London as a Financial centre - Lecture 4

Question 1

Why is London important for international banking?

Answer 1

.2007 survey concluded London ranked first for international banking, number of banks, inter-bank market activity, connectivity
.Remained the same after the 2008 Crisis

Question 2

What % share of global bank lending by assets and claims, what % share of global foreign exchange trading and what % share of global interest rate derivatives trading does London have?

Answer 2

.By assets - 16.3%
.By claims - 17.9%
.Global foreign exchange trading - 36.9%
.Global interest rate derivatives trading - 38.8%

Question 3

What activities was the London financial centre leading in 1914?

Answer 3

.Commercial banking
.Money market
.Investment banking
.Stock exchange

Question 4

What activities was the London commercial centre leading in 1914?

Answer 4

.Shipping
.Marine insurance
.Merchants
.Brokers
.Commodity exchange

Question 5

How did the commercial centres decline in the 20th century?

Answer 5

.Business was internalised within multinational corporations
.Moved to Switzerland with low tax and regulation
.London lost its position as a centre for trade and shipping - no longer a hub for movement of commodities and manufactures

Question 6

After WW2, London had to re-invent itself as a place of business, what were the two major ways it achieved this?

Answer 6

1. Composition with money and banking becoming central
2. Orientation
   .Survived due to the tight financial clusters

Question 7

The London Financial cluster is very resilient, how did it survive WW2?

Answer 7

.Britain Never invaded or subject to revolution
.British economy remained one of the worlds largest
.Strong international links with USA
.Strong currency

Question 8

How is the London Financial cluster resilient to competition?

Answer 8

.Rival centres were badly damaged by the war -Paris, Tokyo, Shanghai, Berlin
.Rivals were less well located than London
.Rivals in smaller countries lacking large domestic markets (Sweden Stockholm)
.New York was poorly located with timezones

Question 9

Advantages of London as a financial centre include?

Answer 9

.Greatest location of bank offices
.Location to by-pass restrictions
.Development of markets and services made London attractive
.Collapse of control and restrictions in 1970 saw the need for new inter-bank markets - perfect for London

Question 10

What is the importance of regulation in relation to the London financial centre?

Answer 10

.Absence of regulation made London a choice for all banks and institutions
.British financial system was self regulative
.Foreign banks in London free to operate 1980’s