Download Lecture 1A: International Financial Centers

Lecture 1A: Defining International
Financial Centers
A Framework for Considering
What Determines an
International Financial Center
Where is this International
Financial Center?
What is an International Financial Center?
There are many possible dimensions to an International Financial
Center, however, one important starting characteristic is to
offer the necessary with infrastructure to support the
financial needs of international businesses.
Other characteristics of an International Financial Center include:
1. A center from which international financial business can be
conducted profitably, easily and efficiently.
2. A center with skilled management and intellectual talent
covering business, finance and interdependent services such
as legal, insurance and accounting, to provide multidisciplined teams that facilitate large cross borders
transactions in the most efficient manner possible (e.g., in
the shortest possible time frame; at a competitive cost).
Characteristics of an International Financial Center
3. A center with deep liquid and sophisticated money and
capital markets and competitive tax and regulatory regimes.
4. A center with significant offshore business skills.
5. A center that can add significant value to financial services
provided from it, through a workforce that can respond
promptly and in an innovative manner.
6. A center with the world-class telecommunications, financial
information providers, and IT capacity combined with a large,
well educated, multilingual workforce.
7. A center where all facets of financial services: CEOs; senior
traders, regional headquarters, treasury operations, data
processing, and other support functions and can be located
efficiently.
8. A center with an attractive environment (living and working)
for business.
Categories of Financial Centers
• Global Financial Centers: These are centers that serve clients from all over
the world in the provision of the widest possible array of international
financial services. There are two true international financial centers:
London and New York.
• Regional Financial Centers: they serve their regional rather than their
national economies. Examples include Dubai, Hong Kong, Singapore.
• Non-Global and non-Regional Financial Centers: These are centers that
provide a wide range of international financial services but cater mainly to
the needs of their national economies rather than their regions or the
world. Perhaps they are best referred to as national Financial Centers.
They include Tokyo, Paris, Frankfurt, and Sydney
• Offshore Financial Centers: These are centers that many view as primarily
tax havens for wealth management and global tax management rather
than providing the full array of international financial services. They are
jurisdictions that have financial institutions engaged primarily in business
with non-residents and with external assets and liabilities out of
proportion to the needs of their domestic economies. They include the
Cayman Islands, Gibraltar, Isle of Man, Liechtenstein, Monaco, and
Mauritius (IMF 2000 classifications).
Comparison of Financial Centers, 2006
Data from the Economist