2. There are many dimensions to an International Financial Centre
(IFC), with various factors integrating to provide the necessary
infrastructure to support international financial business.
Characteristics of an International Financial Centre include:
• A centre from which international financial business can be conducted profitably, easily and
efficiently.
• A centre with skilled management and intellectual talent covering Business, Finance and
interdependent services such as legal and accounting, to provide multi-disciplined teams that
facilitate large cross borders transactions in the shortest possible time frame.
• A centre with deep liquid and sophisticated capital market and world competitive tax and regulatory
regimes with foreign investment and offshore business flow.
• A centre that can add significant value to financial services provided from it, through a workforce
that can respond promptly and in an innovative manner.
• A centre with the World’s best telecommunications and IT capacity and imbued with plentiful, well
educated, multilingual workforce.
• A centre where all facets of financial services: CEOs; senior traders, regional headquarters, treasury
operations, data processing, support functions and call centers, can be located efficiently.
• A centre with convivial and alluring environment for business
3. Global Financial • These are centers that genuinely serve clients from all over the
world in the provision of the widest possible array of IFS;
Centers (GFCs )
Regional Financial • They serve their regional rather than their national economies
examples of such Dubai, Hong Kong;
Centers (RFCs)
• These are centers like Paris, Frankfurt, Tokyo and Sydney that
Ordinary provide a wide range of IFS but cater mainly to the needs of
their national economies rather than their regions or the world –
Financial Centers one may call them national IFCs
Offshore Financial • These are centers that are primarily tax havens for wealth
management and global tax management rather than providing
Centers (OFCs) the full array of IFS.
4. An IFC is inclusive of Offshore Financial Centre (OFC) which essentially provides financial
services thru banks and other agents to non-residents, including the bank intermediation
role of taking deposits from non-residents and lending to non-residents. Other services
provided include fund management, insurance, trust business, asset protection, corporate
planning and tax planning. An OFC can be characterized as centers where the bulk of
financial sector transactions on both sides of the balance sheet are with individuals or
companies that are not residents of OFC, where the transactions are initiated elsewhere,
and where the majority of the institutions involved are controlled by non-residents.
Majority of OFCs have the following characteristics:
Financial systems with Provides some or all of
external assets and the following
Jurisdictions that have liabilities out of opportunities
financial institutions proportion to low or zero taxation;
engaged primarily in domestic financial
business with non- moderate or light
residents; intermediation financial regulation;
designed to finance banking secrecy and
domestic economies; anonymity.
5. The role of a financial system is to
promote economic wellbeing through
financial intermediation, i.e., acting as • Policies concerning financial infrastructure
conduits of savings into investment, and should aim to mitigate risks, increase
the provision of financial infrastructure
for effecting financial transactions. In efficiency, enhance market transparency &
promoting the effective performance of liquidity, thus supporting the safety and
this role by the financial system, the soundness of the financial system.
Governments, Regulatory Authorities,
as well as regulations in place are very • Policies concerning financial
pivotal. intermediation should aim to promote the
The role of government must be stability, integrity, diversity and efficiency
enabling with minimum and only of the financial system.
necessary controls. Government
involvement in the financial system • Policies concerning the regulatory regime
must be reduced to the minimum, should aim to provide a regulatory
except where the private interests of framework that promotes the stability of
financial market participants do not the financial system, an appropriate
align with the public interests as well as
for reasons of competitive fairness or measure of protection to users of financial
commercial viability. services, facilitates competition, and is
The Government should formulate consistent with the standards and
specific policies to promote the efficient practices of major financial centers.
functioning of the financial system in the
following manner –
6. An international financial centre is a place where financial institutions from many
different jurisdictions come together to carry out financial intermediation of an
international dimension.
The Government must seek to enhance policies that will pave way for an
efficient financial sector to metamorphosis into a host that is capable of
supporting a dynamic International Financial Centre by
enhancing the developing payment,
maintaining an strengthening
international clearing and
appropriate corporate governance
competitiveness by settlement systems
economic, regulatory standards with a view
promoting to facilitate the safe
and legal to fostering
international financial and efficient conduct
environment for an international
intermediation and of international and
open, fair and confidence in local
attracting foreign cross-border financial
efficient market; financial market;
investments; activities;
7. In increasingly globalized world, the
future of the financial system lies in
its ability to create a dynamic set of • This ensures that risks in the economy are well
financial players, which are able to distributed among the various sub-sectors.
provide the needed support to the
economy. A well-diversified and • This creates a core of more efficient,
competitive financial system is vital competitive, sound and stable skills that would
for the long-term economic growth facilitate the economic transformation process.
and development of a forward
looking country.
The goal of the monetary authority of an IFC should be geared
towards developing a more resilient, competitive and dynamic
financial system with best practices, that supports and contributes
positively to the growth of the economy through the economic
cycle, and has a core of strong and forward looking domestic
financial institutions that are more technology driven and ready to
face the challenges of globalization.
8. • The range of financial products and services should be offered at the lowest cost to both institutional and
individual consumers. In this regard, improvement in productivity and higher returns on assets for the
Efficiency financial institutions will need to be realized through greater penetration of efficient and low cost
delivery channels, access to scale advantages in processing, procurement and other functions, and
leveraging on world-class skills
• The availability of a broad range of products and services is essential to meet the needs of customers that
can be expected to be increasingly more demanding and sophisticated. The degree of innovation of the
Effectiveness financial institutions will determine the range of products and delivery channels offered. In an
increasingly competitive market, innovation and improved services will be introduced through the
existence of innovative players and a more conducive operational environment.
• A safe, sound and stable financial system that is able to withstand sudden adverse economic and
financial shocks that emanate from within and outside the system without significantly disrupting the
Stability intermediary function and the functioning of the economy. To have a stable system, there must be
efficient, effective and robust financial institutions, strong prudential regulations and supervision, and
efficient and reliable infrastructure.
• While the foundation of a strong financial system is the implementation of effective prudential
Prudential regulations and supervision, this needs to be balanced with the need to provide an environment which is
conducive to the development of an efficient and innovative financial system. A major issue in existing
Regulations offshore centre (Bermuda, British Virgin Island, Cyprus, etc.) has centered on Prudential regulations and
effective supervision.
• The availability of strong infrastructure is crucial to ensure overall stability of the financial system, with a
core of strong domestic institutions and an efficient and stable payments system forming the backbone
Infrastructure of the financial system. This can be achieved through institutional development and capacity building,
increasing the competitive environment, the continuous improvement in the existing payments and
financial markets infrastructure, and instituting a more market-driven consumer protection framework.
9. Strong commitment by Government in promoting International Financial Centre
Well Established Financial Market and Banking System
Professional Financial Services Workforce
Efficient and Effective Infrastructure
Political and Economic stability
Competitive Cost and Tax Regime
Transparent Legal and Regulatory system
10. For a city to facilitate the development of IFC, the city-state should concentrate on improving
the quality of immigration, tertiary education, entertainment facilities and global linkages.
Even when it intervened in the financial sector, it systematically focused on areas that involve
people and face-to-face interaction (such as private banking). A IFC can be successful only if it
can attract international skilled man-power all over the world. The success of such a hub must
be based on its ability to concentrate on a certain kind of business activity. It must engender
the core necessary for human capital development and interaction.
