IFCs continue to play a leading role in facilitating and stimulating cross-border investment, as well as managing risk. Whilst legislation changes in onshore nations tend to be slow moving, IFCs are much more ﬂexible, nimble and dynamic, constantly improving their legislature on an ongoing basis. This not only enables them to oﬀer wealth managers superior structuring options, it also means they lead innovation in financial services across the board. Part of this dynamic nature means that IFCs are constantly adopting and adapting legislative initiatives, thereby staying ahead of the curve and becoming ‘evolutionary experts’.
This feature looks at the past, present and future of IFCs, considering what their reputation is built on, what factors aﬀect or inﬂuence choice of IFC, and how IFCs can ensure survival in the face of ongoing legislation and policy restrictions.
The role of international financial centres (IFCs) in fostering legal innovation is one of their most significant, but least recognised contributions to the world economy.
IFCs have historically borrowed and adapted legal concepts and language from each other, as well as from onshore jurisdictions, and have deepened the legal and regulatory structure of the global finance sector by doing so. IFCs have shaped existing statutes for new purposes and drawn on foreign precedents to expand their own case law to support the rapid development of specialised legal rules.
This agility has enabled IFCs to meet otherwise unmet legal needs and to build expertise by handling large volumes of such transactions. This ability to innovate produces economic growth by redistributing risks, channelling capital to growth opportunities, sustaining business enterprise, and creating new products and services.
The Global Financial Centres Index (GFCI) developed from a piece of research on the competitiveness of financial centres that Z/Yen Group undertook for the City of London in 2005.
Previous research compared a small number of centres, typically just London, Frankfurt, Paris, and New York. Financial centre strength was already widely distributed at that point, and Z/Yen developed the GFCI to offer a dynamic measure of the strength of financial centres across the world. The first edition of the GFCI was published in 2007. In September 2020, Z/Yen published the 28th edition of the index, which is updated twice a year.
The GFCI is a factor assessment index that combines two distinct sets of data to create a rating for financial centres:
What makes a good IFC and what does it take to survive? How can IFCs continue to innovate in the face of the never-ending onslaught of legislation and regulations enforced by the EU and OECD, post-COVID 19 challenges, and the challenges of protectionism vs globalisation?