International Financial Centres after the Global Financial Crisis and Brexit by Youssef Cassis

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 Introduction
 A Global Overview from a Historical Perspective
 Youssef Cassis
 OntheeveoftheGlobalFinancial Crisis, the world’s eight leading financial
 centres were New York, London, Tokyo, Frankfurt, Paris, Hong Kong,
 Singapore, and Zurich (with Geneva). Ten years later, the top group was
 made up of the same capital cities, though in a different ranking order
 (Hong Kong and Singapore had definitely overtaken Frankfurt and Paris
 and possibly also Tokyo), plus one newcomer: Shanghai (with Beijing). On
 the face of it, the most severe financial crisis in modern history has hardly
 disturbed the worldofglobalfinance.Inthesameway,theestablishedorder
 does not seem to have been affected by another momentous, though much
 morerecent,event:theBrexitvoteofJune2016.Butarethesechangesreally
 minor? What hides behind the slow shifts in the hierarchy of international
 financial centres? While the ensuing chapters of this book will investigate
 the challenges faced by each of these centres, the object of this introductory
 chapter is to provide a global overview of the development of international
 financial centres in the last ten years and to put these recent events in a
 longer-term historical perspective.
 Three sets of questions have to be addressed. The first concerns inter
national financial centres: what are they, how are they ranked, and what
 should we make of existing rankings? The second is related to the effects
 that global financial crises have had on financial centres: have they led to
 the emergence of new centres, the rise of existing ones, and the decline of
 established ones? But financial crises also directly impinge on the activities of
 international centres: how far have they declined and how speedily have they
 recovered? How much have they been reshaped by new regulation? And the
 third question, which also has some relevance to the Brexit issue, has to do

 with the ability of financial centres to reinvent themselves in the face of new
 adverse conditions or, on the contrary, their inability to resist decline.
 These are not entirely straightforward questions. The ranking of financial
 centres—like all rankings, whether of the largest companies or the richest
 countries—can be contentious, because of the criteria on which these rank-
ings are based and because of the conclusions, at once illuminating and
 meaningless, that can be drawn from these rankings. Historical parallels can
 also be treacherous, yet without taking them into account there would be no
 learning from the past. Even if the general course of financial crises can be
 convincingly modelled, each crisis breaks out and unfolds within a unique
 context. There is thus as much to learn from the differences between each of
 them, especially between past and present, as from their apparent similarities.
 The rest of this chapter will consider in turn each of these three sets of
 questions before introducing the other chapters of the book.
 1.1 The Hierarchy of International Financial Centres
 Financial centres can be defined as the grouping together, in a given urban
 space, of a certain numberof financial services; in a more functional way, they
 can be defined as the places where intermediaries coordinate financial trans-
actions and arrange for payments to be settled. This concentration can chiefly
 be explained by external economies—in other words, the cost reductions that
 firms can achieve as a result of the competition, proximity, and size of the
 sector or the place in which they are operating. For a financial centre, what
 primarily matters is the liquidity and efficiency of markets; the diversity and
 complementarity of financial activities; the availability of professional ser-
vices, technological expertise, and a skilled workforce; and access to high-
quality information. The concentration of financial services can be found at
 several levels: national, regional (in the sense of one part of the world), and
 international—depending on the extent of the geographical area served by a
 centre; while the volume and range of financial services offered by a centre is
 correlated with the breadth of its geographical influence. In other words, there
 exists not only a variety of financial centres, in terms, for example, of special-
ization in certain services, leading to complementarity and cooperation, but
 also a hierarchy, and competition between them. Only a handful of financial
 centres perform a truly global role—hence their importance, as the nerve
 centres of international financial activities, and the significance of the
 changes that might affect the way they fulfil their role.
 The financial capital(s) of the eight countries selected for this analysis can
 be considered as the world’s leading international financial centres—but on
 what basis? Even though an implicit order of importance has always been

International Financial Centres after the Global Financial Crisis and Brexit by Youssef Cassis