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Sydney hitting the finance big leagues

 

by Robin Christie | 08 Dec 2015
Sydney is one of the ten largest international finance centres in the world, but it has a long way to go to work its way up the ranks, suggests a new study.

The Centre for International Finance and Regulation (CIFR) funded study, released today, ranks the major international finance centres based on investment banking fees billed from cross-border deals.

The ‘International Competitiveness of Australia’s Financial Services Sector’ study puts Sydney in tenth place, but its findings suggest that the NSW capital can’t rest on its laurels if it’s to remain in the global finance big leagues.

According to study co-authors, Dr Eric Knight from The University of Sydney and Professor Dariusz Wójcik from the University of Oxford, Sydney’s going to need support from all levels of government in the following two key areas if it’s to continue to grow as a finance centre:

Fostering competition measures in the non-finance sectors of the economy.
Encouraging organisations to centralise operations within a city centre.
And there’s plenty of room for growth: The study found that Sydney’s accumulated cross-border fee total since the turn of the century of US$5,126 million was dwarfed by the figure for first placed London of US$130,943 million.

Freedom of movement

The study also points out that flexible, cross-border labour flow is crucial to Sydney’s success as a growing international finance centre. Knight and Wójcik suggest, for example, that the federal government complement existing free trade negotiations with working visas to encourage labour mobility in financial services.

In terms of local action, the two academics have recommended that the NSW government focus on initiatives to drive population growth. And in this regard, Sydney may have a crucial advantage over its Asia-Pacific rivals.

“Unsurprisingly we found that the size of a city’s population is an important determinant of international finance centres, so all things being equal, cities that have the ability to grow their population will outperform,” said Knight.

“This puts places like Singapore and Hong Kong at a disadvantage because their ability to grow their populations is limited by space constraints.”

London leads the pack

To compile its list of the top 10 international financial centres by cross-border fees, the study totalled each city’s fees over the 14-year period between 2000 and 2014 in US dollars. The top 10 are listed as follows:

London: $130,943 million
New York: $125,242 million
Zurich: $100,430 million
Frankfurt: $53,277 million
Paris: $40,482 million
Toronto: $32,967 million
Tokyo: $22,522 million
Amsterdam: $17,948 million
Hong Kong: $9,996 million
Sydney: $5,126 million
Other drivers behind the top performing cities cited by the study include EU membership, workforce flexibility, top universities, presence of a stock exchange, concentration of investment banks and professional services firms, and the ability to enforce contracts.

Interestingly, sector-specific measures such as corporate taxation had limited impact on growth in cross-border fees in financial services, though measures related to individual personal taxation were found to be relevant.


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