What is an offshore financial center? What are the main characteristics of OFCs?
What will be an ideal response?
Offshore financial centers are cities or countries that engage in a variety of financial transactions and that provide significant tax advantages to companies and individuals who do business there. These centers provide an alternative, usually cheaper, source of funding for MNEs so that they don't have to rely strictly on their own national markets. Offshore financial centers have one or more of the following characteristics:
a. a large foreign-currency market for deposits and loans
b. a market that is a large net supplier of funds to the world financial markets
c. a market that is an intermediary or pass-through for international loan funds
d. economic and political stability
e. an efficient and experienced financial community
f. good communications and supportive services
g. an official regulatory climate favorable to the financial industry, in the sense that it protects investors without unduly restricting financial institutions
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