Hong Kong tops WEF's financial stability index

Tue Dec 13, 2011 9:43am EST

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ZURICH, Dec 13 (Reuters) - Hong Kong has muscled its way to the top of the World Economic Forum's Financial Stability Index, overtaking the United States and the United Kingdom for the first time, according to a report published on Tuesday.

The United States slipped to second place in the ranking of the world's leading financial systems and capital markets, although its overall score was unchanged from last year.

The United Kingdom fell to third place due to lower scores on securitisation and IPO activity, the Financial Development Report said.

The report, launched in 2008, analyses financial development including the efficiency and size of banking and other financial services, the business environment, financial stability, and the extent of financial disclosure and market liberalisation in each centre.

Hong Kong, which jumped from fourth place last year, has capitalised on a regulatory crackdown on the finance sector in the United States and Europe and on its proximity to China to lure more financial services to its shores.

"Hong Kong's ascent to the top of our index marks a major milestone, the first time in the report's history that the United Kingdom or the U.S. didn't come out on top," said Kevin Steinberg, chief operating officer of the World Economic Forum (WEF) USA.

"While Western financial centres are understandably focused on short-term challenges, this report should serve as a wake-up call that their long-term leadership may be in jeopardy," he said.

Singapore was ranked fourth, followed by Australia, Canada, the Netherlands and Japan respectively. Nigeria was bottom of the list with Venezuela not far behind.

China rose three places from last year to 19th whereas euro zone countries slipped in the rankings as they struggled to contain their debt crisis, including Germany which dropped one place to 14th.

More than 90 percent of countries have not returned to pre-crisis levels in terms of ease of access to credit and loans, venture capital availability and financing through local equity markets, according to the latest report.

"The challenge will be how to encourage economic activity while not fuelling the next credit bubble, which could cause severe consequences down the line," said Isabella Reuttner, senior project manager at the World Economic Forum and editor of the report.

"Therefore, when looking for possible solutions, decision-makers should not lose sight of the long-term consequences while they fix the short-term situation."

The Financial Development Report ranks 60 countries, analysing drivers of financial system and capital market development that support economic growth.

The World Economic Forum said the index aimed to serve as a tool for advanced and emerging economies to benchmark themselves and identify areas for reform. (Reporting by Caroline Copley; Editing by Susan Fenton)

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