The diversity of roles within the financial sector is matched only by the wide range of expertise in countries across the globe. We examine the key strengths of each region.
Europe, Middle East & Africa (EMEA)
Many are questioning London’s credentials for remaining the top global financial centre lately, but the stats still support its status. Nearly 37% of the global average $4 trillion traded daily on the foreign exchange markets goes through the City. It accounts for 46% of turnover in the $1.2 trillion traded daily on the over-the-counter (OTC) derivatives market, and the London Metal Exchange covers 90% of all non-ferrous metals traded in the commodities sector.
Germany has Europe’s largest debt capital markets (DCM) – with $428.3bn worth of deals transacted in 2011. It also has a sizable fund management industry, with $1.9 trillion in assets under management (AUM). France is the Continent’s largest fund management centre, however, with some 600 fund managers overseeing $3.4 trillion in AUM.
Zurich and Geneva are also among the top global financial centres. There are $5.9 trillion in AUM within Switzerland’s wealth management industry, and the country is number one for trading various physical commodities, as well as being a major centre for fund management and reinsurance. Ireland and Luxembourg are renowned for global custody, administering assets of $2.5 trillion and $2.8 trillion, respectively.
The Middle East is attracting more international wealth managers and is home to three of the 10 largest sovereign wealth funds globally. Scotland has a disproportionately large fund management sector and is becoming a hub for investment banking operations.
Both the Netherlands and the Nordic countries have big institutional fund management industries, as does Belgium, home to post-trade servicing firm Euroclear, which clears $760 trillion annually.
United States and Canada
New York City and Wall Street remain the financial centre of North America and home to two of the world’s largest securities exchanges, NYSE-Euronex and Nasdaq. However, most of the largest banks have moved their headquarters to mid-town and their operations to other cities and states.
For example, San Francisco is home to 122 private equity companies, ranking third globally behind New York and London. Its financial district is known as the ‘Wall Street of the West’ with representative offices of all the major investment banks.
Then there’s Chicago, with its giant commodities and derivatives trading operation, accounting for 16% of the estimated global $600 trillion derivatives market.
Boston is the mutual fund capital of the US, home to Fidelity, Putnam and Eaton Vance. The US has $13 trillion in AUM which is 55% of the world’s total. And two cities in Connecticut, Greenwich and Stamford, are among the top 10 cities in the world for hedge funds.
Canada, which has emerged from the financial crisis with its reputation largely intact, has some of the strongest banks in the world, such as Bank of Montreal, RBC, and Toronto Dominion.
North America has not been immune to the eurozone debt crisis. Once the world leader in DCM, deal value in the US trailed EMEA in 2011 with $2.1 trillion vs. $2.2 trillion, respectively. In M&A, however, the US holds the number one slot, with $1 trillion-worth of activity last year.
The rapid rate of growth within Asia’s financial centres has slowed recently, yet Hong Kong, Singapore, Tokyo and Shanghai all remain in the top 10. The wealth held by high-net-worth individuals in Asia-Pacific grew 12.1% to $10.8 trillion between 2009 and 2010, which helped Singapore cement its strong position in private banking. The city state remains a leading trading hub for commodities, foreign exchange and over-the-counter derivatives.
Singapore is also an operations and IT centre for several leading banks, although some operational and risk management functions are moving to lower-cost countries such as India and the Philippines.
Hong Kong’s high equity capital markets (ECM) deal flow, low tax rates, proximity to the growing Chinese market, and status as the main off-shore yuan-trading centre are all boosting its status globally.
Another of Hong Kong’s main strengths is the size of its stock market, which in 2011 had a market capitalisation of $2.3 trillion.
Tokyo is the world’s fifth largest financial centre. It is Asia’s main foreign exchange market, and has the largest fund management industry in the region.
Australia’s financial sector has a comparatively domestic focus and is dominated by its ‘big four’ commercial banks: National Australia Bank, Commonwealth Bank, Westpac and ANZ. The country also has one of the largest pools of AUM in the world (about $1.2 trillion) thanks largely to a compulsory employee superannuation (retirement savings) programme.
The world's financial hubs at a glance (click for big):
Sources: Dealogic, Swiss Bankers Association, Geneva Trading and Shipping Association, City UK, Bunderverband Investment und Asset Management, Association Française de la Gestion Financière, Irish Funds Industry Association, Association of the Luxembourg Fund Industry, Sovereign Wealth Fund Institute, Capgemini RBC Wealth Management World Wealth Report 2012, Monetary Authority of Singapore.