The Global Financial Centres (Index 23)
The Global
Financial Centres
Index 23
MARCH 2018
Financial Centre Futures
We are pleased to present the twenty-third ediꢀon of the Global
Financial Centres Index (GFCI 23).
In March 2007, Z/Yen released the first ediꢀon of the GFCI, which conꢀnues to provide evaluaꢀons of compeꢀꢀveness and rankings for the major financial centres around the world.
In July 2016 the China Development Insꢀtute (CDI) in Shenzhen and Z/Yen Partners in London established a strategic partnership for research into financial centres. We conꢀnue our collaboraꢀon in producing the GFCI.
The GFCI is updated every March and September and receives considerable aꢁenꢀon from the global financial community. The index serves as a valuable reference for policy and investment decisions.
Z/Yen is the City of London's leading commercial think-tank. Z/Yen was founded in 1994 to promote societal advance through beꢁer
finance and technology. Z/Yen has built its pracꢀce around a core of high-powered project managers, supported by experienced technical specialists so that clients get experꢀse they need, rather than just resources available. The firm is headquartered in London, but Z/Yen is commiꢁed to the ‘virtual office’ concept and is an intense user of technology in order to improve flexibility and benefit staff.
The CDI is a leading naꢀonal think-tank that develops soluꢀons to public policy challenges through broad-scope and in-depth research to help advance China’s reform and opening-up to world markets.
The CDI has been working on the promoꢀon and development of China’s financial system since its establishment 29 years ago. Based on rigorous research and objecꢀve analysis, CDI is commiꢁed to providing innovaꢀve and pragmaꢀc reports for governments at different levels in China and corporaꢀons at home and abroad.
The author of this report, Mark Yeandle, would like to thank
Mike Wardle, Bikash Kharel, Shevangee Gupta, Michael Mainelli,
Carol Feng, Peng Yu, and the rest of the GFCI team for their contribuꢀons with research, modelling, and ideas. The Global Financial Centres Index 23 1
Foreword
2018 is set to be a year of change in Kazakhstan’s
financial landscape as the fully-fledged launch of the Astana Internaꢀonal Financial Centre (AIFC) healthcare faciliꢀes as well as lifestyle opꢀons bring the most comfortable condiꢀons and serve the needs and tastes of different people reallocaꢀng to Astana from undoubtedly unveils a new chapter of reform and around the globe. modernisaꢀon in the country’s financial sector.
In a short span of 20 years, Astana has already been recognised as a poliꢀcal and cultural centre and now, it is also placed as a new desꢀnaꢀon in the map of global
financial centres. It is a very important moment for
Astana, as today, for the first ꢀme, it is featuring in the Global Financial Centre Index, globally recognised
Kazakhstan has always been in the forefront of innovaꢀons and structural reforms. Within just a quarter of the century, Kazakhstan has asserted a reputaꢀon of a regional leader deservedly achieved through years of poliꢀcal stability and a strong commitment to economic liberalisaꢀon in combinaꢀon benchmark assessing the compeꢀꢀveness of internawith the immense stocks of natural resources. Since its ꢀonal financial hubs. This milestone is an independence, Kazakhstan has succeeded in increasing acknowledgment of our efforts by global financial its economy five ꢀmes with total country wealth players. exceeding $110 billion. The achievements of the past years laid out a firm and solid foundaꢀon to face the current global economic challenges with confidence and focus on further aspiraꢀons to achieve long-term sustainable growth and maintain its leading posiꢀons on the regional and global stage. In fact, AIFC has been gaining tremendous response over the last three years when His Excellency, President
Nazarbayev has first introduced his vision of building an internaꢀonal financial centre. AIFC has become an enabling partner to the variety of financial hubs, internaꢀonal organisaꢀons, development insꢀtutes,
AIFC is the unrivalled financial centre aimed at creaꢀng financial corporaꢀons and companies of different scale. uncontested market space for the region of more than Among our most honoured relaꢀonships are the 300 million consumers. It is the first and sole financial strategic partnership with the largest world stock excentre among enꢀre CIS counꢀes who pioneered in changes, Nasdaq Inc. and Shanghai Stock Exchange. introducing a common-law framework designed to
They view AIX, AIFC’s stock exchange, as the main bring the favourable environment for business growth. plaꢃorm for financing the “Belt and Road” projects in
To earn global community’s confidence in AIFC, the most trusted, influenꢀal and well-recognised judges were nominated to the AIFC Court. This is clear the all Central Asian region. AIX is also missioned to host the large scaled privaꢀzaꢀon program of the country’s major naꢀonal companies. The trust and evidence of Kazakhstan and AIFC’s highest commitment support of our global partners give us confidence that to the rule of law, transparency and accountability. we will conꢀnue in our mission to develop the world-class financial centre for the whole region of Central Asia, the Caucasus, Eurasian Economic Union, the Middle East, West China, Mongolia and Europe.
Since incepꢀon, we have invested a significant amount of ꢀme and effort to create best in the class financial centre with a most compelling ecosystem. AIFC’s fundamentals lie within a top-notch legal and Commemoraꢀng a successful launch of AIFC coinciding regulatory regime, no corporate tax regime, depth and with the 20th anniversary of Astana this year, we are breadth in financial services and instruments’ offering, honoured to host AIFC’s Grand Opening Ceremony on highly supporꢀve and flexible environment fostering the long-term growth and innovaꢀve development of its parꢀcipants. AIFC is aimed to become a home for
July 5th, 2018. It is a historical event for us and will allow sharing our plans and long-term vision, demonstrate our credenꢀals and comparaꢀve the best talents and experts by supporꢀng their career advantages as well as engage global industry specialists development and promoꢀng the best working in the most trending topics’ discussions. I welcome the environment, not to menꢀon a city that offers the very readers of GFCI 23 to share this high standards of living. historical day with us.
Astana is a young and fast-growing city that has made its mark on the world map. Astana is oꢂen referred as a city of the future. Modern infrastructure and logisꢀcs developed based on smart city concept, futurisꢀc city architecture represenꢀng a miracle of urban
Kairat Kelimbetov
Governor of AIFC construcꢀon, variety of housing, educaꢀon and 2 The Global Financial Centres Index 23
GFCI 23 Summary and Headlines
GLOBAL FINANCIAL CENTRES INDEX 23
•
Western European financial centres remain volaꢀle. The top five centres rose in the raꢀngs. Most of the lower placed centres lost ground. Hamburg, Munich, Monaco, and Madrid, rose strongly in the ranks, with other improvements for Paris, Jersey, Edinburgh and Lisbon. Hamburg in parꢀcular rose 38 places in the ranks.
•
We researched 110 centres for this ediꢀon of the Global Financial Centres
Index (GFCI 23). The number of financial centres in the main index has increased from 92 to 96 with the addiꢀon of Astana, Baku, New Delhi and Tianjin from the associate centres list.
There are 14 associate centres awaiꢀng potenꢀal inclusion in the main index.
•
•
In the Asia/Pacific region, the leading centres improved their raꢀngs. There were significant rises in the ranks for Qingdao,
Bangkok, Kuala Lumpur and Busan. Tianjin and New Delhi are new entrants to the GFCI.
•
•
GFCI 23 was compiled using 103 instrumental factors. These quanꢀtaꢀve measures are provided by third parꢀes including the World Bank,
The Economist Intelligence Unit, the OECD, and the United Naꢀons. Details can be found in Appendix 4.
North American centres generally achieved improved raꢀngs and improved their ranks accordingly. This was a reversal from GFCI
22. The excepꢀon was Washington DC, which dropped 20 places in the rankings.
Montreal also dropped by one place
(although its raꢀng was 22 higher than in
GFCI 22).
The instrumental factors were combined with 28,599 financial centre assessments provided by respondents to the GFCI online quesꢀonnaire
•
All centres in the Eastern Europe and Central Asia suffered a fall in their raꢀngs.
However, Cyprus, Istanbul and Moscow rose in the ranks. Tallinn and Riga both fell over
30 places in the ranks. Astana and Baku are new entrants to the GFCI.
(
Details of the 2,340 respondents are shown opposite. Further details of the methodology behind GFCI 23 can be found in Appendix 3.
•
•
In the Middle East and Africa, only Dubai and Abu Dhabi increased their raꢀngs.
Mauriꢀus, Riyadh, and Casablanca improved their ranking despite falls in their raꢀngs.
THE RESULTS
•
There is an overall increase in confidence for the leading centres.
Signs of a bias towards stronger and more established centres are evident with the top 25 centres all rising in the raꢀngs. Raꢀngs fell for all of the lowest
50 centres.
All centres in Laꢀn America and the Caribbean fell in the GFCI raꢀngs except for the Cayman Islands. Despite the fall in the raꢀngs, six centres rose in the ranks with the Bahamas leading the way rising 22 places.
The Cayman Islands are now the leading centre in the region.
•
London and New York remain at the top of the rankings and the gap between them in raꢀngs closed to one point on a scale of 1,000. Hong Kong retains third place.
London’s raꢀng rose less than the other four top centres. There is now less than 50 points between the top five centres. San Francisco and Boston moved into the top ten,
•
European ‘island’ centres fell back aꢁer rising in GFCI 22. The Briꢀsh Crown
Dependencies of Jersey, Guernsey, and the Isle of Man all fell in the raꢀngs. replacing Beijing and Zurich.
Respondents
Chart 1 | GFCI 23 Respondents by Industry Sector
Banking
Finance
Government
Regulatory
Insurance
Investment Management
Professional Services
Trade Association
Chart 2 | GFCI 23 Respondents by Region
Western Europe
Asia/Pacific
North America
Middle East Africa
Eastern Europe Central
Asia
Latin America the Caribbean
Other
Chart 3 | GFCI 23 Respondents by Organisaꢀon Size (Number of Employees)
Fewer than 100
100 to 500
500 to 1,000
1,000 to 2,000
2,000 to 5,000
More than 5,000
Other 4 The Global Financial Centres Index 23
Table 1 | GFCI 23 Ranks and Raꢀngs
GFCI 23 GFCI 22 Change in Change in
▲14
▲37
▲37
▲23
▲24
▲30
▲18
Centre
Rank Rank Rating Rating Rank Rating
London 10794 1780
New York 2793 2756 0
Hong Kong 3781 3744 0
Singapore 4765 4742 0
Tokyo 5749 5725 0
Shanghai 6741 6711 0
Toronto 7728 7710 0
San Francisco 8726 17 693
▲9 ▲33
▼1 ▲17
▲9 ▲32
▼1 ▲18
▼1 ▲24
▼1 ▲22
▲10 ▲35
▲3 ▲25
▼7 ▲9
Sydney 724 8707 9
Boston 722 19 690 10
Beijing 721 10 703 11
Melbourne 12 720 13 696
Montreal 13 719 12 697
Chicago 14 718 24 683
Vancouver 15 717 18 692
Los Angeles 17 712 23 683
Shenzhen 18 710 20 689
Dubai 19 709 18 691
Frankfurt 20 708 11 701
Luxembourg 21 701 14 695
Cayman Islands 22 700 31 671
Osaka 23 692 21 688
Paris 24 687 26 680
Abu Dhabi 25 683 25 682 0
Geneva 26 682 16 694
Seoul 27 679 22 686
Guangzhou 28 678 32 668
Hamburg 29 676 67 628
Taipei 30 673 27 677
Dublin 31 666 30 672
Casablanca 32 664 35 665
Qingdao 33 662 47 649
Tel Aviv 34 661 34 666 0
Munich 35 660 50 646
Bermuda 36 656 29 673
Bangkok 37 643 61 634
Calgary 38 642 71 624
Jersey 39 637 40 658
Kuala Lumpur 40 632 55 640
Madrid 41 631 59 636
Stockholm 42 629 39 660
Edinburgh 43 628 52 643
Wellington 44 621 38 661
Warsaw 45 620 36 664
Busan 46 618 70 625
Doha 47 617 45 651
Washington DC 48 616 28 676
Zurich 16 713 9704
▲6 ▲29
▲2 ▲21
▼1 ▲18
▼9 ▲7
▼7 ▲6
▲9 ▲29
▼2 ▲4
▲2 ▲7
▲1
▼10 ▼12
▼5 ▼7
▲4 ▲10
▲38 ▲48
▼3 ▼4
▼1 ▼6
▲3 ▼1
▲14 ▲31
▼5
▲15 ▲14
▼7 ▼17
▲24 ▲9
▲33 ▲18
▲1 ▼21
▲15 ▼8
▲18 ▼5
▼3 ▼31
▲9 ▼15
▼6 ▼40
▼9 ▼44
▲24 ▼7
▼2 ▼34
▼20 ▼60
The Global Financial Centres Index 23 5
Table 1 (conꢀnued) | GFCI 23 Ranks and Raꢀngs
Centre
GFCI 23 GFCI 22 Change in Change in
Rank Rank Rating Rank Rating Rating
▼33
▼33
New Tianjin 588 63 New New New
New New Delhi 560 78 New New New
Astana New 548 88 New New New
Baku New 511 95 New New New
Glasgow 49 049 647 614
Amsterdam 50 33 667 613
Bahrain 51 51 645 612 0
Johannesburg 52 48 648 610
Guernsey 53 41 657 605
Monaco 54 68 627 604
Oslo 602 55 46 650
Mauritius 601 56 69 626
Isle of Man 600 57 56 639
Copenhagen 599 58 43 655
Bahamas 596 59 81 614
British Virgin Islands 594 60 37 663
Milan 593 61 54 641
Brussels 592 62 57 638
Vienna 583 64 42 656
Rome 579 65 74 621
Gibraltar 576 66 75 620
Sao Paulo 574 67 63 632
Riyadh 573 68 77 618
Liechtenstein 570 69 64 631
Mexico City 569 70 73 622
Prague 567 71 58 637
Cyprus 566 72 76 619
Mumbai 565 73 60 635
Lisbon 564 74 79 616
Buenos Aires 563 75 90 600
Istanbul 562 76 78 617
Malta 561 77 85 609
Tallinn 559 79 44 653
Panama 558 80 88 602
Rio de Janeiro 557 81 82 613
Chengdu 556 82 86 604
Moscow 555 83 89 601
Manila 554 84 66 629
Helsinki 553 85 83 612
Trinidad and Tobago 552 86 65 630
Riga 551 87 53 642
Budapest 547 89 72 623
Jakarta 546 90 62 633
St Petersburg 531 91 87 603
Athens 525 92 84 611
Reykjavik 521 93 91 598
Almaty 519 94 80 615
Dalian 501 96 92 595
▼17 ▼54
▼4 ▼38
▼12 ▼52
▲14 ▼23
▼9 ▼48
▲13 ▼25
▼1 ▼39
▼15 ▼56
▲22 ▼18
▼23 ▼69
▼7 ▼48
▼5 ▼46
▼22 ▼73
▲9 ▼42
▲9 ▼44
▼4 ▼58
▲9 ▼45
▼5 ▼61
▲3 ▼53
▼13 ▼70
▲4 ▼53
▼13 ▼70
▲5 ▼52
▲15 ▼37
▲2 ▼55
▲8 ▼48
▼35 ▼94
▲8 ▼44
▲1 ▼56
▲4 ▼48
▲6 ▼46
▼18 ▼75
▼2 ▼59
▼21 ▼78
▼34 ▼91
▼17 ▼76
▼28 ▼87
▼4 ▼72
▼8 ▼86
▼2 ▼77
▼14 ▼96
▼4 ▼94 6 The Global Financial Centres Index 23
Table 2 lists ‘Associate Centres’, which are included within the quesꢀonnaire but have yet to acquire the number of assessments necessary to be included within the main index.
Table 2 | Associate Centres
in the Last 24 months Assessments
Number of Assessments Mean of Centre
Cape Town 615 131
GIFT City-Gujarat 115 505
Hangzhou 105 706
Barbados 85 520
79 Sofia 443
Karachi 79 542
Tehran 74 453
Kuwait City
73 555
Nairobi 65 506
Santiago 60 618
Bratislava 54 467
Stuttgart 21 519
Andorra 16 450
San Diego New New
Chart 4 shows the average raꢀng of the top five centres in each region. This demonstrates that the historical dominance of the leading centres in
Western Europe and North America has been eroded over ꢀme. The average assessment of the top five financial centres in the Asia/Pacific region is now ahead of the comparable figure for
Western Europe and North America. The top centres in other regions, especially in Laꢀn
America and Eastern Europe and Central Asia have closed the gap on other regions but have fallen back in GFCI 23.
Chart 4 | GFCI 23 The Mean Raꢀng of the Top Five Centres in Each Region
775
725
675
625
575
525
475
425
375
Asia/Pacific
Western Europe
North America
Middle East Africa
Latin America the Caribbean
Eastern Europe and Central Asia The Global Financial Centres Index 23 7
Chart 5 shows the performance of the top five
financial centres over ꢀme. There has been no change in the top five posiꢀons. London and New separaꢀng them.
York remain in first and second places although there is now only one point (on a scale of 1,000) Chart 5 | The Top Five Centres— GFCI Raꢀngs Over Time
850
800
750
700
650
600
London
New York
Hong Kong
Singapore
Tokyo
The GFCI quesꢀonnaire asks respondents which
Table 3 shows the top 15 centres menꢀoned. Five centres they think will become more significant in the next few years. of the top seven centres are Asian.
Table 3 | The 15 Centres Likely to Become More Significant
Centre Mentions in last 24 months
GIFT City - Gujarat 24
Shanghai 126
Qingdao 110
Singapore 55
Frankfurt 42
Casablanca 35
Hong Kong 32
Beijing 31
Dublin 29
Astana 26
Luxembourg 23
Chengdu 22
Seoul 21
Dubai 18
Toronto 17 8 The Global Financial Centres Index 23
Areas of Compeꢀꢀveness
The instrumental factors used in the GFCI model are grouped into five broad factors of Human Capital, Infrastructure, Financial Sector
Development, and Reputaꢀon. Chart 6 shows compeꢀꢀveness: Business Environment, the GFCI taxonomy:
Chart 6 | GFCI 23 Areas of Compeꢀꢀveness
Areas of Competitiveness
Business Financial Sector
Environment Development
Human Capital Infrastructure
Reputation
Depth and Breadth of Industry Clusters
Built
Infrastructure
Availability of Skilled Personnel
City Brand and Appeal
Political Stability and Rule of Law
Institutional and Flexible Labour
Regulatory
Environment
Availability of Capital
Level of Innovation
ICT
Market
Infrastructure
Attractiveness and Cultural
Diversity
Macroeconomic
Environment
Education and Development
Market
Liquidity
Transport
Infrastructure
Comparative
Positioning with
Other Centres
Tax and Cost
Competitiveness
Economic
Output
Quality of Life
Sustainable
Development
To assess how financial centres perform in each of these areas, the GFCI factor assessment model is run separately for each of the five groups of compeꢀꢀveness at a ꢀme.
The top 15 ranked centres in each sub-index are shown in Table 4:
Table 4 | GFCI 23 Top 15 by Area of Compeꢀꢀveness
Financial Sector
Rank Business Environment Human Capital Infrastructure Reputational General
Development
1New York London Hong Kong London London
2New York London London New York New York
New York 3Hong Kong Hong Kong Hong Kong Hong Kong
5San Francisco Tokyo Chicago Shanghai San Francisco
4Singapore Singapore Singapore Singapore Washington DC
6Boston Tokyo Boston Los Angeles Los Angeles
7Washington DC Washington DC Sydney Singapore Chicago
Washington DC 8San Francisco Chicago Chicago Washington DC
Tokyo San Francisco 9Boston San Francisco Los Angeles
10 Boston Toronto Tokyo Zurich Frankfurt
Toronto 11 Shanghai Dubai Frankfurt Qingdao
Montreal Frankfurt Boston 12 Los Angeles Toronto
Montreal 13 Beijing Shanghai Beijing Shanghai
Edinburgh Montreal 14 Sydney Osaka Sydney
Geneva 15 Zurich Toronto Shenzhen Montreal
The top financial centres of the world are well developed and strong in most areas. The top four financial centres overall hold the top four posiꢀons in four of the five sub-indices.
The GFCI quesꢀonnaire asks respondents to indicate which factors of compeꢀꢀveness they consider the most important at the moment. The number of ꢀmes that each area is menꢀoned is shown in Table 5 below:
Table 5 | GFCI 23 Main Areas of Compeꢀꢀveness
Area of Competitiveness Number of Mentions Main Issues
Brexit is a major source of uncertainty for all centres - not just London
Business Environment 645 Corruption and the rule of law remain major factors
Protectionism and barriers to international trade are beginnning to worry many
Terrorism, personal safety and human rights are becoming ever more important
UK and USA respondents fear restrictions in movement of talented staff
A crack-down on tax avoidance (through domicile arbitrage) is important
A need for greater harmonisation of tax laws internationally
More promotion of centres is needed for differentiation
Human Capital 583
Taxation 522
Reputation 518
A reputation as a good and safe place to live grows in importance
ICT links and FinTech advances are hot topics now
Infrastructure 503
Great need for increase air travel connectivity in some financial centres
Will London lose its critical mass after Brexit?
Financial Sector Development 498
Fear of clustering being threatened by protectionism
“I wish that the Brexit negoꢀaꢀons would speed up.
We seem to be in the same posiꢀon of deep uncertainty as we were a year ago...”
INVESTMENT BANKER BASED IN LONDON 10 The Global Financial Centres Index 23
Regulatory Quality
Our research into the compeꢀꢀveness of financial centres indicates that the quality of regulaꢀon in a centre, as well as overall government effecꢀveness are both significant factors in a financial centre’s compeꢀꢀveness.
Charts 7 and 8 map two factors that relate to the quality of government and regulaꢀon and demonstrate the correlaꢀon of these factors with the GFCI 23 raꢀng (the size of the bubbles indicates the relaꢀve GDP of each centre).
The quality of regulaꢀon, the rule of law and the implementaꢀon of regulaꢀon are arguably the most important factors for a financial centre.
Chart 7 | GFCI 23 Raꢀng against Regulatory Quality (supplied by the World Bank)
London
New York
Tokyo
Hong Kong
Singapore
Asia/Pacific
Eastern Europe Central Asia
Latin America the Caribbean
Middle East Africa
North America
Western Europe
BE28 Regulatory Quality
Chart 8 | GFCI 23 Raꢀng against Government Effecꢀveness (supplied by the World Bank)
London
New York
Hong Kong
Tokyo
Singapore
Asia/Pacific
Eastern Europe Central Asia
Latin America the Caribbean
Middle East Africa
North America
Western Europe
BE18 Government Effectiveness
Connecꢀvity
One of the most important benefits of hosꢀng a thriving financial centre is connected to other
financial centres. One way of measuring this connecꢀvity is to look at the number of assessments given to and received from other
financial centres.
Charts 9 and 10 use New York and Chicago as examples to contrast the different levels of connecꢀvity that the two centres enjoy.
Chart 9 | GFCI 23 Connecꢀvity — New York
Chart 10 | GFCI 23 Connecꢀvity — Chicago 12 The Global Financial Centres Index 23
Financial Centre Profiles
Using clustering and correlaꢀon analysis we have idenꢀfied three measures (axes) that determine a financial centre’s profile along different dimensions of compeꢀꢀveness.
‘Speciality’ – the depth within a financial centre of the following industry sectors: investment management, banking, insurance, professional services, and the government and regulatory sector. A centre’s ‘speciality’ performance is calculated from the difference between the GFCI raꢀng and the industry sector raꢀngs.