What is an International Finance Centre?

What is an International Finance Centre?

Sir Mark Boleat

40 years: Executive leadership & banking

An International Financial Centre, or IFC, is a physical area from which financial services are provided to people in other countries. Sir Mark Boleat discusses the types of IFCs, its requirements and recent trends with a specific focus on London's position as an IFC.

An International Financial Centre, or IFC, is a physical area from which financial services are provided to people in other countries. Sir Mark Boleat discusses the types of IFCs, its requirements and recent trends with a specific focus on London's position as an IFC.

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What is an International Finance Centre?

14 mins 58 secs

Overview

An IFC is a centre operating from a physical location that facilitates international activity and operates under a regulatory framework that meets international norms. IFCs provide financial services to international clients as well as support services such as law, accountancy and technology. An IFC has to be attractive to businesses not operating in the jurisdiction and meet a number of inter-related requirements, mainly relating to stability and resources. The markets IFCs operate in change over time in response to economic and political conditions and factors relevant to IFCs themselves.

Key learning objectives:

  • Define an IFC

  • Outline the different sub-categories of IFCs

  • Identify the requirements for an IFC and the criteria the Global Financial Centres index use

  • Identify the recent trends with regard to IFCs

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Summary

What is an IFC?

  • A financial centre operating from a physical location
  • Facilitating international activity
  • Operating under a regulatory framework that meets international norms
  • Providing financial services to international clients
  • Providing support services such as law, accountancy and technology

Define the different sub-categories of IFCs

Some IFCs provide a wide range of financial services globally, such as:
  • London, Singapore, Hong Kong, New York, and (arguably) Dubai and Shanghai
Another group predominantly serves specific regions or product areas:
  • Guernsey (captive insurance), Bermuda (reinsurance), Jersey (channelling investments from the Middle East and Asia into the UK), Hong Kong (a gateway for business into and from China), Dubai (the Middle East), Mauritius (financial services gateway into India).

What are the general requirements for an IFC and what criteria does the Global Financial Centres index use?

An IFC has to:
  • Be attractive to businesses not operating in the jurisdiction
  • Meet a number of inter-related requirements, predominantly relating to stability and resources
  • Benefit from political, economic, legal and regulatory stability
  • Meet international regulatory norms
  • Have good infrastructure: technology, modern offices, high quality communications, good international air links, good housing and local transport, access to talent (including an education system to produce the qualified people to fill lower and middle-level positions)
The Z/Yen Global Financial Centres Index ranks financial centres using five headings:
  • Business environment
  • Human capital
  • Infrastructure
  • Financial centre development
  • Reputation

What is the recent trend in IFCs?

  • The USA using its economic power as a diplomatic weapon
  • China’s increasing power as an economic force and therefore as a user of financial services
  • International tax and regulatory standards have been considerably strengthened
  • Globalisation is increasingly being questioned
  • Brexit will substantially change London’s role
  • Technological developments reduce the importance of proximity.

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Sir Mark Boleat

Sir Mark Boleat

Sir Mark Boleat has held a wide range of board level appointments in the UK and Jersey. He is currently the Chairman of LINK, Eldon Insurance Services and the Governors of the City of London Academy Highbury Grove. Sir Mark is also Vice Chairman of the Advisory Board of the International Business and Diplomatic Exchange.

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