What is a Financial Centre – and can Latvia become one?

28 November, 2016

What is the role of financial services export in Latvia’s economy? How can Latvia become an international financial centre? What is a financial centre and are there different models? How can risks be managed? These were some of the issues discussed by local and international experts, politicians, civil servants and finance professionals at a conference at the Pullman Hotel in Riga on 4 November 2016organized by Certus think-tank, the Latvian Chamber of Commerce and Industry (LRTK), and Dienas Bizness newspaper.


University of Latvia Professor Ramona Rupeika-Apoga elaborated on different models and scales of financial centres around the globe.


A financial centre is a hub that uses the business environment, human resources, regional reputation and the financial sector’s infrastructure to ensure a flow of financial resources.

There are several reasons why financial resources can be relocated:

Different scales of financial centres are formed as resources are redirected to different parts of the world. Global financial centres like London and New York provide a wide spectre of global services. Regional financial centres such as Dubai, Hong Kong and Singapore operate in a particular international region (Europe, Asia, etc.). National financial centres – like Tokyo, Paris, Frankfurt, Sidney – are focused on local residents. Offshore financial centres – Cayman Islands, Gibraltar, the Isle of Man, Liechtenstein, Monaco – provide their clients with an attractive tax regime and confidentiality.


Financial centres also differ in specialization. While each has a unique history there are also common features that include history (many have been significant trading centres),; politics as well as  economic and geographical factors.

For instance, Hong Kong became an international regional financial centre in the 1940s, when its big neighbour China experienced an extended period of political and economic instability. Hong Kong is currently ranked 4th in the Global Financial Centres Index (GFCI 20). Well-considered fiscal and monetary policy, liberal government policy regarding non-residents, and legislation based on British law, has enhanced the development of Hong Kong as a regional financial centre.


Dublin has developed rapidly as a regional European financial centre (31st  place in GFCI 20) due to well-developed financial infrastructure and favourable tax regime.

Riga’s potential as an international financial hub can be seen can be seen in the number of international clients from Eastern Europe (Russia, Ukraine, Belarus, Moldova), the South Caucasus (Armenia, Azerbaijan, Georgia), and the Central Asia (Kazakhstan, Kyrgyzstan Tajikistan, Turkmenistan, Uzbekistan) that are served in the hub.

Moreover, Riga has several advantages to develop as a regional financial centre: A favourable business environment and low political risks; good quality financial services at competitive prices; a highly qualified staff fluent in English and Russian; multiple conventions on the avoidance of double taxation; a legal environment that corresponds with international requirements and standards. Riga is ranked 52nd in the GFCI 20.


Regional financial centres require corresponding national support. Latvia attracts 78% of all international deposits in the three Baltic; However, political support is still needed for Riga to develop its full potential as a regional financial centre.