Using hard data to gauge which international finance centres are leading the world, The Banker's ranking tables make for some fascinating - and often surprising - insights. Writer Silvia Pavoni
The battle between financial centres to gain a slice of world markets is as intense as ever. All financial centres must focus on their competitive advantages.
In an effort to derive some order out of which international finance centres (IFCs) are performing better than others, The Banker has researched and weighted a variety of data across the globe to reflect the economic, business and financial appeal of full-service IFCs and specialised jurisdictions. Favouring hard statistics over opinions, the rankings present some foreseeable results along with some highly unexpected ones.
The top two positions are still firmly held by London and New York, which alternate their supremacy in a number of financial markets sub-categories. Overall, it is New York that leads the list in the financial markets ranking, although not by a large measure, while London tops the rankings by business friendliness, and inward and outward foreign direct investments into the financial sector - both indicators of the growth potential of the City.
Among the surprises in the main ranking is Frankfurt's third position. Few may have noticed, but the German city has attracted by far the largest number of foreign listings on its stock exchange: 146 of the total 189 new listings, or 77%, in 2008 were foreign companies, compared with London's 42 out of 185 and New York's 17 out of 74 - both much larger exchanges by market capitalisation.
Regional surprises
Our regional rankings offer some surprises too. In Latin America, where perception has it that Brazil hosts the most influential financial centre in the region, São Paulo, our ranking reveals a somewhat different picture. The list is topped by Mexico City, while São Paulo sits in second position, followed by Costa Rica, Buenos Aires and Rio de Janeiro.
Singapore leads the Asian ranking, followed by Sydney and Tokyo. If the Japanese capital's efforts to internationalise its financial centre still have to bear tangible results, its market size remains one of the largest in the world and supports Tokyo's relevance in the global financial space.
The Cayman Islands emerges as the clear leader of the specialised jurisdictions ranking, scoring high in terms of size of the market and breadth of expertise.
The results of regulators' efforts to contain risk and re-build sustainable financial markets will undoubtedly have a significant effect on the fortunes of IFCs and specialised jurisdictions alike. The Banker looks forward to assessing the situation throughout 2010.
Methodology
The Banker's ranking of international financial centres is based not simply on the size of the financial services industry in each location, but focuses instead on the level of international business and the value offered to international institutions seeking to expand their international operations.
In recognition of the fact that data for offshore financial centres is seldom consistent with that for mainland financial centres, The Banker has compiled a separate table for offshore centres using data available specifically for these locations, for example, the IMF's Information Framework Initiative data. This data takes account of specialist markets, for example, the captive insurance industry.
Where data is available only at a national level rather than city level, a lower weighting was generally applied. Latest available data was used.
