[PDF Notes] What are the Factors that lead London as International Centre of Finance?

Many factors contributed for the evolution and development of London as a famous international center of finance:

(i) Britain’s growing imperialist power during the 19th century increased its trade and commercial links with many countries of the world. Hence, London became a great international commercial and financial center.

(ii) England enjoyed continuous political stability for a long period which is a necessary precondition for economic growth and financial activities.

(iii) London had huge amounts of capital resources, part of which were earned by England through export surplus, and part were reserves of foreign governments held in London banks.

(iv) London had the tradition of meeting all its obligations in gold. Hence a bill on London generally used to function as an international currency due to IRS easy convertibility into gold.

(v) London has developed certain money market institutions, like, acceptance houses and discount houses. Other international finance centers (e.g., New York and Paris) do not have such institutions.

(w) London also had developed fully organised banking system which promoted confidence and attracted foreign capital.

(vi) London money market has always been a free market without any interference from the government.

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