2023-Public-Sector-Perspectives

Michael Paulus Head of Public Sector Asia, Citi Winnie Zhang Public Sector Asia, Citi What Makes a Successful IFC? T he diversity of the world’s leading International Financial Centers demonstrates that there are multiple routes to success. Yet there are also a number of critical factors that are common to all. What are they? And how — and why — is the Financial Center landscape changing? Natalie Tsui Public Sector Asia, Citi Celestine Law Public Sector Asia, Citi Tobias Cheung Public Sector Asia, Citi For more than 30 years, New York, London, Hong Kong and Singapore have dominated international finance as the four most prominent and successful International Financial Centers (IFCs) in the world. Due to economic, political and health/COVID-19 challenges over the past five years, the relative position of these four cities has changed. At the same time, the landscape is rapidly evolving with new centers gaining ground on the four traditional IFCs. The International Monetary Fund (IMF) has defined offshore finance as the provision of financial services by any agents to non-residents. 1 Offshore finance can be provided via Regional Financial Centers (RFCs), Offshore Financial Centers (OFCs) and International Financial Centers (IFCs), according to the IMF. RFCs and OFCs typically serve smaller domestic economies. In contrast, IFCs are defined as countries or jurisdictions which (1) provide advanced settlement and payment systems, (2) support large domestic economies, (3) maintain deep and liquid markets with diverse sources and uses of funds, and (4) provide a solid regulatory framework to safeguard the interests of involved parties. IFCs often host branches of international institutions and potentially form part of the value chain for these institutions. Critical success factors of IFCs There is no single formula to build a successful IFC. Key elements and priorities vary across different geographies, cultures and time. However, there are certain general factors, both “hard” and “soft”, that are pre-requisites for success (Table 1). 1 h ttps://www.imf.org/external/np/mae/oshore/2000/eng/role.htm#:~:text=Offshore%20finance%20 can%20be%20defined,and%20lending%20to%20non%2Dresidents IFCs are defined as countries or jurisdictions which (1) provide advanced settlement and payment systems, (2) support large domestic economies, (3) maintain deep and liquid markets with diverse sources and uses of funds, and (4) provide a solid regulatory framework to safeguard the interests of involved parties. Citi Perspectives for the Public Sector 11