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New Tendencies in the Global Financial System

A profound difference characterises this new phase of world finance: for the first time, financial flows tend to concentrate in new areas, especially in Asia, and for the most part they no longer flow into historic financial centres like London. 

 

Therefore New York, which has the United States’ real economy behind it, appears to be more stable than London, which has instead unexpectedly renounced its hinterland, constituted by the European Union. With the Chinese economy regaining the weight in the world economy that it had before the industrial revolution, Shanghai has become the first financial centre of East Asia, supplanting Hong Kong. The latter seems destined to be surpassed even by Singapore, which can point to Asia’s financial services leadership, which includes countries like Malaysia and Indonesia and that is even moving towards a banking union. Singapore also depends on its own real economy in the most advanced technology sectors, which Hong Kong lacks.
For this reason, while centres such as New York, Shanghai and Singapore can count on markets of at least continental size, and on the issuing of financial instruments in local currency, London and Hong Kong appear destined to fall back on an offshore role, sustained in the short term by de-regulation, but without the real, solid foundations on which stand centres destined to have a future. In the current phase of globalisation, interdependence is maximised at the continental level, the centres of gravity – real financial hubs – multiply, and the function of off-shore hubs is precarious.
The research, even if it is not focused on Europe, begins to identify some post-Brexit perspectives that can be explored. It indicates four competitors (Frankfurt, Paris, Amsterdam and Dublin) and two winners (Frankfurt and Paris). Therefore, there is only one winner, the European Union, which, under Michel Barnier’s guidance, is leading the separation negotiations with intelligence and speed. The biggest battle is over the Clearing Houses that generate the bulk of profits earned by the City of London on the euro market.
The RTI intends to further examine the possible development of European financial centres, in the post-Brexit period, using a virtually unexplored perspective, that of specialisation. Edinburgh compared to London, or Boston compared to New York, are examples of successful specialisations in the management of long-term “patient savings”. From this perspective, the superiority of Frankfurt in insurance and of Paris in the banking sector may suggest the direction of research, with ideas useful for other vocations that may concern, in addition to Dublin and Amsterdam, other cities such as Turin and Milan.
 
By Elena Flor, Secretary General Robert Triffin International

 

It confirms the decisive importance of the hinterland for the lasting affirmation of financial centres.

 
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