New York still number 1 financial centre; Frankfurt, Hong Kong pressure London, Cyprus is number 98

New York keeps its first place in the ranking of global financial centres, and London in second place is under pressure from Frankfurt and Shanghai.

Frankfurt jumped seven places in the ranking of the study from the Z/Yen think tank,  the City Of London, and the China Development institute called the Global Financial Centres Index March edition which has just been release. The movement of nearly £900 billion pounds out of the UK to the EU since Brexit, according to the  is thought to be driving Frankfurt’s climb up the list.

London is holding in second place by only one point ahead of Shanghai in third place. Hong Kong took fourth place, and Singapore followed closely in the fifth. But in the specific ranking for the banking sector, London is now in fourth place behind New York, Shanghai and Hong Kong.

Cyprus was ranked number 98, just behind Trinidad & Tobago, and ahead of Gibraltar at 99, but well ahead of Athens at 103. Luxembourg, Cyprus’s biggest competitor in financial services, fell five places 117. Last place fell to China’s Wuhan at number 114.

Within the top 30 centres, Vancouver, Seoul, Sydney, Milan, and Stuttgart rose by more than five places. Centres in Western Europe had mixed fortunes in this  with 12 centres rising in the rankings and 16 falling. Berlin, which is not well known as a financial centre, entered the index for the first time at number 45. Seoul and Sydney were ranked high in the top 20 in Asia.

“Despite some sharp changes, the index shows a relatively high level of stability in the top half of the index, with few centres changing 10 or more places in the rankings. In the lower half of the index, there was more volatility, perhaps reflecting some uncertainty about the resilience of emerging and smaller centres,” the study noted.

In Asia, some financial centres are expected to move up the ranking in the near future – these are Qingdao, Seoul and Guangzhou.

To give a sense of how this ranking is made, the study explains its evaluation of Frankfurt as a financial centre. “Taking Frankfurt’s results, the diagrams show that in the areas of competitiveness subindices, Frankfurt scores well in financial sector development, but scores less well in human capital and reputation. Over time, it has improved its rank in all areas other than reputation. By industry sector, Frankfurt is well-regarded by those working in investment management and insurance and has improved its position in both sectors, but is less well thought of by those from a banking or government & regulatory background.”

Business environment has proved to be the most important factor deciding the attractiveness of a financial centre. Regulation and law should be strong and predictable but adaptable to changing circumstances. Regulators must be educated on new technologies, the report said.

Connectivity is also a critical factor. Financial centres thrive when they develop deep connections with other centres. The GFCI allows us to measure connectivity by investigating the number of assessments given to and received from other financial centres. This is an area in which London leads Frankfurt, for example, with London having connections with a wider spread of centres than Frankfurt. Both are well connected with other European centres; but London is much better connected to the other leading centres in the GFCI.