Financial centre

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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. Lower Manhattan viewed from Brooklyn.jpg
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.

A financial centre is defined by the IMF as encompassing: [lower-alpha 1] 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 Cayman Islands, Dublin, and Singapore. [lower-alpha 2]

International Monetary Fund International organisation

The International Monetary Fund (IMF) is an international organization headquartered in Washington, D.C., consisting of 189 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. Formed in 1944 at the Bretton Woods Conference primarily by the ideas of Harry Dexter White and John Maynard Keynes, it came into formal existence in 1945 with 29 member countries and the goal of reconstructing the international payment system. It now plays a central role in the management of balance of payments difficulties and international financial crises. Countries contribute funds to a pool through a quota system from which countries experiencing balance of payments problems can borrow money. As of 2016, the fund had SDR477 billion.

New York City Largest city in the United States

The City of New York, usually called either New York City (NYC) or simply New York (NY), is the most populous city in the United States. With an estimated 2018 population of 8,398,748 distributed over a land area of about 302.6 square miles (784 km2), New York is also the most densely populated major city in the United States. Located at the southern tip of the state of New York, the city is the center of the New York metropolitan area, the largest metropolitan area in the world by urban landmass and one of the world's most populous megacities, with an estimated 19,979,477 people in its 2018 Metropolitan Statistical Area and 22,679,948 residents in its Combined Statistical Area. A global power city, New York City has been described as the cultural, financial, and media capital of the world, and exerts a significant impact upon commerce, entertainment, research, technology, education, politics, tourism, art, fashion, and sports. The city's fast pace has inspired the term New York minute. Home to the headquarters of the United Nations, New York is an important center for international diplomacy.

London Capital of the United Kingdom

London is the capital and largest city of both England and the United Kingdom. Standing on the River Thames in the south-east of England, at the head of its 50-mile (80 km) estuary leading to the North Sea, London has been a major settlement for two millennia. Londinium was founded by the Romans. The City of London, London's ancient core − an area of just 1.12 square miles (2.9 km2) and colloquially known as the Square Mile − retains boundaries that follow closely its medieval limits. The City of Westminster is also an Inner London borough holding city status. Greater London is governed by the Mayor of London and the London Assembly.

Contents

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. City of London skyline from London City Hall - Sept 2015 - Crop Aligned.jpg
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.

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, [lower-alpha 3] 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. [lower-alpha 4]

A global city, also called world city or sometimes alpha city or world center, is a city which is a primary node in the global economic network. The concept comes from geography and urban studies, and the idea that globalization is created, facilitated, and enacted in strategic geographic locales according to a hierarchy of importance to the operation of the global system of finance and trade.

Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations and selling their related cash flows to third party investors as securities, which may be described as bonds, pass-through securities, or collateralized debt obligations (CDOs). Investors are repaid from the principal and interest cash flows collected from the underlying debt and redistributed through the capital structure of the new financing. Securities backed by mortgage receivables are called mortgage-backed securities (MBS), while those backed by other types of receivables are asset-backed securities (ABS).

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]

Asset management refers to systematic approach to the governance and realization of value from the things that a group or entity is responsible for, over their whole life cycles. It may apply both to tangible assets and to intangible assets. Asset management is a systematic process of developing, operating, maintaining, upgrading, and disposing of assets in the most cost-effective manner.

Insurance equitable transfer of the risk of a loss, from one entity to another in exchange for payment

Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss

A financial intermediary is an institution or individual that serves as a middleman among diverse parties in order to facilitate financial transactions. Common types include commercial banks, investment banks, stockbrokers, pooled investment funds, and stock exchanges. Financial intermediaries reallocate otherwise uninvested capital to productive enterprises through a variety of debt, equity, or hybrid stakeholding structures.

Definitions

FSF–IMF approach

In April 2000, the Financial Stability Forum ("FSF"), [lower-alpha 5] 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]

The Financial Stability Forum (FSF) was a group consisting of major national financial authorities such as finance ministries, central bankers, and international financial bodies. It was first convened in April 1999 in Washington. At the 2009 G20 London summit, the G20 nations established a successor to the FSF, called the Financial Stability Board with an expanded membership and broadened mandate.

  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]

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

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)

The Central District of Hong Kong, one of the main financial centres in Asia, seen from the Peak. 13-08-09-peak-by-RalfR-01.jpg
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 Flag of the United States.svg New York City 794
2 Flag of the United Kingdom.svg LondonĆ787
3 Flag of Hong Kong.svg Hong Kongć783
4 Flag of Singapore.svg SingaporeĆ772
5 Flag of the People's Republic of China.svg Shanghai 770
6 Flag of Japan.svg Tokyo 756
7 Flag of Canada (Pantone).svg Toronto 755
8 Flag of Switzerland.svg ZürichΔ†739
9 Flag of the People's Republic of China.svg Beijing 738
10 Flag of Germany.svg 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)

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. Skyline Frankfurt am Main 2015.jpg
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 (IFCD), the top ten financial centres in the world were: [14]

RankChange
Centre
Rating
1Steady2.svg Flag of the United States.svg New York City 87.72
2Steady2.svg Flag of the United Kingdom.svg LondonĆ86.64
3Increase2.svg 1 Flag of Japan.svg Tokyo 84.57
4Increase2.svg 1 Flag of Singapore.svg SingaporeĆ77.23
5Decrease2.svg 2 Flag of Hong Kong.svg Hong Kongć77.10
5Steady2.svg Flag of the People's Republic of China.svg Shanghai 77.10
7Steady2.svg Flag of France.svg Paris 64.83
8Steady2.svg Flag of Germany.svg Frankfurt 60.27
9Increase2.svg 2 Flag of the People's Republic of China.svg Beijing 59.98
10Decrease2.svg 1 Flag of the United States.svg 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.

The New York Stock Exchange on Wall Street, the world's largest stock exchange by listed capitalisation. Photos NewYork1 032.jpg
The New York Stock Exchange on Wall Street, the world's largest stock exchange by listed capitalisation.
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 agencies Standard 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.
The London Stock Exchange in the City of London, the largest exchange in Europe by capitalisation. Paternoster Square.jpg
The London Stock Exchange in the City of London, the largest exchange in Europe by capitalisation.
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]
The Tokyo Stock Exchange, the largest stock exchange in Asia. TokyoStockExchange1144.jpg
The Tokyo Stock Exchange, the largest stock exchange in Asia.

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.

The International Finance Centre in Hong Kong, opened in 2003. IFC, Hong Kong Island (2796343561).jpg
The International Finance Centre in Hong Kong, opened in 2003.

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.

The Frankfurt Stock Exchange building, which dates back to 1879. Frankfurt Am Main-Neue Boerse von Suedosten-20120222.jpg
The Frankfurt Stock Exchange building, which dates back to 1879.
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]
Sydney's northern CBD serves as the financial and banking hub of the city SydneyCBDfromTower.jpg
Sydney's northern CBD serves as the financial and banking hub of the city

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

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). Gravure van het Oost Indisch Huis (17e eeuw).jpg
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).
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. SA 3025-De binnenplaats van de Beurs van Hendrick de Keyser.jpg
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 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. The Dam in Amsterdam, by Gerrit Adriaensz Berckheyde.jpg
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.

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 agencies Standard 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. India is also making an International Financial Center GIFT City from scratch. GIFT city is now functional and has already won the crown of fastest emerging International Finance Center of South Asia. 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]

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    Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system. This may be handled by either a government or non-government organization. Financial regulation has also influenced the structure of banking sectors by increasing the variety of financial products available. Financial regulation forms one of three legal categories which constitutes the content of financial law, the other two being market practices, case law.

    The global financial system is the worldwide framework of legal agreements, institutions, and both formal and informal economic actors that together facilitate international flows of financial capital for purposes of investment and trade financing. Since emerging in the late 19th century during the first modern wave of economic globalization, its evolution is marked by the establishment of central banks, multilateral treaties, and intergovernmental organizations aimed at improving the transparency, regulation, and effectiveness of international markets. In the late 1800s, world migration and communication technology facilitated unprecedented growth in international trade and investment. At the onset of World War I, trade contracted as foreign exchange markets became paralyzed by money market illiquidity. Countries sought to defend against external shocks with protectionist policies and trade virtually halted by 1933, worsening the effects of the global Great Depression until a series of reciprocal trade agreements slowly reduced tariffs worldwide. Efforts to revamp the international monetary system after World War II improved exchange rate stability, fostering record growth in global finance.

    An offshore bank is a bank regulated under international banking license, which usually prohibits the bank from establishing any business activities in the jurisdiction of establishment. Due to less regulation and transparency, accounts with offshore banks were often used to hide undeclared income. Since the 1980s, jurisdictions that provide financial services to nonresidents on a big scale, can be referred to as offshore financial centres. Since OFCs often also levy little or no tax corporate and/or personal income and offer, they are often referred to as tax havens.

    Financial services economic service provided by the finance industry

    Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companies, consumer-finance companies, stock brokerages, investment funds, individual managers and some government-sponsored enterprises. Financial services companies are present in all economically developed geographic locations and tend to cluster in local, national, regional and international financial centers such as London, New York City, and Tokyo.

    Bank Hapoalim Israel’s largest bank

    Bank Hapoalim is one of Israel's largest banks.

    Economy of Toronto

    The economy of Toronto is the largest contributor to the Canadian economy, at 20% of national GDP, and an important economic hub of the world. Toronto is a commercial, distribution, financial and industrial centre. It is the banking and stock exchange centre of Canada, and is the country's primary wholesale and distribution point. Ontario's wealth of raw materials and hydroelectric power have made Toronto a primary centre of industry. The metropolitan area of Greater Toronto produces more than half of Canada's manufactured goods. The economy of Toronto is growing rapidly.

    The main elements of Japan's financial system are much the same as those of other major industrialized nations: a commercial banking system, which accepts deposits, extends loans to businesses, and deals in foreign exchange; specialized government-owned financial institutions, which fund various sectors of the domestic economy; securities companies, which provide brokerage services, underwrite corporate and government securities, and deal in securities markets; capital markets, which offer the means to finance public and private debt and to sell residual corporate ownership; and money markets, which offer banks a source of liquidity and provide the Bank of Japan with a tool to implement monetary policy.

    Big Bang (financial markets) drastic changes affecting the London Stock Exchange and implemented on 27 October 1986

    The phrase Big Bang, used in reference to the sudden deregulation of financial markets, was coined to describe measures, including abolition of fixed commission charges and of the distinction between stockjobbers and stockbrokers on the London Stock Exchange and change from open-outcry to electronic, screen-based trading, effected by Margaret Thatcher in 1986.

    Economy of London

    London, the capital city of the United Kingdom, is one of the world's leading financial centres for international business and commerce and is one of the "command centres" for the global economy.

    Stifel Financial Corp. is an American multinational independent investment bank and financial services company created under its present name in July 1983 and listed on the New York Stock Exchange on November 24, 1986. Its predecessor company was founded in 1890 as the Altheimer and Rawlings Investment Company and is headquartered in downtown St. Louis, Missouri.

    A tax haven is defined as a country or place with very low "effective" rates of taxation for foreign investors. In some traditional definitions, a tax haven also offers financial secrecy. However, while countries with high levels of secrecy but also high rates of taxation, can feature in some tax haven lists, they are not universally considered as tax havens. In contrast, countries with lower levels of secrecy but also low "effective" rates of taxation, appear in most § Tax haven lists. The consensus around effective tax rates has led academics to note that the term "tax haven" and "offshore financial centre" are almost synonymous.

    BNP Paribas CIB

    BNP Paribas Corporate and Institutional Banking (CIB) is the global investment banking arm of BNP Paribas, the largest banking group in the world. In October 2010, BNP Paribas was ranked by Bloomberg and Forbes as the largest bank and largest company in the world by assets with over US$3.1 trillion. BNP Paribas CIB's main centres are in Paris and London, with large scale operations in New York, Hong Kong, and Singapore, and smaller operations in almost every financial centre in the world. It employs 185,000 people across 56 countries and provides financing, advisory and capital markets services. BNP Paribas CIB is a globally recognised leader in two areas of expertise: trading derivatives on all asset classes, and structured financing. BNP Paribas CIB also has a large corporate advisory network in Europe and Asia. BNP Paribas CIB has 13,000 clients, consisting of companies, financial institutions, governments, investment funds and hedge funds.

    Offshore financial centre corporate-focused tax havens

    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, but to the fact that the largest users of the OFC are nonresident. The IMF lists OFCs as a third class of financial centre, with International Financial Centres (IFCs), and Regional Financial Centres (RFCs); there is overlap.

    Financial services in Gibraltar refers to the services provided in the British Overseas Territory of Gibraltar by the finance industry: banks, investment banks, insurance companies, credit card companies, consumer finance companies, government-sponsored enterprises, and stock brokerages.

    Conduit and Sink OFCs Classification of tax havens

    Conduit OFC and Sink OFC is an empirical quantitative method of classifying corporate tax havens, offshore financial centres (OFCs) and tax havens.

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