurich 5 (-2) Geneva 5 (-2) Geneva 1 (+1) Toronto 1 (+3) Geneva 5 (-1)

10 Shanghai 1 (+7) Toronto 1 (+5) Frankfurt 5 (-2) Shanghai 1(+23) Shenzhen 1 (+9)

Rank People Business

Environment

Market Access Infrastructure General

Competitiveness

Table 13Sub-Indices by Areas of Competitiveness (Changes from GFCI 6 in brackets)

The reputation of a financial centre isanother indicator of potential success. Inthe GFCI model, one way to look at this isto examine the difference between theaverage assessment given to a centreand its overall rating (the averageassessment adjusted to reflect theinstrumental factors). If a centre has a

higher average assessment than the GFC 7 rating this indicates thatrespondents’ perceptions of a centre aremore favourable than the quantitativedata-based measures alone wouldsuggest. Table 14 shows the 20 centreswith the highest difference betweenaverage assessment and GFCI rating:

It is notable that six of the top ten centresby this measure are Asian. This would helpexplain the strong performance of Asia inGFC 7. However, it should be stressed thatin the case of Beijing, Shanghai andShenzhen, a large number of favourableassessments came from other Asiancentres rather than from a ‘worldwide’financial services community. Three ofthe top 11 centres by this measure areoffshore centres – although similarly, asizeable proportion of their assessmentscome from other offshore centres.

32


Table 14Top 20 CentresAssessments &Ratings

City Average Weighted* GFC 7 Rating Difference

Assessment

Shenzhen 733 670 63

Shanghai 723 668 55

Hong Kong 786 739 47

Isle of Man 661 618 43

New York 812 775 37

Singapore 769 733 36

Beijing 684 651 33

London 807 775 32

Jersey 674 643 31

Seoul 645 615 30

Guernsey 660 632 28

Zurich 700 677 23

Tokyo 714 692 22

Chicago 698 678 20

Sydney 690 670 20

Toronto 686 667 19

Frankfurt 675 660 15

San Francisco 665 651 14

Geneva 683 671 12

Boston 664 652 12

* weighted by

how recently

they were given

to be directly

comparable with

the GFCI

Reputation

This edition of GFC has adopted a newapproach to investigating thecompetitiveness of different centres,combining the well-established ratingssystem with a new set of profiles that lookat how well connected different centresare, and the breadth and depth of thefinancial services that they provide. Thishas enabled a more sophisticateddiscussion of the underpinnings ofcompetitiveness for different types ofcentres, particularly important in a globalfinancial environment that continues tobe extremely volatile.

Overall, of the 75 centres rated in GFC 7,71 centres have received higher scoresand only four have decreased since thelast report. GFCI 6 demonstrated thatwhilst the financial crisis had createduncertainty and a significant reduction inconfidence, the assessments had begunto recover. GFC 7 demonstrates a morerobust return of confidence.

For the first time in the GFCI, London andNew York are equal first, both with 775points on a scale of 1 to 1,000. In GFCI 6,London was 16 points ahead butexperienced a fall of 15 points in thecurrent ratings. This shift is also reflectedby changes in position in the sub-indices,with New York leading the field amongstthe Banking and Government &Regulatory respondents, and Londondropping to third in the ratings from theInsurance respondents. New York has alsoovertaken London in three of the sub-indices of areas of competitiveness:People, Business Environment andInfrastructure.

London and New York still lead theratings, although the gap between themand the third placed centre, Hong Kong,continues to diminish, from 81 points ayear ago and 45 points six months ago tojust 36 points now. With Singapore, infourth place by a mere six points, thesefour centres continue to show stable longterm competitiveness as world-leading inthe rankings.

The profiles approach used in this reportoffers another way to classify centres,with centres being assigned to a profileon the basis of their connectivity, anddepth and breadth of financial servicesbased there. Here, eight centres areconsidered to be global leaders: London,New York, Hong Kong and Singapore, asin the ratings, and also Chicago, Zurich,Toronto and Frankfurt. This approach alsoallows a more sophisticated look at bothleading and emerging centres thanpossible from the ratings alone. Tokyo, forexample, (fifth overall) showing a strongperformance in terms of its services butwith the potential to benefit fromimproving its connections globally, andemerging centres such as Shanghai,Beijing, Dubai and Moscow showing thatthey have the connectivity to succeedbut lack the necessary specific sectoralstrengths to fulfill their potential as yet.

A notable story in GFCI 6 was the rise ofthe Asian centres, with all of themshowing a marked increase in scores. Thisstrong performance has continued inGFC 7, with all centres apart fromShenzhen showing a further increase inscores. Particularly notable are the rise ofTokyo into fifth place and the substantialpoints increases for Beijing and Seoul.Whilst Shenzhen has fallen by 25 points, itremains in the top ten, in 9th place,although lacking the connectivity thatputs Beijing and Shanghai in the ‘global’set of profiles.

The GFCI questionnaire asks respondentswhich financial centres they believe aresuffering most as a result of the currentfinancial crisis: the responses indicatethat New York, London and Dubai areperceived to have been impacted onthe most, with 110, 89 and 51 mentionsrespectively.

The main concerns voiced about New York were with regard to thepotential for new regulatoryarrangements to be damaging tocompetitiveness. London’s greatest

33


Summary & Conclusions

challenges were likewise perceived to bethe fear of a regulatory backlash and thelevels of corporate and personal taxationthat may drive high earners abroad. Theloss of skilled personnel to the industry is aconcern of respondents in all the leadingcentres and the most commonlyidentified risks posed by the financial crisisin general are a regulatory ‘kneejerk’reaction, followed by credit risk and thena more general recession.

Clearly the Business Environment isviewed as the key area ofcompetitiveness - it is mentioned inresponses more often than People andInfrastructure combined. This is areflection of the regulatory reaction tothe financial crisis but also reflectsconcerns over taxation. One of thethemes that emerges from therespondents is the need for predictabilityand stability of regulation.

The GFCI has previously highlighted theneed for centres to be connected andco-operative; this is more important thanever in times of great uncertainty andfinancial instability. The new profilesapproach adopted in this edition reflectsthe importance of this, and allows for newdimensions of competitiveness to beconsidered as part of the global financialinfrastructure.

34


35


Respondent’s Details

Table 15Respondents byIndustry Sector

Sector Number and % of Responses

Banking 502 29.7%

Asset Management 292 17.3%

Insurance 311 18.4%

Professional Services 186 11.0%

Regulatory & Government 85 5.0%

Other 314 18.6%

TOTAL 1,690 100.0%

Table 16Respondents by Size ofOrganisation

Number of Employees Worldwide Number and % of Responses

Fewer than 100 436 25.8%

100 to 500 229 13.6%

500 to 1,000 127 7.5%

1,000 to 2,000 96 5.7%

2,000 to 5,000 166 9.8%

More than 5,000 534 31.6%

Unspecified 102 6.0%

TOTAL 1,690 100.0%

Table 17Respondents byLocation

Location Total Number and % of Responses Number and % of New Responses

Europe 521 31% 78 15%

North America 133 8% 24 5%

Asia 578 34% 226 45%

Offshore 449 27% 178 35%

Multiple or Other 9 1% 1 0%

TOTAL 1,690 100% 507 100%

Table 18 shows how closely instrumentalfactor rankings correlate with the GFC 7rankings for the top 20 instrumental factors:

36


Instrumental Factors

Table 18Top 20InstrumentalFactors bycorrelation withGFCI 7

Instrumental Factor R2 with GFCI 7

Lifestyle Assets 0.685

Mastercard Centres of Commerce Index 0.595

World Competitiveness Scoreboard 0.526

Global Competitiveness Index 0.480

Intellectual Capital 0.442

RPI (% change on year ago) 0.393

Credit Ratings 0.379

City Brands Index 0.371

Capital Access Index 0.360

Quality of Roads 0.351

Banking Industry Country Risk Assessments 0.350

Global Cities Index 0.346

JLL Direct Real Estate Transaction Volumes 0.342

Business Environment 0.316

Capitalisation of Stock Exchanges 0.315

The Access Opportunities Index - Business 0.307

The World’s Most Innovative Countries 0.306

Economic Freedom of the World 0.282

Number of International Fairs and Exhibitions 0.277

Airport Satisfaction 0.261

It is interesting to see that the broadermeasures of competitiveness seem to actas good indicators for financial centrecompetitiveness. The ten most highlycorrelated instrumental factors are allbroad measures of competitiveness ratherthan being specific to financial services.

This indicates that cities that are successfulat most things are likely to be verycompetitive financial centres. A full list of instrumental factors is shown opposite, with 1 meaning that the factor has beenupdated since GFCI 6:

37


Table 19Instrumental Factors

Instrumental Factor Source Website

PeopleIntellectual Capital Price Waterhouse Coopers http://www.pwc.com/extweb/pwcpublications.nsf

Graduates in Social Science

Business and Law World Bank www.worldbank.org/education

Gross Tertiary Education Ratio World Bank www.worldbank.org/education

Visa Restrictions Index Henley & Partners http://www.henleyglobal.com/citizenship/visa-restrictions/

1 Human Development Index UN Development Programme http://hdr.undp.org

Quality of Living Survey Mercer HR www.mercerhr.com

Personal Safety Index Mercer HR www.mercerhr.com

International Crime Victims Survey UN Office of Drugs and Crime http://rechten.uvt.nl/icvs/news.htm#The_2009_ICVS

Lifestyle Assets Price Waterhouse Cooper http://www.pwc.com/extweb/pwcpublications.nsf

World’s Top Tourism Destinations Euromonitor Archive www.euromonitor.org

Number of World Heritage Sites World Economic Forum http://www.weforum.org/en/initiatives/

gcp/TravelandTourismReport

Average Days with Precipitation

per Year Sperling’s BestPlaces www.bestplaces.net

Business environment

1 Business Environment EIU www.economist.com/markets/rankings

1 Ease of Doing Business Index The World Bank www.doingbusiness.org/economyrankings

1 Operational Risk Rating EIU

Global Services Location Index AT Kearney www.atkearney.com

Opacity Index Milken Institute www.milkeninstitute.org/publications

1 Corruption Perceptions Index Transparency International www.transparency.org/publications

1 Wage Comparison Index UBS www.ubs.com

Corporate Tax Rates Price Waterhouse Coopers n/a

Employee Effective Tax Rates Price Waterhouse Coopers n/a

Personal Tax Rates OECD www.oecd.org

1 Total Tax Receipts (as % of GDP) OECD http://oberon.sourceoecd.org

1 Bilateral Tax Information

Exchange Agreements OECD http://www.oecd.org

Index of Economic Freedom Heritage Foundation www.heritage.org/index/countries.cfm

1 Economic Freedom of the World Fraser Institute www.freetheworld.com/release.html

1 Banking Industry Country

Risk Assessments Standard & Poor http://www2.standardandpoors.com

Political Risk Index Exclusive Analysis Ltd http://www.exclusive-analysis.com/

1 – This index has been updated since GFCI 6

38


Market accessCapital Access Index Milken Institute www.milkeninstitute.org/research

Master Card Centres of Commerce Master Card www.mastercard.com/us/company/en/wcoc/index.html

Access Opportunities Index SRI International www.sri.com/news/releases

Securitisation International Financial Services Londonwww.ifsl.org.uk

1 Capitalisation of Stock Exchanges World Federation of Stock Exchanges www.world-exchanges.org

1 Value of Share Trading World Federation of Stock Exchanges www.world-exchanges.org

1 Volume of Share Trading World Federation of Stock Exchanges www.world-exchanges.org

1 Broad Stock Index Levels World Federation of Stock Exchanges www.world-exchanges.org

1 Value of Bond Trading World Federation of Stock Exchanges www.world-exchanges.org

1 Volume of Stock Options Trading World Federation of Stock Exchanges www.world-exchanges.org

1 Volume of Stock Futures Trading World Federation of Stock Exchanges www.world-exchanges.org

1 Net External Position of Banks Bank for International Settlements http://www.bis.org/statistics/bankstats.htm

1 External Position of Central Banks

(as % GDP) Bank for International Settlements http://www.bis.org/statistics/bankstats.htm

Global Credit Rankings Institutional Investor Magazine http://www.iimagazinerankings.com/

rankingsRankCCMaGlobal09/globalRanking.asp

Infrastructure

1 Office Occupancy Costs CBRE http://www.cbre.com/EN/Research/Global+Reports/

Office Space Across the World Cushman & Wakefield www.cushwake.com/cwglobal

Direct Real Estate Volumes Jones Lang LaSalle www.joneslanglasalle.co.uk

Real Estate Transparency Index Jones Lang LaSalle www.joneslanglasalle.co.uk

E-Readiness Ranking EIU www.economist.com/markets/rankings

Transportation & Infrastructure Assets Price Waterhouse Coopers http://www.pwc.com/extweb/pwcpublications.nsf

City Infrastructure Mercer HR http://www.mercer.com/qualityofliving

1 Airport Satisfaction Skytraxx www.airlinequality.com/AirportRanking/ranking-intro.htm

Quality of Ground Transport Network World Economic Forum http://www.weforum.org/en/initiatives/


Quality of Roads World Economic Forum http://www.weforum.org/en/initiatives/


General competitiveness

World Competitiveness Scoreboard IMD www.imd.ch/research

1 Global Competitiveness Index World Economic Forum www.weforum.org

Global Business Confidence Grant Thornton www.grantthorntonibos.com

1 Foreign Direct Investment Inflows UNCTAD http://www.unctad.org

The World’s Most Innovative Countries EIU http://www.economist.com/markets/rankings/

displaystory.cfm?story_id=13562333

Global Intellectual Property Index Taylor Wessing http://www.taylorwessing.com/ipindex/

1 Retail Price Index Economist www.economist.com/markets/indicators

Cost of Living Survey Mercer HR www.mercerhr.com

City Brands Index Anholt www.simonanholt.com

Global Cities Index AT Kearney http://www.foreignpolicy.com/story/cms.php?story_id=4509

Number of International

Fairs & Exhibitions World Economic Forum http://www.weforum.org/en/initiatives/


City Population Density City Mayors Statistics http://www.citymayors.com/statistics/

largest-cities-density-125.html

Documents

GLOBAL FINANCIAL CENTRES 7