Financial centre

Definitions

FSF–IMF approach

In April 2000, the Financial Stability Forum ("FSF"),^[d] concerned about OFCs on global financial stability produced a report listing 42 OFCs.^[7] In June 2000, the IMF published a working paper on OFCs, but which also proposed a taxonomy on classifying the various types of global financial centres, which they listed as follows (with the description and examples they noted as typical of each category, also noted):^[8]

1. 
   International Financial Centre ("IFC"). Described by the IMF as being large international full–service centres with advanced settlement and payments systems, supporting large domestic economies, with deep and liquid markets where both the sources and uses of funds are diverse, and where legal and regulatory frameworks are adequate to safeguard the integrity of principal–agent relationships and supervisory functions. IFCs generally borrow short–term from non–residents and lend long–term to non–residents. In terms of assets, London is the largest and most established such centre, followed by New York, the difference being that the proportion of international to domestic business is much greater in the former. Examples cited by the IMF were: London, New York and Tokyo;
   
2. 
   Regional Financial Center ("RFC"). The IMF noted that RFCs, like IFCs, have developed financial markets and infrastructure and intermediate funds in and out of their region, but in contrast to IFCs, have relatively small domestic economies. Examples cited by the IMF were: Hong Kong, Singapore, and Luxembourg;
   
3. 
   Offshore Financial Centre ("OFC"). The IMF noted that OFCs are usually smaller, and provide more specialist services, however, OFCs still ranged from centres that provide specialist and skilled activities, attractive to major financial institutions, and more lightly regulated centres that provide services that are almost entirely tax driven, and have very limited resources to support financial intermediation. The IMF listed 46 OFCs in 2000, the largest of which was Ireland, the Caribbean (includes the Cayman Islands, and the British Virgin Islands), Hong Kong, Singapore and Luxembourg.
   

The IMF noted that the three categories were not mutually exclusive and that various locations could fall under the definition of an OFC and an RFC, in particular (e.g. Singapore and Hong Kong were cited).^[8]