2013年-CEPS欧洲政策研究中心_The_Future_of_Europes_Financial_Centres_8页_206kb

The Future of Europe's Financial Centres

Summary by Karel Lannoo

Core Content

The article discusses the evolving landscape of Europe's financial centres, focusing on how EU legislation, particularly the Financial Services Action Plan (FSAP), is reshaping their competitive dynamics. It highlights the increasing importance of a well-defined regulatory and competitive strategy for financial centres in the context of financial market liberalisation and globalisation.

Classification of Financial Centres

Financial centres are broadly classified into three categories:

• International Financial Centres (IFCs): Offer a wide range of financial services, have deep and liquid markets, and are associated with large domestic economies. Examples in Europe include London, Paris, Frankfurt, and Zurich.
• Regional Financial Centres (RFCs): Focus on smaller domestic economies and regional financial activities. Examples include Madrid, Milan, Geneva, Brussels, and Luxembourg.
• Offshore Financial Centres (OFCs): Provide limited specialist services with low taxation and moderate regulation. Examples in Europe include Jersey, Liechtenstein, Monaco, and Gibraltar.

The article also distinguishes between functional financial centres, which serve the real economy, and booking financial centres, which primarily facilitate transactions without generating underlying value. It notes that front office functions (e.g., trading, underwriting) benefit from agglomeration effects, while back office functions can be relocated more easily due to technological advancements.

Impact of EU Legislation

EU legislation, especially the FSAP, is driving a shift in the financial sector by increasing competition and reducing the traditional advantages of financial centres. The prospectus directive, MiFID, and taxation on savings directive are key components of this shift:

• Prospectus Directive: Allows for harmonised capital-raising across the EU, reducing the ability of financial centres to differentiate themselves through regulatory standards. It has led to the creation of alternative platforms like the Euro MTF in Luxembourg and the Professional Securities Market in London.
• MiFID: Enables banks to internalise equity trading, undermining the monopoly of exchanges and promoting a more decentralised market. The implementation of MiFID has been uneven across member states, creating a "variable geometry" in the financial sector.
• Taxation on Savings Directive: Increases transparency and taxes savings held in non-EU countries, leading to repatriation of funds and threatening smaller financial centres. It has also prompted Switzerland and other OFCs to adjust their tax regimes.

SWOT Analysis of European Financial Centres

Key Observations

• London remains the leading financial centre in Europe, with a strong reputation and significant capital-raising activity.
• Dublin and Luxembourg are highlighted as successful examples of small cities that have transformed into specialised financial centres.
• Competition is intensifying, with financial centres increasingly competing on regulatory performance, not just on differences in standards.
• Regulatory harmonisation is a double-edged sword. While it enhances market integration, it also reduces the ability of smaller centres to attract business through regulatory flexibility.
• Labour market flexibility and tax policy are critical for maintaining the attractiveness of financial centres. The UK's flexible regime is often cited as a key factor in London's success.
• EU enlargement has expanded the single market, benefiting Western European financial institutions and reinforcing their dominance.
• Globalisation is both an opportunity and a threat, as it allows for greater integration but also increases pressure on smaller financial centres to adapt.

Conclusion

The future of Europe's financial centres is characterised by increased competition and the need for strategic adaptation. While EU legislation is driving a more integrated and regulated market, it also creates opportunities for financial centres to differentiate themselves through specialisation, human capital, and regulatory efficiency. Smaller financial centres must remain vigilant and focus on these areas to maintain their competitive edge. The examples of Dublin and Luxembourg suggest that with the right policies, even modest cities can become significant financial hubs.