About the GFCI
The latest Global Financial Centres Index released in September indicate that the Cayman Islands has sunk four places in the global rankings since the last Index was released, to a placement of 26th out of 75 financial centres. Business Editor Lindsey Turnbull reports on the findings of this latest Index. First in a two-part series.
Initially commissioned five years ago by the City of London to study just four top financial centres (London, Frankfurt, Paris and New York), The Z/Yen Group found their investigations into what made financial centres competitive led them to the conclusion that the study needed to be broadened considerably, to include all the world’s financial centres, to make the study far more valuable to its commissioners.
Out of that study developed the Global Financial Centres Index, still commissioned by the City of London, and first published in March 2007. The GFCI has been published every six months ever since and the findings of the sixth edition were released at the end of September.
Focus on offshore
Back in December 2008’s Journal I wrote about Cayman’s disappointment at only achieving 21st place in the GFCI global rankings as at September 2008. Since then, Cayman slipped down a place in the following March 2009 Index and now has dropped a further four places in the latest September 2009 (known as GFCI 6) publication of the Index.
Since a year ago the world has gone through the worst economic recession since the Great Depression and the global financial climate has a vastly changed landscape. Competitor offshore jurisdictions to the Cayman Islands have almost all dropped a few places (Jersey tops the offshore centres in 14th place, down one from the last Index, Guernsey dropped three places to 15th and the Isle of Man dropped seven to 25th). The BVI however managed to climb one place to 33rd position.
The impact of the recent focus by OECD countries on offshore centres has made its mark on the rankings of offshore centres. The GFCI 6 report notes that: “there is a strong correlation between the offshore centres and their OECD status. The offshore centres such as the Channel Islands which are on the OECD ‘White List’ have higher GFCI ratings whereas centres such as the Bahamas and Gibraltar on the OECD ‘Grey List’ are well below the White Listed Centres.”
The Bahamas is ranked 48th (down 12 places) while Gibraltar is ranked 51st, down 18 places from the March 2009 Index.
The report states that it appears “the offshore centres have greater volatility in the assessments given than other leading centres. This might be due to rapid changes in perceptions related to political statements made about offshore centres.”
Former Cayman Islands Monetary Authority Chairman Tim Ridley says Cayman should not be too worried about this drop: “Cayman’s slight drop in the overall rankings is somewhat misleading and should not be too concerning. The drop is principally the result of a number of Asian centres, such as Beijing and Taipei, leaping up the rankings (demonstrating Asia’s recognised growing importance). Cayman in fact received more favourable marks than previously. Also of note is the express mention in the Report that those OFC’s on the OECD white list (like Cayman) clearly benefited and separated themselves from OFC’s still on the grey list.”
Even so, Ridley says this is no time to let the guard down: “Never the less Cayman must work harder to keep its financial services platform competitive and attractive as a location for value added and substantive structures and transactions.”
Cayman Islands Financial Services Association Chairman Anthony Travers dismisses the Index as far as its relevance to the Cayman Islands and says: “Given that transactional focus of the Cayman Islands is about to undergo a significant transformation, the timing of this report, which is at best eurocentric, lacks current relevance.”
Mark Yeandle, of the Y/Zen Group says although the Cayman Islands fell by four places, the rating increased by 17 points (on a scale of 1,000).
He states: “Virtually all offshore centres fell in the ranks in GFCI 6 and they all received lower average assessments (from the online questionnaire) in 2009 that they had in 2007 and 2008.
“The Cayman Islands average assessment s fell by over 10 per cent (less than several of the other offshore centres). The comments we received about the offshore centres reflect the recent focus given by politicians, regulators and international bodies such as the OECD. There is a sense of uncertainty about the future of offshore centres in general (and particularly those – not including the Caymans – that are not co-operative with national tax authorities). This uncertainty has been reflected in the ratings.”
September 2009 Index findings: a return of confidence
Out of the 75 centres rated, 59 have received higher scores than the previous Index and only four have received a lower score, which, says the GFCI 6 report, indicates a return of confidence, especially when compared to the previous March 2009 Index, in which most centres were marked lower and reflected the low point in the markets. “The level of assessments has returned to the scores of last spring and summer reflecting increased optimism and indications that people feel the end of the crisis may be in sight,” the report states.
The top spots
According to the GFCI 6 report, Hong Kong (ranked third) and Singapore (fourth) have demonstrated stable and long term competitiveness over the last two years and they have now joined London and New York as genuine global leaders.
London and New York still top the listing however, with London in first place and New York second, although the gap between the second and third placed centre has been cut from 81 points in the March 09 Index to 45 points in this latest Index. London has actually increased its lead slightly with 16 points between it and New York, up from 13 points in the March 2009 GFCI 5 Index.
The report says that London remains in the top quartile of nearly all instrumental factors and leads in all areas of competitiveness. It also calls for more co-operation between the two leading centres, saying “We have long argued that the relationship between London and New York is mutually supportive and a gain for one does not mean a loss for the other.”
The rise of Asia
All Asian centres have risen in this Index, which the report attributes to the possibility of Asian centres not being so badly affected by the recent economic crisis than many of the leading North American and European centres. The report states: “The rise in Asian centres certainly ties in with the fact that many Asian economies are currently faring better than the main Western economies.”
Top Asian centres include the already mentioned Hong Kong (third) and Singapore (fourth), as well as Shenzhen (fifth), Tokyo (seventh), Shanghai (tenth) and Beijing (22nd).
The biggest climbs of all centres have been made by Asia – Beijing had the greatest climb overall, moving 29 places, Shanghai moving up 25 places Seoul moving 18 and Taipei 17.
As an indication of the potential growth of Asia, when polled as to which centres are likely to become more significant in the next few years, Asia features extremely strongly. Shanghai tops this list, followed by Shenzhen, Hong Kong, Beijing then Singapore.
Next month read about the mixed fortunes of Europe and North America as well as how the centres fare in areas such as competitiveness.