Handbook of Research on Cluster Theory

Handbook of Research on Cluster Theory

Handbooks of Research on Clusters series

Edited by Charlie Karlsson

Clusters have increasingly dominated local and regional development policies in recent decades and the growing intellectual and political interest for clusters and clustering is the prime motivation for this Handbook. Charlie Karlsson unites leading experts to present a thorough overview of economic cluster research.

Chapter 15: Clustering in Financial Services

Naresh R. Pandit, Gary A.S. Cook and G.M. Peter Swann

Subjects: economics and finance, regional economics, urban and regional studies, clusters, regional economics


15 Clustering in financial services Naresh R. Pandit, Gary A.S. Cook and G.M. Peter Swann 1 Introduction The primary function of the financial services industry is to intermediate profitably between savers and borrowers in an economy, in effect distributing funds accumulated by savers to meet the demands of borrowers. Two second-order functions are risk pooling and management, and facilitating payments. When considering the location of financial services, it is useful to distinguish between retail and wholesale services. On the whole, retail financial services are directly offered to the general public and the small firm sector. Examples include interest-bearing savings accounts, loans to enable the purchase of residential property, and overdrafts. Such services tend to follow population and so are dispersed in line with the dispersal of the general population. Wholesale financial services, on the other hand, are offered to large companies and governments. Examples include bond and equity issues, help with mergers and acquisitions, and sophisticated financial risk management products such as financial derivatives. In most developed economies, such wholesale services tend to cluster, concentrating in a small number of places (Bindemann, 1999; Davis, 1990; Poon, 2003). Begg (1992) provides a useful typology of such wholesale financial services clusters. At the global level, three clusters are in a leading class of their own: London, New York and Tokyo. These clusters provide a wide range of financial services and are where the headquarters of major financial services firms and institutions are located (Andersson, 2000; Sassen, 1991). Second-order...

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