Financial Development Leaders

TIMOTHY A. CLARY/AFP/Getty Images

Financial Development Leaders

The annual Financial Development Report from the Geneva-based World Economic Forum (WEF), now in its second year, has already established itself as a must-read for world policymakers and investors. But sorting out which countries have the most-developed financial markets this year was especially difficult because of the turmoil that has shaken the global economy since 2007, when the U.S. subprime loan crisis and subsequent credit crunch unfolded.

With the help of dozens of prominent bankers, academics, and consultants, the WEF evaluated 55 countries, using scores of quantitative and qualitative measures—from the transparency and liquidity of a country's stock markets to the sophistication of its legal and regulatory framework, and from the quality of business education to the availability of venture capital, mobile phones, and broadband Internet access.

Perhaps the two biggest surprises in this year's ranking came right at the top. The U.S.—which has more financial assets than any other country in the world—fell from No. 1 to No. 3 in its overall financial development rating. What's to blame? Profound instability in financial markets and the dollar, poor commercial access to capital, and weakness in the U.S. regulatory and political environment.

The other surprise was Britain's rise to the No. 1 spot, up from second place last year, despite the recession's especially deep bite there. While the country's huge financial sector has suffered from the same instability that hit the U.S., Britain leads the world on a host of metrics, from the density of insurance and volume of foreign currency transactions to dynamic derivatives trading and the liberalization of financial markets.

For a look at the world's 25 most financially developed nations, ranked from No. 1 down, click on.