Financial centre

A financial centre is a broad term the IMF define as encompassing:[a] International Financial Centres (IFCs), such as New York City, London, and Tokyo; Regional Financial Centres (RFCs), such as Frankfurt, Chicago and Sydney; and Offshore Financial Centres (OFCs), such as The Cayman Islands, Dublin, and Singapore.[b]

IFCs, and many RFCs, are full–service financial centres with direct access to large capital pools from banks, insurance companies, investment funds, and listed capital markets, and are major global cities. OFCs, and also some RFCs, tend to specialise in tax-driven services, such as corporate tax planning tools, tax–neutral vehicles,[c] and shadow banking/securitization, and can include smaller locations (e.g. Luxembourg), or city-states (e.g. Singapore). The IMF notes an overlap between RFCs and OFCs (e.g. Hong Kong and Singapore are OFCs and RFCs). Since 2010, academics consider OFCs synonymous with tax havens.[d]

Lower Manhattan viewed from Brooklyn
New York City's Financial District in Lower Manhattan, including Wall Street. New York is ranked as one of the largest International Financial Centres ("IFC") in the world.
City of London skyline from London City Hall - Sept 2015 - Crop Aligned
The City of London (the "Square Mile") is one of the oldest financial centres. London is ranked as one of the largest International Financial Centres ("IFC") in the world.

Background

Financial centres are locations with a concentration of participants in banking, asset management, insurance or financial markets with venues and supporting services for these activities to take place.[4] Participants can include financial intermediaries (such as banks and brokers), institutional investors (such as investment managers, pension funds, insurers, hedge funds), and issuers (such as companies and governments). Trading activity can take place on venues such as exchanges and involve clearing houses, although many transactions take place over-the-counter (OTC), that is directly between participants. Financial centres usually host companies that offer a wide range of financial services, for example relating to mergers and acquisitions, public offerings, or corporate actions; or which participate in other areas of finance, such as private equity and reinsurance. Ancillary financial services include rating agencies, as well as provision of related professional services, particularly legal advisory and management accounting.[5]

Definitions

FSF–IMF approach

In April 2000, the Financial Stability Forum ("FSF"),[e] concerned about OFCs on global financial stability produced a report listing 42 OFCs.[6] In June 2000, the IMF published a working paper on OFCs, but which also proposed a taxonomy on classifying the various types of global financial centres, which they listed as follows (with the description and examples they noted as typical of each category, also noted):[1]

  1. International Financial Centre ("IFC"). Described by the IMF as being large international full–service centres with advanced settlement and payments systems, supporting large domestic economies, with deep and liquid markets where both the sources and uses of funds are diverse, and where legal and regulatory frameworks are adequate to safeguard the integrity of principal–agent relationships and supervisory functions. IFCs generally borrow short–term from non–residents and lend long–term to non–residents. In terms of assets, London is the largest and most established such centre, followed by New York, the difference being that the proportion of international to domestic business is much greater in the former. Examples cited by the IMF were: London, New York and Tokyo;
  2. Regional Financial Center ("RFC"). The IMF noted that RFCs, like IFCs, have developed financial markets and infrastructure and intermediate funds in and out of their region, but in contrast to IFCs, have relatively small domestic economies. Examples cited by the IMF were: Hong Kong, Singapore, and Luxembourg;
  3. Offshore Financial Centre ("OFC"). The IMF noted that OFCs are usually smaller, and provide more specialist services, however, OFCs still ranged from centres that provide specialist and skilled activities, attractive to major financial institutions, and more lightly regulated centres that provide services that are almost entirely tax driven, and have very limited resources to support financial intermediation. The IMF listed 46 OFCs in 2000, the largest of which was Ireland, the Caribbean (includes the Cayman Islands, and the British Virgin Islands), Hong Kong, Singapore and Luxembourg.

The IMF noted that the three categories were not mutually exclusive and that various locations could fall under the definition of an OFC and an RFC, in particular (e.g. Singapore and Hong Kong were cited).[1]

Rationale for OFCs

The IMF noted that OFCs could be set up for legitimate purposes (listing various reasons), but also for what the IMF called dubious purposes, citing tax evasion and money–laundering. In 2007, the IMF produced the following definition of an OFC: a country or jurisdiction that provides financial services to nonresidents on a scale that is incommensurate with the size and the financing of its domestic economy.[7] The FSF annual reports on global shadow banking use the IMF definition to track the OFCs with the largest financial centres relative to their domestic economies.[8]

Uncovering Offshore Financial Centers Figure 3 Network of ownership flows between countries
Conduit and Sink OFCs: Mapping the links between financial centres

Progress from 2000 onwards from IMFOECDFATF initiatives on common standards, regulatory compliance, and banking transparency, has reduced the regulatory attraction of OFCs over IFCs and RFCs. Since 2010, academics considered the services of OFCs to be synonymous with tax havens, and use the term OFC and tax haven interchangeably (e.g. the academic lists of tax havens include all the FSF–IMF OFCs).[2][3]

In July 2017, a study by the University of Amsterdam's CORPNET group, broke down the definition of an OFC into two subgroups, Conduit and Sink OFCs:[9]

  • 24 Sink OFCs: jurisdictions in which a disproportionate amount of value disappears from the economic system (e.g. the traditional tax havens).
  • 5 Conduit OFCs: jurisdictions through which a disproportionate amount of value moves toward Sink OFCs (e.g. the corporate–focused tax havens)
    (Conduits are: Netherlands, United Kingdom, Switzerland, Singapore and Ireland)

Sink OFCs rely on Conduit OFCs to re–route funds from high–tax locations using base erosion and profit shifting ("BEPS") tax planning tools, which are encoded, and accepted, in the Conduit OFC's extensive networks of global bilateral tax treaties. Because Sink OFCs are more closely associated with traditional tax havens, they tend to have more limited treaty networks and access to global higher–tax locations.

Rankings

Prior to the 1960s, there is little data available to rank financial centres.[10]:1 In recent years many rankings have been developed and published. Two of the most relevant are the Global Financial Centres Index and the Xinhua–Dow Jones International Financial Centres Development Index.[11]

Global Financial Centres Index (2007–ongoing)

13-08-09-peak-by-RalfR-01
The Central District of Hong Kong, one of the main financial centres in Asia, seen from the Peak.

The Global Financial Centres Index ("GFCI") is compiled semi–annually by the London–based British think tank Z/Yen in conjunction with the Shenzen–based think tank China Development Institute.[12] As of March 2019, the top ten global financial centres per the GFCI article containing a ranked list of 100 financial centres were:[13]

Rank
Centre
Rating
1 United States New York City 794
2 United Kingdom LondonĆ 787
3 Hong Kong Hong Kongć 783
4 Singapore SingaporeĆ 772
5 China Shanghai 770
6 Japan Tokyo 756
7 Canada Toronto 755
8 Switzerland ZürichΔ† 739
9 China Beijing 738
10 Germany Frankfurt 737

(Δ) Appears on the FSF–IMF Offshore Financial Centre (OFC) Lists.
(†) Also appears as one of the top 5 Conduit OFC, in CORPNET's 2017 research; or
(‡) Also appears as one of the top 5 Sink OFC, in CORPNET's 2017 research.

Xinhua–Dow Jones Index (2010–2014)

Skyline Frankfurt am Main 2015
Frankfurt's banking district, home to various global and European bank headquarters. The district houses the main German stock exchange and many EU and German regulators.

The Xinhua–Dow Jones International Financial Centers Development Index was compiled annually by the Xinhua News Agency of China with the Chicago Mercantile Exchange and Dow Jones & Company of the United States from 2010 to 2014. During that time New York was the top–ranked centre.

According to the 2014 Xinhua–Dow Jones International Financial Centres Development Index, the top ten financial centres in the world were:[14]

Rank Change
Centre
Rating
1 Steady United States New York City 87.72
2 Steady United Kingdom LondonĆ 86.64
3 Increase 1 Japan Tokyo 84.57
4 Increase 1 Singapore SingaporeĆ 77.23
5 Decrease 2 Hong Kong Hong Kongć 77.10
5 Steady China Shanghai 77.10
7 Steady France Paris 64.83
8 Steady Germany Frankfurt 60.27
9 Increase 2 China Beijing 59.98
10 Decrease 1 United States Chicago 58.22

(Δ) Appears on the FSF–IMF Offshore Financial Centre (OFC) Lists.
(†) Also appears as one of the top 5 Conduit OFC, in CORPNET's 2017 research; or
(‡) Also appears as one of the top 5 Sink OFC, in CORPNET's 2017 research.

Examples

Old finance centers such as Amsterdam, London, Paris, New York, and Tokyo have long histories.[15][16] Today there is a diverse range of financial centres worldwide.[17] While New York and London often stand out as the leading global financial centres,[18][19] other established financial centres provide significant competition and several newer financial centres are developing.[20] Despite this proliferation of financial centres, academics have discussed evidence showing increasing concentration of financial activity in the largest national and international financial centres in the 21st century.[21]:24–34 Others have discussed the ongoing dominance of New York and London, and the role linkages between these two financial centres played in the financial crisis of 2007–08.[22]

Comparisons of financial centres focus on their history, role and significance in serving national, regional and international financial activity. Each centre's offering includes differing legal, tax and regulatory environments.[23] One journalist suggested three factors for success as a financial city: "a pool of capital to lend or invest; a decent legal and taxation framework; and high-quality human resources".[24]

Major IMF IFCs

New York, London and Tokyo are in every list of major IFCs. Some of the major RFCs (see below), such as Paris, Frankfurt, Chicago, and Shanghai appear as IFCs in some lists.

Photos NewYork1 032
The New York Stock Exchange on Wall Street, the world's largest stock exchange by listed capitalisation.[25]
  • New York. Since the middle of the 20th century, New York City, represented by Wall Street, has been described as a leading financial centre.[10]:1[21]:25[22]:4–5 Over the past few decades, with the rise of a multipolar world with new regional powers and global capitalism, numerous financial centres have challenged Wall Street, particularly London and several in Asia, which some analysts believe will be the focus of new worldwide growth.[26]:39–49[27] One source described New York as extending its lead as the world's centre of finance in September 2018; according to Reuters, the think-tank New Financial concluded the “raw” value of domestic and international financial activity like managing assets and issuing equity underscored the position of New York as the world's leading financial centre.[28]
New York City remains the largest centre for trading in public equity and debt capital markets, driven in part by the size and financial development of the U.S. economy.[26]:31–32[29] The NYSE and NASDAQ are the two largest stock exchanges in the world.[30] New York also leads in hedge fund management; private equity; and the monetary volume of mergers and acquisitions. Several investment banks and investment managers headquartered in New York City are important participants in other financial centres.[26]:34–35 The New York Federal Reserve Bank, the largest within the Federal Reserve System, regulates financial institutions and implements U.S. monetary policy,[31][32] which in turn influences the world's economy.[33][34] The three major global credit rating agenciesStandard and Poor's, Moody's Investor Service, and Fitch Ratings – are headquartered or co–headquartered in New York City, with Fitch being co–headquartered in London.
Paternoster Square
The London Stock Exchange in the City of London, the largest exchange in Europe by capitalisation.[30]
  • London. London has been a leading international financial centre since the 19th century, acting as a centre of lending and investment around the world.[10]:74–75[35]:149 English contract law was adopted widely for international finance, with legal services provided in London.[36] Financial institutions located there provided services internationally such as Lloyd's of London (founded 1686) for insurance and the Baltic Exchange (founded 1744) for shipping.[37] During the 20th century London played an important role in the development of new financial products such as the Eurodollar and Eurobonds in the 1960s, international asset management and international equities trading in the 1980s, and derivatives in the 1990s.[15]:13[5]:6,12–13,88–9[38]
London continues to maintain a leading position as a financial centre in the 21st century, and maintains the largest trade surplus in financial services around the world.[39][40][41] However, like New York, it faces new competitors including fast-rising eastern financial centres such as Hong Kong and Shanghai. London is the largest centre for derivatives markets,[42] foreign exchange markets,[43] money markets,[44] issuance of international debt securities,[45] international insurance,[46] trading in gold, silver and base metals through the London bullion market and London Metal Exchange,[47] and international bank lending.[5]:2[38][48] London benefits from its position between the Asia and U.S. time zones,[49] and has benefited from its location within the European Union,[50]:1 though this may end following the outcome of the Brexit referendum of 2016 and the decision of the United Kingdom to leave the European Union. As well as the London Stock Exchange, the Bank of England, the second oldest central bank, and the European Banking Authority are in London, although the EBA is moving to Paris in March 2019 after Brexit.[51]
TokyoStockExchange1144
The Tokyo Stock Exchange, the largest stock exchange in Asia.[30]
  • Tokyo. One report suggests that Japanese authorities are working on plans to transform Tokyo but have met with mixed success, noting that "initial drafts suggest that Japan's economic specialists are having trouble figuring out the secret of the Western financial centres' success."[52] Efforts include more English-speaking restaurants and services and the building of many new office buildings in Tokyo, but more powerful stimuli such as lower taxes have been neglected and a relative aversion to finance remains prevalent in Japan.[52] Tokyo emerged as a major financial centre in the 1980s as the Japanese economy became one of the largest in the world.[10]:1 As a financial centre, Tokyo has good links with New York City and London.[53][54]

Major IMF OFCs

These centres appear in all FSF–IMF lists of OFCs and, bar the Caribbean OFCs of the Cayman Islands, the British Virgin Islands, and Bermuda, represent all the major OFCs. Some also appear as RFCs in various lists, particularly Hong Kong, and Singapore. They also appear on most lists of major tax havens, and on lists of the largest Conduit and Sink OFCs in the world.

  • Amsterdam. Amsterdam is well known for the size of its pension fund market. It is also a centre for banking and trading activities.[55] Amsterdam was a prominent financial centre in Europe in the 17th and 18th centuries and several of the innovations developed there were transported to London.[5]:24 In June 2017, a study published in Nature ranked the Netherlands as the world's largest Conduit OFC, a term use to describe the re-routing of fund flows to tax havens.[9][56][57]
IFC, Hong Kong Island (2796343561)
The International Finance Centre in Hong Kong, opened in 2003.
  • Luxembourg. Luxembourg is a specialised financial services centre that is the largest location for investment fund domiciliation in Europe, and second in the world after the United States. Many of the funds domiciled in Luxembourg are managed in London.[50]:5–6 Luxembourg is the leading private banking centre in the Eurozone and the largest captive reinsurance centre in Europe. 143 banks from 28 different countries are established in Luxembourg.[67] The country is also the third largest renminbi centre in the world by numbers, in certain activities such as deposits, loans, bond listing and investment funds.[68] Three of the largest Chinese banks have their European hub in Luxembourg (ICBC, Bank of China, China Construction Bank).
  • Singapore. With its strong links with London,[69] Singapore has developed into the Asia region's largest centre for foreign exchange and commodity trading, as well as a growing wealth management hub.[70] Other than Tokyo, it is one of the main centres for fixed income trading in Asia. However, the market capitalisation of its stock exchange has been falling since 2014 and several major companies plan to delist.[71]
  • Zurich. Zurich is a significant centre for banking, asset management including provision of alternative investment products, and insurance.[72][73][74] Since Switzerland is not a member of the European Union, Zurich is not directly subject to EU regulation.

Major IMF RFCs

In some lists, RFCs such as Paris, Frankfurt, Chicago, and Shanghai appear as IFCs, however, they do not appear in all lists. They are certainly major RFCs.

Frankfurt Am Main-Neue Boerse von Suedosten-20120222
The Frankfurt Stock Exchange building, which dates back to 1879.[77]
  • Frankfurt. Frankfurt attracts many foreign banks which maintain offices in the city. It is the seat of Deutsche Börse, one of the leading stock exchanges and derivatives markets operators, and the European Central Bank, which sets the monetary policy for the single European currency, the euro; in addition, in 2014 the European Central Bank took over responsibility for banking supervision for the 18 countries which form the Eurozone. It is also the seat of Deutsche Bundesbank, the German central bank,[78] as well as of EIOPA, the EU's supervisory authority for insurances and occupational pension systems.[79]
Frankfurt has been the financial centre of Germany since the second half of the 20th century as it was before the mid-19th century. Berlin held the position during the intervening period, focusing on lending to European countries while London focused on lending to the Americas and Asia.[80][81]
  • Madrid. Madrid is the headquarters to the Spanish company Bolsas y Mercados Españoles, which owns the four stock exchanges in Spain, the largest being the Bolsa de Madrid. Trading of equities, derivatives and fixed income securities are linked through the Madrid-based electronic Spanish Stock Market Interconnection System (SIBE), handling more than 90% of all financial transactions. Madrid ranks fourth in European equities market capitalisation, and Madrid's Stock Exchange is second in terms of number of listed companies, just behind New York Stock Exchange (NYSE plus NASDAQ).[82] As a financial centre, Madrid has extensive links with Latin America and acts as a gateway for many Latin American financial firms to access the EU banking and financial markets.[83]:6–7
  • Shanghai. Official efforts have been directed to making Pudong a financial leader by 2010.[88] Efforts during the 1990s were mixed, but in the early 21st century, Shanghai gained ground. Factors such as a "protective banking sector" and a "highly restricted capital market" have held the city back, according to one analysis in 2009 in China Daily.[89] Shanghai has done well in terms of market capitalisation but it needs to "attract an army of money managers, lawyers, accountants, actuaries, brokers and other professionals, Chinese and foreign" to enable it to compete with New York and London.[90] China is generating tremendous new capital, which makes it easier to stage initial public offerings of state-owned companies in places like Shanghai.[91]
SydneyCBDfromTower
Sydney's northern CBD serves as the financial and banking hub of the city
  • Sydney. Australia's most populous city is a financial and business services hub not only for Australia but for the Asia-Pacific region. Sydney competes quite closely with other Asia Pacific hubs, however it concentrates a greater portion of Australian-based business in terms of clients and services. Sydney is home to two of Australia's four largest banks, the Commonwealth Bank of Australia and Westpac Banking Corporation, both headquartered in the Sydney CBD. Sydney is also home to 12 of the top 15 asset managers in Australia, Melbourne, on the other hand, tends to concentrate more of the Australian superannuation funds (pension funds). Sydney is using the large Barangaroo development project on its harbour to further position itself as an Asian Pacific hub.[92] Sydney is also home to the Australian Securities Exchange and an array of brokerage banks which are either headquartered or regionally based in Sydney including Australia's largest investment bank Macquarie Group.[93][94]
  • Toronto. The city is a leading market for Canada's largest financial institutions and large insurance companies. It has also become one of the fastest growing financial centres following the late-2000s recession, helped by the stability of the Canadian banking system. Most of the financial industry is concentrated along Bay Street, where the Toronto Stock Exchange is also located.[95]
  • Others. Mumbai is an emerging financial centre, which also provides international support services to London and other financial centres.[96][97][98] Cities such as São Paulo, Mexico City and Johannesburg and other "would-be hubs" lack liquidity and the "skills base," according to one source.[24] Financial industries in countries and regions such as the Indian subcontinent and Malaysia require not only well-trained people but the "whole institutional infrastructure of laws, regulations, contracts, trust and disclosure" which takes time to happen.[24]

History

Pre 17th century

Primitive financial centres started in the 11th century in the Kingdom of England at the annual fair of St. Giles and in the Kingdom of Germany at the Frankfurt autumn fair, then developed in medieval France during the Champaign Fairs.[99][77]

Italian city-states

The first real international financial center was the City State of Venice which slowly emerged from the 9th century to its peak in the 14th century.[99] Tradable bonds as a commonly used type of security, were invented by the Italian city-states (such as Venice and Genoa) of the late medieval and early Renaissance periods.

The low countries

For the origin and history of the bourse in general (not to be confused with the concept of the stock exchange and stock market), see exchange (organized market).

In the sixteenth century, the overall economic supremacy of the Italian city-states gradually came to an end, and the centre of financial activities in Europe shifted to the Low Countries, first to Bruges, and later to Antwerp and Amsterdam. They also became important centres of financial innovation.

17th–18th centuries

Rise of Amsterdam

Gravure van het Oost Indisch Huis (17e eeuw)
17th-century etching of the Oost-Indisch Huis (Dutch for "East India House"), the headquarters of the United East India Company (VOC) in Amsterdam. Considered by many to be the first historical model of the multinational corporation in its modern sense, the VOC was also the first company to be listed on a formal stock exchange. In other words, the VOC was the world's first publicly listed company (or publicly traded company).
SA 3025-De binnenplaats van de Beurs van Hendrick de Keyser
Courtyard of the Amsterdam Stock Exchange (Beurs van Hendrick de Keyser in Dutch), the world's first formal stock exchange. The Amsterdam Stock Exchange was the leading centre of global securities markets in the 17th century.
The Dam in Amsterdam, by Gerrit Adriaensz Berckheyde
The Dam Square in Amsterdam, by Gerrit Adriaensz Berckheyde, c. 1660. In the picture of the centre of highly cosmopolitan and tolerant Amsterdam, Muslim/Oriental figures (possibly Ottoman or Moroccan merchants) are shown negotiating. The 17th-century Dutch institutional innovations helped lay the foundations for modern-day international financial centres that now dominate the global financial system.[100][101]

In the 17th century, Amsterdam became the leading commercial and financial centre. It held this position for more than a century,[102][103][104] and was the first modern model of an international financial centre.[105] As Richard Sylla (2015) noted, "In modern history, several nations had what some of us call financial revolutions. These can be thought of as creating in a short period of time all the key components of a modern financial system. The first was the Dutch Republic four centuries ago."[106][107][108] Amsterdam – unlike its predecessors such as Bruges, Antwerp, Genoa, and Venice – controlled crucial resources and markets directly, sending its fleets to all quarters of the world.[109]

During their Golden Age, the Dutch were responsible for three major institutional innovations in economic, financial and business history of the world:

In many respects, the 17th-century Dutch financial innovations helped shape the foundations of modern-day financial system of the world,[135][136][137] and greatly influenced the financial history of many English-speaking countries (especially the United Kingdom and United States)[138][139] in subsequent centuries.

By the early 1800s, London officially replaced Amsterdam as the world's leading financial centre. In his book Capitals of Capital (2010), Youssef Cassis argues that the decline and fall of Amsterdam, as the world's foremost financial capital, was one of the dramatic events in history of global finance.[140]

19th–21st centuries

London and Paris were the world's only prominent financial centers throughout most of the 19th century.[10]:1 After 1870, Berlin and New York grew to become major financial centres mainly serving their national economies. An array of smaller international financial centers found market niches, such as Amsterdam, Brussels, Zurich, and Geneva. London remained the leading international financial center in the four decades leading up to World War I.[10]:74–75[15]:12–15 Since then, New York and London have developed leading positions in different activities and some non-Western financial centres have grown in prominence, notably Tokyo, Hong Kong and Singapore.

Rise of London

London has been a leading international financial centre since the 19th century, acting as a centre of lending and investment around the world.[10]:74–75[141]:149 English contract law was adopted widely for international finance, with legal services provided in London.[142] Financial institutions located there provided services internationally such as Lloyd's of London (founded 1686) for insurance and the Baltic Exchange (founded 1744) for shipping.[143] During the 20th century London played an important role in the development of new financial products such as the Eurodollar and Eurobonds in the 1960s, international asset management and international equities trading in the 1980s, and derivatives in the 1990s.[15]:13[5]:6,12–13,88–9[38]

London continues to maintain a leading position as a financial centre in the 21st century, and maintains the largest trade surplus in financial services around the world.[144][145][146] However, like New York, it faces new competitors including fast-rising eastern financial centres such as Hong Kong and Shanghai. London is the largest centre for derivatives markets,[147] foreign exchange markets,[148] money markets,[149] issuance of international debt securities,[150] international insurance,[151] trading in gold, silver and base metals through the London bullion market and London Metal Exchange,[152] and international bank lending.[5]:2[38][153] London benefits from its position between the Asia and U.S. time zones,[154] and has benefited from its location within the European Union,[50]:1 though this may end following the outcome of the Brexit referendum of 2016 and the decision of the United Kingdom to leave the European Union. As well as the London Stock Exchange, the Bank of England, the second oldest central bank, and the European Banking Authority are in London, although the EBA is moving to Paris in March 2019 after Brexit.[155]

Rise of New York

Since the middle of the 20th century, New York City, represented by Wall Street, has been described as a leading financial centre.[10]:1[21]:25[22]:4–5 Over the past few decades, with the rise of a multipolar world with new regional powers and global capitalism, numerous financial centres have challenged Wall Street, particularly London and several in Asia, which some analysts believe will be the focus of new worldwide growth.[26]:39–49[156] One source described New York as extending its lead as the world's centre of finance in September 2018; according to Reuters, the think-tank New Financial concluded the “raw” value of domestic and international financial activity like managing assets and issuing equity underscored the position of New York as the world's leading financial centre.[28]

New York City remains the largest centre for trading in public equity and debt capital markets, driven in part by the size and financial development of the U.S. economy.[26]:31–32[157] The NYSE and NASDAQ are the two largest stock exchanges in the world.[30] New York also leads in hedge fund management; private equity; and the monetary volume of mergers and acquisitions. Several investment banks and investment managers headquartered in New York City are important participants in other financial centres.[26]:34–35 The New York Federal Reserve Bank, the largest within the Federal Reserve System, regulates financial institutions and implements U.S. monetary policy,[31][158] which in turn influences the world's economy.[159][160] The three major global credit rating agenciesStandard and Poor's, Moody's Investor Service, and Fitch Ratings – are headquartered or co–headquartered in New York City, with Fitch being co–headquartered in London.

Rise of Asian centres

In Asia, Tokyo emerged as a major financial centre in the 1980s as the Japanese economy became one of the largest in the world.[10]:1 Hong Kong and Singapore developed soon after leveraging their links with London and Britain.[22]:10–11[69] In the 21st century, other centres have grown including Toronto, Sydney, Seoul and Shanghai. Dubai has become a centre for finance in the Middle East, including for Islamic finance. The rapid rise of India has enabled Mumbai to become an emerging financial centre. Linked to the rise of these new IFCs, has seen the rise of "partner OFCs" (offshore tax-havens to which funds are routed), such as Taiwan (a major Sink OFC for Asia, and 7th largest global Sink OFC), Mauritius (a major Sink OFC for S.E Asia, especially India, and Africa, and the 9th largest global Sink OFC).

The private nationwide financial system in China was first developed by the Shanxi merchants, with the creation of so-called "draft banks". The first draft bank Rishengchang was created in 1823 in Pingyao. Some large draft banks had branches in Russia, Mongolia and Japan to facilitate the international trade. Throughout the nineteenth century, the central Shanxi region became the de facto financial centres of Qing China. With the fall of Qing Dynasty, the financial centers gradually shifted to Shanghai, mainly due to its geographical location at the estuary of the Yangtze river, and the control of customs in China. After the establishment of People's Republic of China, the financial centres in China today are Beijing, Shanghai and Shenzhen.

See also

Notes

  1. ^ The IMF definition, and examples, from June 2000.[1]
  2. ^ "Offshore" does not refer to the location of the OFC (i.e. many FSF–IMF OFCs, such as Luxembourg and Hong Kong, are located "onshore"), but to the fact that the largest users of the OFC are nonresident (i.e. the users are located "offshore").
  3. ^ Tax–neutral is a term that OFCs use to describe legal structures where the OFC does not levy any taxes, duties or VAT on fund flows into, during, or exiting (e.g. no withholding taxes) the vehicle. Major examples being the Irish Qualifying investor alternative investment fund (QIAIF), and the Cayman Islands SPC.
  4. ^ This is since circa 2010, after the post 2000 IMFOECDFATF initiatives on common standards, regulatory compliance, and banking transparency, which had significantly weakened the regulatory attraction of OFCs over IFCs and RFCs.[2][3]
  5. ^ The FSF is a group consisting of major national financial authorities such as finance ministries, central bankers, and international financial bodies
  6. ^ The concept of the bourse (or the exchange) was 'invented' in the medieval Low Countries, most notably in predominantly Dutch-speaking cities like Bruges and Antwerp, before the birth of formal stock exchanges in the 17th century. From Flemish cities the term 'beurs' spread to other European states where it was corrupted into 'bourse', 'borsa', 'bolsa', 'börse', etc. In Britain, too, the term 'bourse' was used between 1550 and 1775, eventually giving way to the term 'royal exchange'. Until the early 1600s, a bourse was not exactly a stock exchange in its modern sense. With the founding of the Dutch East India Company (VOC) in 1602 and the rise of Dutch capital markets in the early 17th century, the 'old' bourse (a place to trade commodities, government and municipal bonds) found a new purpose – a formal exchange that specialize in creating and sustaining secondary markets in the securities (such as bonds and shares of stock) issued by corporations – or a stock exchange as we know it today.[116]

References

  1. ^ a b c "Offshore Financial Centers: IMF Background Paper". International Monetary Fund. 23 June 2000.
  2. ^ a b James R. Hines Jr. (2010). "Treasure Islands". Journal of Economic Perspectives. 4 (24): 103–125. Tax havens are also known as “offshore financial centers” or “international financial centers”, phrases that may carry slightly different connotations but nevertheless are used almost interchangeably with “tax havens
  3. ^ a b Gabriel Zucman (August 2013). "THE MISSING WEALTH OF NATIONS: ARE EUROPE AND THE U.S. NET DEBTORS OR NET CREDITORS?" (PDF). The Quarterly Journal of Economics. 128 (3): 1321–1364. Tax havens are low–tax jurisdictions that offer businesses and individuals opportunities for tax avoidance” (Hines, 2008). In this paper, I will use the expression “tax haven” and “offshore financial center” interchangeably (the list of tax havens considered by Dharmapala and Hines (2009) is identical to the list of offshore financial centers considered by the Financial Stability Forum (IMF, 2000), barring minor exceptions)
  4. ^ "Financial Centres: What, Where and Why?" (PDF). The University of Western Ontario. Retrieved 24 May 2015.
  5. ^ a b c d e f Roberts, Richard (2008). The City: A Guide to London's Global Financial Centre. Economist.
  6. ^ "Report from the Working Group on Offshore Centres" (PDF). Financial Stability Forum. 5 April 2000.
  7. ^ Ahmed Zoromé (1 April 2007). "Concept of Offshore Financial Centers: In Search of an Operational Definition" (PDF). International Monetary Fund. IMF Working Paper 07/87
  8. ^ "Global Shadow Banking and Monitoring Report: 2017" (PDF). Financial Stability Forum. 5 March 2018. p. 30. Jurisdictions with the largest financial systems relative to GDP (Exhibit 2–3) tend to have relatively larger OFI [or Shadow Banking] sectors: Luxembourg (at 92% of total financial assets), the Cayman Islands (85%), Ireland (76%) and the Netherlands (58%)
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Busan

Busan (Korean pronunciation: [pu.sɐn]), formerly known as Pusan and now officially Busan Metropolitan City, is South Korea's second most-populous city after Seoul, with a population of over 3.5 million inhabitants. It is the economic, cultural and educational center of southeastern Korea, with its port—Korea's busiest and the 9th-busiest in the world—only about 120 miles (190 km) from the Japanese islands of Kyushu and Honshu. The surrounding "Southeast Economic Zone" (including Ulsan and South Gyeongsang) is now South Korea's largest industrial area.

Busan is divided into 15 major administrative districts and a single county, together housing a population of approximately 3.6 million. The full metropolitan area, including the adjacent cities of Gimhae and Yangsan, has a population of approximately 4.6 million. The most densely built-up areas of the city are situated in a number of narrow valleys between the Nakdong and the Suyeong Rivers, with mountains separating most of the districts. The Nakdong is Korea's longest river and Busan's Haeundae Beach is also the country's largest.

Busan is a center for international conventions, hosting APEC in 2005. It is also a center for sports tournaments in Korea, having hosted the 2002 Asian Games and FIFA World Cup. It is home to the world's largest department store, the Shinsegae Centum City. Busan was added to the UNESCO Creative Cities Network as a "City of Film" in December 2014.

Daejeon

Daejeon (Korean: [tɛ̝.dʑʌn] (listen)) is South Korea's fifth-largest metropolis. Daejeon had a population of over 1.5 million in 2010.

Located in the central region of South Korea, Daejeon serves as a hub of transportation and is at the crossroads of major transport routes. The capital Seoul is about 50 minutes away by KTX high-speed train.

Daejeon is one of South Korea's administration hubs with the Daejeon Government Complex (Other administrative hubs: Seoul, Gwacheon and Sejong). The Korean administration in the 1980s decided to relocate some of its functions from Seoul, the national capital, to other cities. Currently, 12 national government offices, including Korea Customs Service, Small and Medium Business Administration, Public Procurement Service, National Statistical Office, Military Manpower Administration, Korea Forest Service, Cultural Heritage Administration, and Korean Intellectual Property Office, as well as Patent Court of Korea, are located in Daejeon. Korail, Korea Water Resources Corporation, and Korea Minting and Security Printing Corporation are also headquartered in the city.

Daejeon has 18 universities, including KAIST and Chungnam National University. Daejeon has earned its name as "Asia's Silicon Valley" and "high technology city".

The city hosted the Taejon Expo '93 and the International Mathematical Olympiads in 2000. Several important research institutes are based in the city.Daedeok Innopolis (Daedeok Research and Development Special Zone) is composed of 28 government-funded research institutions, as well as 79 private research institutes with as many as 20,000 researchers. In addition, Daejeon established the World Technopolis Association (WTA) in 1998 with the view of realizing regional development through international cooperation with world science cities. The WTA has grown to have 67 members from 32 countries, and it actively cooperates with many international organizations including UNESCO as its official consultative body.

Downtown MRT station

Downtown MRT station (DT17) is an underground Mass Rapid Transit (MRT) station on the Downtown Line, located in Downtown Core, Singapore.

Situated underneath Central Boulevard, it primarily serves the Marina Bay Financial Centre and the future commercial

developments in the Marina Bay area. It is within walking distance to Raffles Place MRT station on the North South and East West lines.

Dubai International Financial Centre

The Dubai International Financial Centre (DIFC) is a special economic zone in Dubai covering 110 ha, established in 2004 and a financial hub for the Middle East, Africa and South Asia (MEASA) markets. DIFC has its own independent, internationally regulated regulator and judicial system, common law framework, global financial exchange, tax-friendly regime, and a large business community. The district houses hundreds of financial institutions, including wealth funds and private investors, but it also hosts multinationals, retail outlets, cafés, restaurants, residential space, public green spaces, hotels and art galleries.

DIFC is one of Dubai's independent free-zones; it offers companies 100% ownership without the need for a local partner. The district is governed by a common-law framework distinct from the UAE legal system, with laws and regulations issued in English. DIFC offers clients a 50-year guarantee of zero taxes on corporate income and profits, complemented by the UAE’s network of double taxation avoidance treaties.

Federal Territories (Malaysia)

The Federal Territories (Malay: Wilayah Persekutuan) in Malaysia comprise three territories: Kuala Lumpur, Putrajaya and Labuan, governed directly by the federal government of Malaysia. Kuala Lumpur is the national capital of Malaysia, Putrajaya is the administrative capital, and Labuan is an offshore international financial centre. Kuala Lumpur and Putrajaya are enclaves in the state of Selangor, while Labuan is an island off the coast of Sabah.

Global Financial Centres Index

The Global Financial Centres Index (GFCI) is a ranking of the competitiveness of financial centres based on over 29,000 financial centre assessments from an online questionnaire together with over 100 indices from organisations such as the World Bank, the Organisation for Economic Co-operation and Development (OECD), and the Economist Intelligence Unit. The first index was published in March 2007. It has been jointly published twice per year by Z/Yen Group in London and the China Development Institute in Shenzhen since 2015, and is widely quoted as a source for ranking financial centres.

Gwangju

Gwangju (Korean pronunciation: [kwaŋ.dʑu]) is the sixth-largest city in South Korea. It is a designated metropolitan city under the direct control of the central government's Home Minister. The city was also the capital of South Jeolla Province until the provincial office moved to the southern village of Namak in Muan County in 2005.

Its name is composed of the words Gwang (Hangul: 광; Hanja: 光) meaning "light" and Ju (주; 州) meaning "province." Gwangju was historically recorded as Muju (무주; 武州), in which "Silla merged all of the land to establish the provinces of Gwangju, Ungju, Jeonju, Muju and various counties, plus the southern boundary of Goguryeo and the ancient territories of Silla" in the Samguk Sagi. In the heart of the agricultural Jeolla region, the city is also famous for its rich and diverse cuisine.

Incheon

Incheon (Hangul: 인천; Hanja: 仁川; Korean pronunciation: [intɕʰʌn]; formerly romanized as Inchŏn; literally "kind river"), officially the Incheon Metropolitan City (인천광역시), is a city located in northwestern South Korea, bordering Seoul and Gyeonggi to the east. Inhabited since the Neolithic, Incheon was home to just 4,700 people when it became an international port in 1883. Today, about 3 million people live in the city, making it South Korea's third most-populous city after Seoul and Busan. The city's growth has been assured in modern times with the development of its port due to its natural advantages as a coastal city and its proximity to the South Korean capital. It is part of the Seoul Capital Area, along with Seoul itself and Gyeonggi Province, forming the world's fifth largest metropolitan area by population.

Incheon has since led the economic development of Korea by opening its port to the outside world, ushering in the modernization of Korea as a center of industrialization. In 2003, the city was designated as Korea's first free economic zone. Since then, large local companies and global enterprises have increasingly invested in the Incheon Free Economic Zone, including Samsung which chose Songdo International City as its new investment destination for its bio industry.

As an international city, Incheon has held numerous large scale international conferences, such as the Incheon Global Fair & Festival in 2009. The 17th Asian Games Incheon 2014 was also held in Incheon on 19 September 2014. Incheon has established itself as a major transportation hub in northeast Asia with the Incheon International Airport and Incheon Port. The city is also home to the Green Climate Fund, an international organization addressing environmental issues.

Labuan

Labuan (Jawi: لابوان), officially the Federal Territory of Labuan (Malay: Wilayah Persekutuan Labuan, Jawi: ولايه ڤرسكوتوان لابوان), is a federal territory of Malaysia. It is made up of the eponymous Labuan Island and six smaller islands, and is located off the coast of the state of Sabah in East Malaysia. Labuan's capital is Victoria and is best known as an offshore financial centre offering international financial and business services via Labuan IBFC since 1990 as well as being an offshore support hub for deepwater oil and gas activities in the region. It is also a tourist destination for people travelling through Sabah, nearby Bruneians and scuba divers. The name Labuan derives from the Malay word labuhan which means harbour. Labuan is often referred to as the pearl of Borneo.

Labuan International Business and Financial Centre

Labuan International Business and Financial Centre (IBFC) is a special economic zone of the Malaysian government based on the island of Labuan off the Borneo coast. It was established in 1990 and has been marketed as having a unique position to tap investment opportunities in Asia and beyond.The Labuan IBFC shares a common time zone with many large Asian cities and its location between China and India as well as its proximity to several other financial centres has been used to promote the Labuan IBFC as a convenient location for business dealings. Labuan has been designated as a financial centre and free trade zone by the Malaysian government.

List of tallest buildings in Singapore

The city-state of Singapore has over 8,600 completed high-rises, the majority of it being located in the Downtown Core, the city centre of Singapore. In the city, there are about 80 skyscrapers. Tanjong Pagar Centre currently holds the title of tallest building in Singapore. It stands at 290m (951 ft), exempted from the height restriction of 280m in the Central Business District.

Singapore's history of skyscrapers began with the 1939 completion of the 17-storey Cathay Building. The 70-metre (230 ft) structure was, at the time of its completion, the tallest building in Southeast Asia; it was superseded by the 87-metre (285 ft) Asia Insurance Building in 1954, which remained the tallest in Singapore until the 100 m (328 ft) Shaw Centre was completed in 1958. Singapore went through a major building boom in the 1970s and 1980s that resulted from the city's rapid industrialisation. During this time, the Overseas Union Bank Centre became the tallest building in the city-state; the 280 m (919 ft) structure was also the tallest building in the world outside of North America from its 1986 completion until 1989, when the Bank of China Tower in Hong Kong was completed. The skyscraper-building boom continued during the 1990s and 2000s, with 30 skyscrapers at least 140 m (459 ft) tall, many of them residential towers, constructed from 1990 through 2008.

Since 2000, there has been a sharp increase in the number of skyscrapers under construction in the city area, particularly in the Marina Bay district. One project completed in Marina Centre is the Marina Bay Financial Centre, which includes 3 office towers offering 280,000 square metres (3,000,000 sq ft) of prime Grade A office space, 2 residential developments offering 649 luxurious apartments and a 16,400-square-metre (176,000 sq ft) retail mall, named Marina Bay Link Mall. There are also several new developments in the city's shopping hub, Orchard Road. The Orchard Residences is a completed 218 m (715 ft), 52-floor tower being built in conjunction with ION Orchard, a shopping centre just beside Orchard MRT Station. In addition, the 245 m (804 ft) Ocean Financial Centre, a 43-floor skyscraper, is built in Raffles Place.

Marina Bay Financial Centre

The Marina Bay Financial Centre (abbreviation: MBFC) is a mixed-use development located along Marina Boulevard and Central Boulevard at Marina Bay, Singapore. It consists of three office towers, two residential towers and retail space at Marina Bay Link Mall, occupying a 3.55 hectare site.The construction of the Marina Bay Financial Centre development comprises two phases, with its first phase completed in 3Q 2010. The entire development was completed in 2012 and the grand opening of Marina Bay Financial Centre was officiated by Singapore Prime Minister Lee Hsien Loong on 15 May 2013.The first phase consists of the office Towers 1 (33 storeys) and 2 (50 storeys), Marina Bay Residences with 428 units and 94,500 square feet (8,780 m2) of the retail mall. The local architect for phase 1 was DCA Architects Pte Ltd. The second phase comprises office Tower 3 (46 storeys), 84,500 square feet (7,850 m2) of the retail mall and Marina Bay Suites with 221 units. Marina Bay Suites attained TOP in June 2013. For this major project, Schindler Singapore supplied a total of 105 units of elevators and 6 units of escalators.Clyde & Co Clasis Singapore Private Limited, currently located on the 30th floor of the office Tower 3, houses the Honorary Consulate of Iceland.

Offshore financial centre

An Offshore Financial Centre or OFC is defined as a country or jurisdiction that provides financial services to nonresidents on a scale that is incommensurate with the size and the financing of its domestic economy. "Offshore" does not refer to the location of the OFC (many FSF–IMF OFCs, such as Luxembourg and Hong Kong, are located "onshore"), but to the fact that the largest users of the OFC are nonresident (e.g. they are "offshore"). The IMF lists OFCs as a third class of financial centre, with International Financial Centres (IFCs), and Regional Financial Centres (RFCs); there is overlap (e.g. Singapore is an RFC and an OFC).

During April–June 2000, the FSF–IMF produced the first list of 42–46 OFCs using a qualitative approach. In April 2007, the IMF produced a revised quantitative-based list of 22 OFCs, and in June 2018, another revised quantitative-based list of 8 major OFCs, who are responsible for 85% of OFC financial flows (which includes, Ireland, the Caribbean, Luxembourg, Singapore, Hong Kong and the Netherlands). The removal of currency and capital controls, the early driver for the creation and use of many OFCs in the 1960s and 1970s, saw taxation and/or regulatory regimes become the main reasons for using OFCs from the 1980s. Progress from 2000 onwards from IMF–OECD–FATF initiatives on common standards, regulatory compliance, and banking transparency, has significantly weakened the regulatory attraction of OFCs. Academics now consider the activities of OFCs to be synonymous with tax havens, with a particular focus on corporate tax planning BEPS tools, tax-neutral asset structuring vehicles, and shadow banking/asset securitization.

Research in 2013–14, showed OFCs harboured 8–10% of global wealth in tax-neutral structures, and act as hubs for U.S. multinationals, in particular, to avoid corporate taxes via base erosion and profit shifting ("BEPS") tools (e.g. the double Irish). A study in July 2017, Conduit and Sink OFCs, split the understanding of an OFC into 24 Sink OFCs (e.g. traditional tax havens, to which a disproportionate amount of value disappears from the economic system), and 5 Conduit OFCs (e.g. modern corporate tax havens, through which a disproportionate amount of value moves toward the Sink OFCs). In June 2018, research showed that OFCs had become the dominant locations for corporate tax avoidance BEPS schemes, costing US$200 billion in lost annual tax revenues. A June 2018 joint-IMF study showed much of the FDI from OFCs, into higher-tax countries, originated from higher-tax countries (e.g. the U.K. is the largest investor in itself, via OFCs).

Shanghai World Financial Center

The Shanghai World Financial Center (SWFC; Chinese: 上海环球金融中心) is a supertall skyscraper located in the Pudong district of Shanghai. It was designed by Kohn Pedersen Fox and developed by the Mori Building Company, with Leslie E. Robertson Associates as its structural engineer and China State Construction Engineering Corp and Shanghai Construction (Group) General Co. as its main contractor. It is a mixed-use skyscraper, consisting of offices, hotels, conference rooms, observation decks, and ground-floor shopping malls. Park Hyatt Shanghai is the tower's hotel component, comprising 174 rooms and suites occupying the 79th to the 93rd floors, which at the time of completion was the highest hotel in the world. It is now the third-highest hotel in the world after the Ritz-Carlton, Hong Kong, which occupies floors 102 to 118 of the International Commerce Centre.On 14 September 2007, the skyscraper was topped out and is 492 metres (1,614.2 ft), making it the 9th tallest building in the world and the fourth tallest structure in Mainland China. The SWFC opened to the public on 28 August 2008, with its observation deck opening on 30 August. The observation deck offers views from 474 m (1,555 ft) above ground level.The SWFC has been lauded for its design, and in 2008 it was named by architects as the year's best-completed skyscraper. In 2013, the SWFC was exceeded in height by the adjacent Shanghai Tower, which is China's tallest structure as of 2017. Together, The Shanghai World Financial Center, The Shanghai Tower and The Jin Mao Tower form the world's first adjacent grouping of three supertall skyscrapers.

Suzhou IFS

Suzhou International Financial Square (Chinese: 苏州国际金融中心), is a 92-floor, 452-meter skyscraper in the Industrial Park, Suzhou, Jiangsu, located to the east of Jinji Lake. It is a multi-purpose building which includes apartments, hotels and offices.

Taipei 101

Taipei 101, sometimes stylized TAIPEI 101, formerly known as the Taipei World Financial Center – is a landmark supertall skyscraper in Xinyi District, Taipei, Taiwan. The building was officially classified as the world's tallest from its opening in 2004 until the 2010 completion of the Burj Khalifa in Dubai. Its elevators, capable of 60.6 km/h (37.7 mph) used to transport passengers from the 5th to 89th floor in 37 seconds, set new records. In 2011 Taipei 101 received a Platinum rating under the LEED certification system to become the tallest and largest green building in the world. The structure regularly appears as an icon of Taipei in international media, and its fireworks displays are a regular feature of New Year's Eve broadcasts.

Taipei 101's postmodernist architectural style evokes Asian traditions in a modern structure employing industrial materials. Its design incorporates a number of features that enable the structure to withstand the Pacific Rim's earthquakes and the region's tropical storms. The tower houses offices and restaurants as well as both indoor and outdoor observatories. The tower is adjoined by a multi-level shopping mall that claims the world's largest ruyi symbol as an exterior feature.

Taipei 101 is owned by Taipei Financial Center Corporation. The skyscraper opened on 31 December 2004.

Trade Centre 2

Trade Centre 2 (Arabic: المركز التجاري الثانية‎), also known as Dubai Financial Centre, is a locality in Dubai, United Arab Emirates (UAE). Trade Centre 2 is located in the western Dubai, along Sheikh Zayed Road. It borders Trade Centre 1 to the north, Business Bay to the south, and Zabeel to the east. Trade Centre 2 begins at Trade Centre Roundabout (Interchange No. 1), at the intersection of Sheikh Zayed Road and route D 63 (Al Dhiyafa Road) and terminates at Interchange No. 2 (Defence Roundabout). Like Trade Centre 1, Trade Centre 2 does not have a local road system; it is bounded to the east by 310th Road and to the south by route D 71 (Al Doha Street).

Trade Centre 2 consists of commercial and residential skyscrapers along Sheikh Zayed Road. Important landmarks in Trade Centre 2 include Dubai World Trade Centre, Emirates Towers, Rose Tower, 21st Century Tower, Angsana Hotel & Suites, Dusit Dubai and Falcon Tower .

Ulsan

Ulsan (Korean pronunciation: [ul.s͈an]), officially the Ulsan Metropolitan City, is South Korea's seventh-largest metropolitan city and the eight-largest overall with a population of over 1.1 million inhabitants. It is located in the south-east of the country, neighboring Busan to the south and facing Gyeongju to the north.

Ulsan is the industrial powerhouse of South Korea, forming the heart of the Ulsan Industrial District. It has the world's largest automobile assembly plant operated by the Hyundai Motor Company; the world's largest shipyard, operated by Hyundai Heavy Industries; and the world's third largest oil refinery, owned by SK Energy. In 2017, Ulsan had a GDP per capita of $65,093, the highest of any region in South Korea.

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