Edited by Charlie Karlsson
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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