The Global Financial Center’s Index
The Global Financial Centres Index (GFCI) was first published in March 2007 to produce an indicative rating of the competitiveness of each major financial centre in the world. The FCI enables financial centres to be ranked against each other and identifies the changing priorities and concerns of finance professionals. This report, the second in the series (GFCI 2), includes updates to the external indices used in the GFCI model, additional indices, and changes reflecting the perceptions of financial services professionals.
GFCI 2 also includes some enhancements to the GFCI methodology; GFCI 1 results are restated throughout GFCI 2 to reflect those enhancements . The top six centres in GFCI 2 have maintained the same rankings as in GFCI 1. London leads New York slightly in all five areas of competitiveness; people, business environment, market access, infrastructure and general competitiveness. London is a little further ahead of New York than it was in GFCI 1. In GFCI 1 the gap was seven points on a 1,000 point scale. The gap is now 19 points although this is still not a significant margin. GFCI 2 shows, again, that London and New York are the two leading global financial centres. London and New York have slightly increased their lead over the next two strongest centres, Hong Kong and Singapore, and are now 90 points ahead (compared with 88 points ahead in GFCI 1). In GFCI 1, it was clear that Hong Kong and Singapore were the leading Asian centres. These two financial centres are still well ahead of Tokyo. Zurich, a financial centre strongly focused on the two niche sectors of private banking and asset management, is in 5th place. Frankfurt remains in 6th place and Geneva has moved three places up the rankings to 7th place. Centres that have moved significantly since GFCI 1 include Luxembourg which has risen by nine positions to 17th, whilst Wellington, Hamilton (Bermuda), Warsaw and Lisbon have all fallen.
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Regulation on Bank Activities and Mixing Banking and Commerce
Almost in all countries in the world there has been a discussion about whether to allow banks to engage ‘non-traditional’ activities, such as securities underwriting, insurance underwriting and real estate investment, and mixing banking and commerce, that banks own and control non-financial firms, or non-financial firms own and control banks.
In economic theory there are two opposite views about regulations on bank activities and mixing banking and commerce. The supporters of regulatory restrictions stress the following arguments:
1. Conflicts of interest may arise.
Close ties between a commercial bank, engaged in securities business, and its underwriting operations can increase the public’s perceptions of conflicts of interest in the bank and impair the bank’s ability to certify credibly the value of securities it underwrites. There are two sources of conflict (Randall S. Kroszner and Raghuram G. Rajan ,a a, (1997)):
· Banks may have an incentive to bail out of bad bank loans by refinancing these firms in the public market: if a client firm’s prospects deteriorate without the public realizing it, a commercial bank could attempt to persuade its underwriting operation to bring out a public issue on behalf of the firm, misrepresent the issue’s quality to the investing public in order to sell it, and use the proceeds to repay earlier bank loans made to the firm. Read more
