The World Economic Forum (WEF) reported in its second annual Financial Development Report that the world’s largest financial centers still lead its 2009 Index rankings, although the effects of financial instability in the economic recession have pulled down their scores compared to last year.
The Report ranks 55 of the world’s leading financial systems and capital markets. The rankings are based on over 120 variables spanning institutional and business environments, financial stability, and size and depth of capital markets, amongst other factors. The financial crisis was acutely felt in most global financial systems and caused most countries’ scores to drop significantly compared to 2008.
The UK, buoyed by the relative strength of its banking and non-banking financial activities, claimed the Index’s top spot. However, the US, first in 2008, slipped to third position behind Australia, largely due to poorer financial stability scores and a weakened banking sector.
Australia showed particular strength this year, rising to second from a lowly eleventh, a trend echoed in many Asia-Pacific economies. Singapore and Hong Kong reached fourth and fifth in the 2009 Index, from tenth and eighth, respectively, in the previous year.
Germany and France suffered a heavy fall in overall scores that pulled them out of the top 10. They dropped in the rankings but demonstrated financial stability scores that were significantly higher than the UK and the US, which found themselves at 37th and 38th, respectively, in the financial stability rankings – worse than, for example, Nigeria, Bangladesh and South Africa.
Kevin Steinberg, Chief Operating Officer, World Economic Forum USA, said: “We hope this report will provide some insight as to how the financial crisis has affected the world’s major financial systems. It draws attention to the diversity of factors beyond financial stability that must be addressed to support the role of financial systems in driving economic growth. The United Kingdom and US may still show leadership in the rankings, but their significant drops in score show increasing weakness and imply their leadership may be in jeopardy.”
Some developing countries performed well in the financial stability section of the Index. Chile came in third, while Malaysia, Mexico and Brazil were all in the top 15. Norway and Switzerland took the top two spots in this category, with Hong Kong third and Singapore fifth.
The WEF stated that there is necessarily a lag in obtaining complete cross-country data used to calculate the Index. As successive iterations of the report are published, it added, the long-term effects of the crisis on financial system development would become increasingly clear.
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