Cayman drops in financial report

The Cayman Islands has dropped to 26th place overall out of 75 financial centres surveyed in the newest edition of the Global Financial Sectors Index, a Z/Yen Group report released twice annually by the City of London.

The report ranks global financial centres in terms of competitiveness using a factor assessment model which combines external indices with responses to an online questionnaire

Cayman’s drop from 22nd place overall of 62 centres surveyed in the previous report released in March also saw Cayman drop from first to fourth place in the offshore sector, placing behind Jersey, Guernsey and the Isle of Man.

Taking top spots globally were London, New York, Hong Kong and Singapore.

‘This independent research demonstrates three trends: cautious optimism that the global financial services industry is showing signs of recovery; further movement of the financial business centre of gravity towards fast-developing markets – especially in Asia; and the emergence of a ‘Premier League’ of economically and socially interconnected cities,’ said a City of London spokesman.

In comparison to New York’s rating of 790, Cayman’s rating was 608 while the lowest ranked jurisdiction, Reykjavik, rated 415.

The 64 external indices of competitiveness are grouped into five overarching areas: people, business environment, infrastructure, market access and general competitiveness. For the first time, they also include an index of tax information exchange agreements, an index of global intellectual property and three new measures of transport infrastructure.

The online survey results came from 36,497 financial centre assessments from 1,802 financial services professionals collected over a two-year period from July 2007 to June 2009 with the newest responses holding greater weight.

‘There is a strong correlation between GFCI ratings and the OECD status. The offshore centres such as the Channel Islands, which are on the OECD ‘white list’ have higher GFCI ratings whereas centres such as the Bahamas and Gibraltar on the OECD ‘grey list’ are well below the white-listed centres,’ the report says.

It also notes that ‘the scores of the offshore centres have risen… but not by as much as those of many other centres. The rankings of the offshore locations have generally declined, particularly those centres towards the lower end of the table.’

However, the survey respondents only answer questions about jurisdictions they are familiar with, and the top four offshore jurisdictions appear to follow each other in terms of volatility and the level of awareness about them.

‘All the top offshore centres achieve higher than average assessments from other offshore centres and from London but lower assessments from Europe and Asia,’ it states.

‘Very few respondents from North America assessed the offshore centres (even those in the Caribbean). This is perhaps surprising bearing in mind the pressure being applied to the offshore centres by the US government and the wide coverage in the financial press that these centres have been generating.’

The report also concluded that most of the leading centres are also the most well known globally outside of their own home region, while the main concerns regarding competitiveness were the fear of a regulatory backlash that limits the freedom of financial institutions and the loss of skills and experience from the industry.