Global Financial Centres Index (GFCI)

The City of London Corporation has launched an independent Global Financial Centres Index (GFCI), and has commissioned Z/Yen to develop and manage the Index.  The GFCI is an ‘index of indices’, based on a number of existing rankings, in combination with a regular survey of senior industry figures.  The Index will be a dynamic product, which will track changing perceptions of cities as financial centres on an ongoing basis.

We would be grateful for your opinions on any financial centres with which you are familiar.  Please be assured that answers will be kept confidential, and used only to compile the GFCI.  The survey should take less than five minutes to complete.  We will send you a copy of our report.

Take the Survey Now (external link)
View March 2007 Report
View March 2007 Executive Summary

The GFCI builds upon previous independent research commissioned by the City of London Corporation to evaluate London’s relative competitiveness as a financial centre:

• Centre for the Study of Financial Innovation, “Sizing up the City – London’s Ranking as a Financial Centre”, City of London Corporation (June 2003).
• Z/Yen, “The Competitive Position of London as a Global Financial Centre”
  
  , City of London Corporation (November 2005).

These studies concluded that the key factors for financial centre competitiveness were, in order of importance:

• the availability of skilled personnel;

• the regulatory environment;

• access to international financial markets;

• the availability of business infrastructure;

• access to customers;

• a fair and just business environment;

• government responsiveness;

• the corporate tax regime;

• operational costs;

• access to suppliers of professional services;

• the quality of life;

• cultural and language issues;

• the quality and availability of commercial property;

• the personal tax regime.

Both reports compared London with other financial centres including New York City, Frankfurt and Paris.  The GFCI builds upon these and ranks 46 financial centres on an ongoing basis.

The GFCI ranks cities on the basis of their attractiveness to financial services professionals.  It is based on what we describe as a ‘component factor model’. This is a statistical model built up with different types of data components or inputs.  There are two specific inputs to the GFCI:

• individual indices measuring the competitive position of financial centres;

• responses to a regular survey asking finance professionals to rate centres as locations in which to conduct their business.

The GFCI is dynamically updated.  This process permits, for instance, a recently changed index of office rental costs to adjust the competitiveness of London and the other financial centres.

The process of creating the GFCI can be outlined diagrammatically as:

 

The component factor model answers these types of question:

“If an investment banker rates Singapore with a certain rating, then, based on the set of index scores for Singapore, how would that person rate Paris based on the set of index scores for Paris?”

or:

“If an pension fund manager rates Edinburgh with a certain rating, then, based on the set of index scores for Edinburgh, how would that person rate Milan on the set of index scores for Milan?”

A few features of building the GFCI using both external indices and a survey are worth noting:

• every time an input survey is updated, there will be automatic adjustments to the competitiveness ratings;
• regular input surveys of people’s impressions will change the model, thus the ratings;
• there will be several potential inputs to each of the competitiveness factors;
• sub-indices can be developed by using the sectors represented by survey respondents;
• the component factor model could be interrogated in a ‘what if’ mode, for instance “how much would London rental costs need to fall in order to increase London’s ranking against New York?”

Take the Survey Now (external link)

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Read some of Z/Yen‘s other published research projects.