The US has five financial centers in the world’s top 10, while Europe pulls in just two, but how do European cities stack up against each other?
In the rapidly evolving landscape of global finance, European cities are in fierce competition to establish themselves as stable financial centers – an attractive label that can bring with it important investment from business owners and increased attention from politicians.
In a new ranking of the Global Financial Centers Index (GFCI), seven European cities are among the top 20 financial centers in the world.
While the US dominates the top end of the list, with New York taking the top spot, London continues to lead in Europe.
It moved slightly closer to the Big Apple compared to last year’s ranking and ranks second globally, but is only slightly ahead of Singapore and Hong Kong in third and fourth place respectively.
How are other European cities doing and what are the factors that make a city a competitive financial centre?
Geneva in Switzerland is the only other European city to join the British capital in the top 10.
Increasing its rating by 29 points, Geneva outperformed its financial competitors in the last year according to the GFCI, climbing from 23rd to 10th place.
The Swiss city is just five points behind San Francisco in fifth place.
Analysts cite Switzerland’s regulatory environment and low levels of corruption as huge advantages for cities’ financial strength.
The financial capital of the EU has overtaken Paris
Frankfurt, home of European Central Bankgrabbed the third top European spot from Paris in the latest report.
Known as the City of the Euro, Frankfurt is also home to Germany’s central bank: the Bundesbank.
The German financial center rose from 17th to 14th place globally in the GFCI, while Paris slipped from 14th to 15th place. However, only one rating point separates them.
Frankfurt is also among the 15 cities that survey participants expect to gain more prominence.
European cities rounding out the top 20 are Luxembourg (16th), Zurich (18th) and Amsterdam (19th).
Germany has five cities in the top 50
It’s Germany the strongest European nation when it comes to looking at the rankings for each country.
Although none of them make the top 10, Germany has five cities in the global top 50 list – the most of any European country.
Apart from Frankfurt, Berlin rose from 26th to 23rd place, while Munich fell from 18th to 26th.
Stuttgart rose slightly from 47th to 46th, while Hamburg fell from 43rd to 49th.
Switzerland is the European nation with the next most cities in the top 50, with Lugano in 47th place. The UK has two, with Edinburgh in 34th place.
The other European cities included in the top 50 are Ireland’s Dublin (25th), Sweden’s Stockholm (40th), Norway’s Oslo (42nd), Italy’s Milan (45th), Spain’s Madrid (48th) and the Finnish Helsinki (50th).
Their individual results clustered closely together, suggesting possible changes in the next GFCI report.
The British Crown Dependencies make the cut, but there is a noticeable east-west divide
Also worth noting are the three British Crown Dependencies, each of which has a place in the top 60. Jersey, Guernsey and the Isle of Man are ranked 52nd, 58th and 59th respectively. They are not part of the United Kingdom, but are self-governing possessions of the British Crown.
The GFCI categorizes Europe into two groups: Western Europe and Eastern Europe and Central Asia, showing a clear division between east and west.
Up to the 60th place in the list, all the best financial centers in Europe are in the group of Western Europe.
Kazakhstan’s Astana is ranked 60th, taking the top spot in the Eastern Europe and Central Asia group. Next is Prague in 79th place and then Tallinn in 87th place.
Away from Europe, the US scored highly with five financial centers in the top 10, reflecting the strength of the US economy. Leading Chinese hubs are also included in the top 20.
What makes a good financial center?
According to GFCI 34, a city’s reputation and business environment have a significant relationship with its financial competitiveness.
The report found that the Corruption Perceptions Index and the Global Economic Freedom Index demonstrate the relationship: a city’s ranking as a financial center rises in line with its increase in economic freedom and decrease in the perception of corruption.
City branding is also an important factor influencing the competitiveness of financial centers.
Analysts say the city’s positive reputation, built through factors such as safety, stability, cultural offerings and quality of life, can attract businesses, professionals and investors.