Financial Centres - Lecture 3

Question 1

What is the role of financial centres?

Answer 1

.Payments are made and received
.Savings are lent
.Funds are borrowed
.Investments are made
.International financial markets can be accessed

Question 2

Since the 1970’s financial systems have been transformed through, what?

Answer 2

.Globalisation - ending exchange controls
.Deregulation - Remove barriers between banks
.Governments - Direct control
.Technology - More communication

Question 3

What is a financial centre?

Answer 3

.A physical location
.Dense cluster of related activities
.Financial activities concentrated in a location

Question 4

Why are financial centres clustered?

Answer 4

.Each firm derives extra benefit from the proximity of other firms
.Sharing of services, access to skills, speed of dissemination of information and risk

Question 5

What is the inertia of financial centres?

Answer 5

.Lack of change
.Inner strengths mean centres are not easily displaced
.New York has remained the financial centre of the USA for 200 years

Question 6

Over the last 100 years, there has been some major shifts of financial centres in some countries(Uncommon), why is this?

Answer 6

.Major shocks
.Berlin changed to Frankfurt after division into West and East
.Paris was an important centre until its decline in the first and second world war

Question 7

What is the significance of the New York financial centre?

Answer 7

.Leading financial centre in the world
.Wall street banks dominate corporate finance globally
.Success derives from the size of the US economy

Question 8

What is the significance of the Tokyo financial centre?

Answer 8

.Leading centre in Asia
.Tokyo banks are important internationally
.Success derives from the Japanese economy’s importance

Question 9

What is the significance of the London financial centre?

Answer 9

.Leading centre in Europe and Internationally
.Leading foreign exchange market
.Hub for international banking
.Most important global money market

Question 10

What is the fundamental aspect of financial centres?

Answer 10

Constant flux between centripetal forces attracting business and centrifugal forces driving it out

Question 11

What are centripetal forces?

Answer 11

.Stability
.Accessibility
.Deep/broad markets
.Freedom from taxes and regulation

Question 12

What are centrifugal forces?

Answer 12

.Instability
.Hostility and exclusion
.Imposition of taxes and regulation
.Cost of offices

Question 13

What are some threats to financial centres?

Answer 13

.Competition domestically and internationally
.Wars, disasters, pandemics, revolution
.Changes in communication technology as this removes the need for clusters

Question 14

Networks can compete with Financial centres, what are their benefits and limitations?

Answer 14

Benefit - Replicate many features as a result of the speed and capacity of modern tech
Limitation - Information flow delays can be critical for markets and decision making

Question 15

Did the 2008 Financial crisis affect the London financial centre?

Answer 15

.No the financial centre did not decline
.Did pose a challenge as it was banks and markets that suffered the most

Question 16

Is Amsterdam a leading financial centre?

Answer 16

.Not anymore
.Lead for around 200 years
.Until the 19th century when it declined