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A financial centre ( BE), financial center ( AE), or financial hub, is a location with a concentration of
participants Participation or Participant may refer to: Politics *Participation (decision making), mechanisms for people to participate in social decisions *Civic participation, engagement by the citizens in government *e-participation, citizen participation ...
in
banking A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because ...
, asset management,
insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
or
financial markets A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial ma ...
with venues and supporting services for these activities to take place. Participants can include financial intermediaries (such as banks and brokers),
institutional investors An institutional investor is an entity which pools money to purchase securities, real property, and other investment assets or originate loans. Institutional investors include commercial banks, central banks, credit unions, government-link ...
(such as investment managers,
pension fund A pension fund, also known as a superannuation fund in some countries, is any plan, fund, or scheme which provides retirement income. Pension funds typically have large amounts of money to invest and are the major investors in listed and priva ...
s, insurers, and
hedge funds A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as ...
), and
issuers Issuer is a legal entity that develops, registers, and sells securities for the purpose of financing its operations. Issuers may be governments, corporations, or investment trusts. Issuers are legally responsible for the obligations of the issue ...
(such as companies and governments). Trading activity can take place on venues such as exchanges and involve clearing houses, although many transactions take place
over-the-counter Over-the-counter (OTC) drugs are medicines sold directly to a consumer without a requirement for a prescription from a healthcare professional, as opposed to prescription drugs, which may be supplied only to consumers possessing a valid prescr ...
(OTC), that is directly between participants. Financial centres usually host companies that offer a wide range of financial services, for example relating to
mergers and acquisitions Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspec ...
, public offerings, or corporate actions; or which participate in other areas of
finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of f ...
, such as
private equity In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships (LP), which buy and restructure financially weak companies that produce goods and provide services. A private-equity fund is both a t ...
, hedge funds, and
reinsurance Reinsurance is insurance that an insurance company purchases from another insurance company to insulate itself (at least in part) from the risk of a major claims event. With reinsurance, the company passes on ("cedes") some part of its own ins ...
. Ancillary financial services include rating agencies, as well as provision of related
professional services Professional services are occupations in the service sector requiring special training in the arts or sciences. Some professional services, such as architects, accountants, engineers, doctors, and lawyers require the practitioner to hold prof ...
, particularly legal advice and
accounting Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "languag ...
services. The
International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...
's classes of major financial centres are: International Financial Centres (IFCs), such as
New York City New York, often called New York City or NYC, is the List of United States cities by population, most populous city in the United States. With a 2020 population of 8,804,190 distributed over , New York City is also the L ...
,
London London is the capital and List of urban areas in the United Kingdom, largest city of England and the United Kingdom, with a population of just under 9 million. It stands on the River Thames in south-east England at the head of a estuary dow ...
and
Tokyo Tokyo (; ja, 東京, , ), officially the Tokyo Metropolis ( ja, 東京都, label=none, ), is the capital and largest city of Japan. Formerly known as Edo, its metropolitan area () is the most populous in the world, with an estimated 37.46 ...
; Regional Financial Centres (RFCs), such as
Shanghai Shanghai (; , , Standard Chinese, Standard Mandarin pronunciation: ) is one of the four Direct-administered municipalities of China, direct-administered municipalities of the China, People's Republic of China (PRC). The city is located on the ...
,
Shenzhen Shenzhen (; ; ; ), also historically known as Sham Chun, is a major sub-provincial city and one of the special economic zones of China. The city is located on the east bank of the Pearl River estuary on the central coast of southern provi ...
,
Frankfurt Frankfurt, officially Frankfurt am Main (; Hessian: , " Frank ford on the Main"), is the most populous city in the German state of Hesse. Its 791,000 inhabitants as of 2022 make it the fifth-most populous city in Germany. Located on it ...
, and
Sydney Sydney ( ) is the capital city of the state of New South Wales, and the most populous city in both Australia and Oceania. Located on Australia's east coast, the metropolis surrounds Sydney Harbour and extends about towards the Blue Mounta ...
; and Offshore Financial Centres (OFCs), such as Cayman Islands,
Dublin Dublin (; , or ) is the capital and largest city of Ireland. On a bay at the mouth of the River Liffey, it is in the province of Leinster, bordered on the south by the Dublin Mountains, a part of the Wicklow Mountains range. At the 2016 ...
,
Hong Kong Hong Kong ( (US) or (UK); , ), officially the Hong Kong Special Administrative Region of the People's Republic of China (abbr. Hong Kong SAR or HKSAR), is a List of cities in China, city and Special administrative regions of China, special ...
, and
Singapore Singapore (), officially the Republic of Singapore, is a sovereign island country and city-state in maritime Southeast Asia. It lies about one degree of latitude () north of the equator, off the southern tip of the Malay Peninsula, bor ...
. International Financial Centres, and many Regional Financial Centres, are full–service financial centres with direct access to large capital pools from banks, insurance companies, investment funds, and listed capital markets, and are major global cities. Offshore Financial Centres, and also some Regional Financial Centres, tend to specialise in tax-driven services, such as corporate tax planning tools, tax–neutral vehicles, and
shadow banking The shadow banking system is a term for the collection of non-bank financial intermediaries (NBFIs) that provide services similar to traditional commercial banks but outside normal banking regulations. Examples of NBFIs include hedge funds, i ...
/
securitisation Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations (or other non-debt assets which generate receivables) and selling ...
, and can include smaller locations (e.g.
Luxembourg Luxembourg ( ; lb, Lëtzebuerg ; french: link=no, Luxembourg; german: link=no, Luxemburg), officially the Grand Duchy of Luxembourg, ; french: link=no, Grand-Duché de Luxembourg ; german: link=no, Großherzogtum Luxemburg is a small lan ...
), or city-states (e.g. Singapore). The IMF notes an overlap between Regional Financial Centres and Offshore Financial Centres (e.g. Hong Kong and Singapore are both Offshore Financial Centres and Regional Financial Centres). Since 2010, academics consider Offshore Financial Centres synonymous with
tax havens A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, o ...
.


Definitions


FSF–IMF approach

In April 2000, the Financial Stability Forum ("FSF"), concerned about OFCs on global financial stability produced a report listing 42 OFCs. In June 2000, the International Monetary Fund (IMF) published a working paper on OFCs, but which also proposed a taxonomy on classifying the various types of global financial centres, which they listed as follows (with the description and examples they noted as typical of each category, also noted): The IMF noted that the three categories were not mutually exclusive and that various locations could fall under the definition of an OFC and an RFC, in particular (e.g. Singapore and Hong Kong were cited).


Rationale for OFCs

The IMF noted that OFCs could be set up for ''legitimate purposes'' (listing various reasons), but also for what the IMF called ''dubious purposes'', citing tax evasion and money–laundering. In 2007, the IMF produced the following definition of an OFC: ''a country or jurisdiction that provides financial services to nonresidents on a scale that is incommensurate with the size and the financing of its domestic economy''. The FSF annual reports on global shadow banking use the IMF definition to track the OFCs with the largest financial centres relative to their domestic economies. Progress from 2000 onwards from
IMF The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glob ...
OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de coopération et de développement économiques, ''OCDE'') is an intergovernmental organisation with 38 member countries, founded in 1961 to stimulate ...
FATF initiatives on common standards, regulatory compliance, and banking transparency, has reduced the regulatory attraction of OFCs over IFCs and RFCs. Since 2010, academics considered the services of OFCs to be synonymous with
tax havens A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, o ...
, and use the term OFC and tax haven interchangeably (e.g. the academic lists of tax havens include all the FSF–IMF OFCs). In July 2017, a study by the
University of Amsterdam The University of Amsterdam (abbreviated as UvA, nl, Universiteit van Amsterdam) is a public research university located in Amsterdam, Netherlands. The UvA is one of two large, publicly funded research universities in the city, the other being ...
's CORPNET group, broke down the definition of an OFC into two subgroups, Conduit and Sink OFCs: * 24 Sink OFCs: jurisdictions in which a disproportionate amount of value disappears from the economic system (e.g. the traditional
tax havens A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, o ...
). * 5 Conduit OFCs: jurisdictions through which a disproportionate amount of value moves toward Sink OFCs (e.g. the corporate–focused tax havens)
(Conduits are: Netherlands, United Kingdom, Switzerland, Singapore and Ireland) Sink OFCs rely on Conduit OFCs to re–route funds from high–tax locations using base erosion and profit shifting ("BEPS") tax planning tools, which are encoded, and accepted, in the Conduit OFC's extensive networks of global bilateral tax treaties. Because Sink OFCs are more closely associated with traditional tax havens, they tend to have more limited treaty networks and access to global higher–tax locations.


Rankings

Prior to the 1960s, there was little data available to rank financial centres. In recent years many rankings have been developed and published. Two of the most relevant are the ''Global Financial Centres Index'' and the ''Xinhua–Dow Jones International Financial Centres Development Index''.


Global Financial Centres Index (2007–ongoing)

The Global Financial Centres Index ("GFCI") is compiled semi-annually by the
London London is the capital and List of urban areas in the United Kingdom, largest city of England and the United Kingdom, with a population of just under 9 million. It stands on the River Thames in south-east England at the head of a estuary dow ...
-based think tank Z/Yen in conjunction with the
Shenzhen Shenzhen (; ; ; ), also historically known as Sham Chun, is a major sub-provincial city and one of the special economic zones of China. The city is located on the east bank of the Pearl River estuary on the central coast of southern provi ...
-based think tank China Development Institute. As of 24 March 2022, the top global financial centres per the
GFCI A residual-current device (RCD), residual-current circuit breaker (RCCB) or ground fault circuit interrupter (GFCI) is an electrical safety device that quickly breaks an electrical circuit with leakage current to ground. It is to protect equi ...
article containing a ranked list of 119 financial centres were:


Xinhua–Dow Jones Index (2010–2014)

The Xinhua–Dow Jones International Financial Centers Development Index was compiled annually by the
Xinhua News Agency Xinhua News Agency (English pronunciation: )J. C. Wells: Longman Pronunciation Dictionary, 3rd ed., for both British and American English, or New China News Agency, is the official state news agency of the People's Republic of China. Xinhua ...
of China with the
Chicago Mercantile Exchange The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc", or "the Merc") is a global derivatives marketplace based in Chicago and located at 20 S. Wacker Drive. The CME was founded in 1898 as the Chicago Butter and Egg Board, an ...
and Dow Jones & Company of the United States from 2010 to 2014. During that time New York was the top-ranked centre. According to the 2014 Xinhua–Dow Jones International Financial Centres Development Index (IFCD), the top ten financial centres in the world were: (Δ) Appears on the FSF–IMF Offshore Financial Centre (OFC) Lists.
(†) Also appears as one of the top 5 Conduit OFC, in CORPNET's 2017 research; or
(‡) Also appears as one of the top 5 Sink OFC, in CORPNET's 2017 research.


Examples

Old finance centres such as Amsterdam, London, Paris, and New York have long histories. Today there is a diverse range of financial centres worldwide. While New York and London often stand out as the leading global financial centres, other established financial centres provide significant competition and several newer financial centres are developing. Despite this proliferation of financial centres, academics have discussed evidence showing increasing concentration of financial activity in the largest national and international financial centres in the 21st century. Others have discussed the ongoing dominance of New York and London, and the role linkages between these two financial centres played in the
financial crisis of 2007–08 Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of f ...
. Comparisons of financial centres focus on their history, role and significance in serving national, regional and international financial activity. Each centre's offering includes differing legal, tax and regulatory environments. One journalist suggested three factors for success as a financial city: "a pool of capital to lend or invest; a decent legal and taxation framework; and high-quality human resources".


Major IMF IFCs

New York, London, and Tokyo are in every list of major IFCs. Some of the major RFCs (see below), such as Paris, Frankfurt, Chicago, and Shanghai appear as IFCs in some lists. * New York City.
Since the middle of the 20th century, New York City, represented by Wall Street in Manhattan's Financial District, has been described as a leading financial centre. Over the past few decades, with the rise of a
multipolar world Polarity in international relations is any of the various ways in which power is distributed within the international system. It describes the nature of the international system at any given period of time. One generally distinguishes three types o ...
with new regional powers and
global capitalism Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, private pr ...
, numerous financial centres have challenged Wall Street, particularly London and several in Asia, which some analysts believe will be the focus of new worldwide growth. One source described New York as extending its lead as the world's centre of finance in September 2018; according to
Reuters Reuters ( ) is a news agency owned by Thomson Reuters Corporation. It employs around 2,500 journalists and 600 photojournalists in about 200 locations worldwide. Reuters is one of the largest news agencies in the world. The agency was est ...
, the think-tank ''New Financial'' concluded the "raw" value of domestic and international financial activity like managing assets and issuing equity underscored the position of New York as the world's leading financial centre.
:
New York City remains the largest centre for trading in public equity and
debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...
capital markets, driven in part by the size and financial development of the
U.S. economy The United States is a highly developed mixed-market economy and has the world's largest nominal GDP and net wealth. It has the second-largest by purchasing power parity (PPP) behind China. It has the world's seventh-highest per capita GD ...
. The
NYSE The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District of Lower Manhattan in New York City. It is by far the world's largest stock exchange by market capitalization of its liste ...
and
NASDAQ The Nasdaq Stock Market () (National Association of Securities Dealers Automated Quotations Stock Market) is an American stock exchange based in New York City. It is the most active stock trading venue in the US by volume, and ranked second ...
are the two largest stock exchanges in the world. New York also leads in
hedge fund A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as ...
management;
private equity In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships (LP), which buy and restructure financially weak companies that produce goods and provide services. A private-equity fund is both a t ...
; and the monetary volume of
mergers and acquisitions Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspec ...
. Several investment banks and
investment managers Investment management is the professional asset management of various securities, including shareholdings, bonds, and other assets, such as real estate, to meet specified investment goals for the benefit of investors. Investors may be institutio ...
headquartered in New York City are important participants in other financial centres. The
New York Federal Reserve Bank The Federal Reserve Bank of New York is one of the 12 Federal Reserve Banks of the United States. It is responsible for the Second District of the Federal Reserve System, which encompasses the State of New York, the 12 northern counties of New ...
, the largest within the
Federal Reserve System The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after ...
, regulates financial institutions and implements U.S. monetary policy, which in turn influences the world's economy. The three major global credit rating agenciesStandard and Poor's, Moody's Investor Service, and
Fitch Ratings Fitch Ratings Inc. is an American credit rating agency and is one of the " Big Three credit rating agencies", the other two being Moody's and Standard & Poor's. It is one of the three nationally recognized statistical rating organizations (NRS ...
– are headquartered or co–headquartered in New York City, with Fitch being co–headquartered in London.
* London.
London has been a leading international financial centre since the 19th century, acting as a centre of lending and investment around the world. English contract law was adopted widely for
international finance International finance (also referred to as international monetary economics or international macroeconomics) is the branch of financial economics broadly concerned with monetary and macroeconomic interrelations between two or more countries. Inter ...
, with legal services provided in London. Financial institutions located there provided services internationally such as Lloyd's of London (founded 1686) for insurance and the Baltic Exchange (founded 1744) for shipping. During the 20th century London played an important role in the development of new financial products such as the Eurodollar and
Eurobonds Eurobond may refer to: * Eurobond (external bond), a bond issued that is denominated in a currency not native to the country where it is issued * Eurobond (eurozone) Eurobonds or stability bonds were proposed government bonds to be issued in ...
in the 1960s, international asset management and international equities trading in the 1980s, and derivatives in the 1990s.
:
London continues to maintain a leading position as a financial centre in the 21st century, and maintains the largest trade surplus in financial services around the world. However, like New York, it faces new competitors including fast-rising eastern financial centres such as Hong Kong and Shanghai. London is the largest centre for
derivatives market The derivatives market is the financial market for derivatives, financial instruments like futures contracts or options, which are derived from other forms of assets. The market can be divided into two, that for exchange-traded derivatives a ...
s,
foreign exchange market The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all as ...
s, money markets, issuance of international debt securities, international
insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
, trading in gold, silver and base metals through the London bullion market and London Metal Exchange, and international
bank lending In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that de ...
. London has the second largest concentration of
hedge fund A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as ...
s (847 according to HedgeLists.com). London benefits from its position between the Asia and U.S. time zones, and benefited from its location within the
European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are located primarily in Europe, Europe. The union has a total area of ...
, although this ended on 31 January 2020 when the United Kingdom left the European Union following the
Brexit Brexit (; a portmanteau of "British exit") was the Withdrawal from the European Union, withdrawal of the United Kingdom (UK) from the European Union (EU) at 23:00 Greenwich Mean Time, GMT on 31 January 2020 (00:00 1 February 2020 Central Eur ...
referendum of 2016. As well as the
London Stock Exchange London Stock Exchange (LSE) is a stock exchange in the City of London, England, United Kingdom. , the total market value of all companies trading on LSE was £3.9 trillion. Its current premises are situated in Paternoster Square close to St Pau ...
, the
Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the English Government's banker, and still one of the bankers for the Government o ...
, the second oldest central bank, is in London, although the European Banking Authority moved to Paris after Brexit.
* Tokyo. One report suggests that Japanese authorities are working on plans to transform Tokyo but have met with mixed success, noting that "initial drafts suggest that Japan's economic specialists are having trouble figuring out the secret of the Western financial centres' success." Efforts include more English-speaking restaurants and services and the building of many new office buildings in Tokyo, but more powerful stimuli such as lower taxes have been neglected and a relative aversion to finance remains prevalent in Japan. Tokyo emerged as a major financial centre in the 1980s as the Japanese economy became one of the largest in the world. As a financial centre, Tokyo has good links with New York City and London.


Major IMF OFCs

These centres appear in all FSF–IMF lists of OFCs and, bar the Caribbean OFCs of the Cayman Islands, the British Virgin Islands, and Bermuda, represent all the major OFCs. Some also appear as RFCs in various lists, particularly Hong Kong, and Singapore. They also appear on most lists of major tax havens, and on lists of the largest Conduit and Sink OFCs in the world. * Amsterdam. Amsterdam is well known for the size of its pension fund market. It is also a centre for banking and trading activities. Amsterdam was a prominent financial centre in Europe in the 17th and 18th centuries and several of the innovations developed there were transported to London. In June 2017, a study published in ''
Nature Nature, in the broadest sense, is the physical world or universe. "Nature" can refer to the phenomena of the physical world, and also to life in general. The study of nature is a large, if not the only, part of science. Although humans are ...
'' ranked the Netherlands as the world's largest Conduit OFC, a term use to describe the re-routing of fund flows to tax havens. Additionally, after the UK's departure from the European Union, Amsterdam became Europe’s largest share trading centre. * Dublin. Dublin (via its International Financial Services Centre, "IFSC"), is a specialised financial services centre with a focus on fund administration and domiciling, fund management, custodial activities and aircraft leasing. It is the largest securitisation location in the EU-27, and the second largest domicile for investment funds, particularly alternative investment funds, after Luxembourg. Many of the funds domiciled and managed in Dublin are at the instruction of investment managers in larger Asset Management jurisdictions such as London, Frankfurt, New York and Luxembourg. Dublin's advanced BEPS tax tools, for example the double Irish, the single malt, and the capital allowances for intangible assets ("CAIA") tools, have led the economist Gabriel Zucman to judge Ireland to be the largest corporate tax haven by virtue of its use as a conduit OFC. * Hong Kong. As a financial centre, Hong Kong has strong links with London and New York City. It developed its financial services industry while a British territory and its present legal system, defined in
Hong Kong Basic Law The Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China is a national law of China that serves as the organic law for the Hong Kong Special Administrative Region (HKSAR). Comprising nine chapters, 160 a ...
, is based on English law. In 1997, Hong Kong became a
Special Administrative Region of the People's Republic of China The special administrative regions (SAR) of the People's Republic of China are one of the provincial-level administrative divisions of the People's Republic of China directly under the control of its Central People's Government (State ...
, retaining its laws and a high degree of autonomy for at least 50 years after the transfer. Recently, this formula has been threatened by interference of the Chinese central government (see also Hong Kong national security law and 2019 Hong Kong extradition bill). Most of the world's 100 largest banks have a presence in the city. Hong Kong is a leading location for initial public offerings, competing with New York City, and also for merger and acquisition activity. * Luxembourg. Luxembourg is a specialised financial services centre that is the largest location for investment fund domiciliation in Europe, and second in the world after the United States. Many of the funds domiciled in Luxembourg are managed in London. Luxembourg is the leading private banking centre in the
Eurozone The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU pol ...
and the largest captive reinsurance centre in Europe. 143 banks from 28 countries are established in Luxembourg. The country is also the third largest
renminbi The renminbi (; symbol: ¥; ISO code: CNY; abbreviation: RMB) is the official currency of the People's Republic of China and one of the world's most traded currencies, ranking as the fifth most traded currency in the world as of April 202 ...
centre in the world by numbers, in certain activities such as deposits, loans, bond listing and investment funds. Three of the largest Chinese banks have their European hub in Luxembourg ( ICBC,
Bank of China The Bank of China (BOC; ) is a Chinese majority state-owned commercial bank headquartered in Beijing and the fourth largest bank in the world. The Bank of China was founded in 1912 by the Republican government as China's central bank, rep ...
, China Construction Bank). * Singapore. With its strong links with London, Singapore has developed into the Asia region's largest centre for foreign exchange and commodity trading, as well as a growing wealth management hub. Other than Tokyo, it is one of the main centres for fixed income trading in Asia. However, the market capitalisation of its stock exchange has been falling since 2014 and several major companies plan to delist. * Zurich. Zurich is a significant centre for banking, asset management including provision of alternative investment products, and insurance. Since Switzerland is not a member of the
European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are located primarily in Europe, Europe. The union has a total area of ...
, Zurich is not directly subject to EU regulation.


Major IMF RFCs

In some lists, RFCs such as Paris, Frankfurt, Chicago, and Shanghai appear as IFCs, however, they do not appear in all lists. They are certainly major RFCs. * Chicago. The
Illinois Illinois ( ) is a state in the Midwestern United States. Its largest metropolitan areas include the Chicago metropolitan area, and the Metro East section, of Greater St. Louis. Other smaller metropolitan areas include, Peoria and Rock ...
city has the "world’s largest xchange-tradedderivatives market" since the
Chicago Mercantile Exchange The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc", or "the Merc") is a global derivatives marketplace based in Chicago and located at 20 S. Wacker Drive. The CME was founded in 1898 as the Chicago Butter and Egg Board, an ...
and the Chicago Board of Trade merged in 2007, under the CME Group. * Dubai. The second largest emirate in the
United Arab Emirates The United Arab Emirates (UAE; ar, اَلْإِمَارَات الْعَرَبِيَة الْمُتَحِدَة ), or simply the Emirates ( ar, الِْإمَارَات ), is a country in Western Asia (Middle East, The Middle East). It is ...
is a growing centre for finance in the
Middle East The Middle East ( ar, الشرق الأوسط, ISO 233: ) is a geopolitical region commonly encompassing Arabian Peninsula, Arabia (including the Arabian Peninsula and Bahrain), Anatolia, Asia Minor (Asian part of Turkey except Hatay Pro ...
, including for
Islamic finance Islamic banking, Islamic finance ( ar, مصرفية إسلامية), or Sharia-compliant finance is banking or financing activity that complies with Sharia (Islamic law) and its practical application through the development of Islamic econom ...
. Its emergence as a financial centre is relatively recent, although commercial banking activity in the UAE became established in the second half of the 20th century (the first commercial bank in Dubai was
British Bank of the Middle East HSBC Bank Middle East Limited is the largest and most widely represented international bank in the Middle East. History The Imperial Bank of Persia (Persian: بانک شاهنشاهی ایران; Bank-e Šâhanšâhi-ye Irân) was a British ban ...
in 1946, and the first domestic commercial bank was the National Bank of Dubai established in 1963). * Frankfurt. Frankfurt attracts many foreign banks which maintain offices in the city. It is the seat of Deutsche Börse, one of the leading stock exchanges and derivatives markets operators, and the
European Central Bank The European Central Bank (ECB) is the prime component of the monetary Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's most important centra ...
, which sets the monetary policy for the single European currency, the
euro The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...
; in addition, in 2014 the European Central Bank took over responsibility for banking supervision for the 18 countries which form the
Eurozone The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU pol ...
. It is also the seat of Deutsche Bundesbank, the German central bank, as well as of
EIOPA The European Insurance and Occupational Pensions Authority (EIOPA) is a European Union financial regulatory institution that replaced the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS). It is established under EU R ...
, the EU's supervisory authority for insurances and occupational pension systems. :Frankfurt has been the financial centre of Germany since the second half of the 20th century as it was before the mid-19th century. Berlin held the position during the intervening period, focusing on lending to European countries while London focused on lending to the Americas and Asia. * Madrid. Madrid is the headquarters to the Spanish company Bolsas y Mercados Españoles, which owns the four stock exchanges in Spain, the largest being the Bolsa de Madrid. Trading of equities, derivatives and fixed income securities are linked through the Madrid-based electronic Spanish Stock Market Interconnection System (SIBE), handling more than 90% of all financial transactions. Madrid ranks fourth in European equities market capitalisation, and Madrid's stock exchange is second in terms of number of listed companies, just behind New York Stock Exchange (NYSE plus NASDAQ). As a financial centre, Madrid has extensive links with
Latin America Latin America or * french: Amérique Latine, link=no * ht, Amerik Latin, link=no * pt, América Latina, link=no, name=a, sometimes referred to as LatAm is a large cultural region in the Americas where Romance languages — languages derived ...
and acts as a gateway for many Latin American financial firms to access the EU banking and financial markets. * Milan. Italy's main centre of banking and finance. It hosts the Borsa Italiana stock exchange, one of the larger stock exchanges in Europe, which is now part of Euronext. * Paris. Alongside equity trading on the
Paris Stock Exchange Euronext Paris is France's securities market, formerly known as the Paris Bourse, which merged with the Amsterdam, Lisbon, and Brussels exchanges in September 2000 to form Euronext NV. As of 2022, the 795 companies listed had a combined marke ...
, there is futures and options trading, insurance, corporate banking and asset management taking place in Paris. The city is home to the
Banque de France The Bank of France (French: ''Banque de France''), headquartered in Paris, is the central bank of France. Founded in 1800, it began as a private institution for managing state debts and issuing notes. It is responsible for the accounts of the ...
and the European Securities and Markets Authority. Paris has been a major financial centre since the 19th century. The European Banking Authority is also moving to Paris in March 2019 following Brexit. * Seoul.
South Korea South Korea, officially the Republic of Korea (ROK), is a country in East Asia, constituting the southern part of the Korea, Korean Peninsula and sharing a Korean Demilitarized Zone, land border with North Korea. Its western border is formed ...
's capital has developed significantly as a financial centre since the late-2000s recession. In 2009, Seoul ranked 53rd among global financial centres; by 2012, Seoul had risen to number 9. Seoul has continued to build office space with the completion of the
International Financial Center Seoul International Finance Center Seoul (서울국제금융센터), commonly known as IFC Seoul (아이 에프 시 서울), is a mixed-use integrated commercial development in Seoul, South Korea. It is located in Yeouido-dong, Yeongdeungpo-gu, Seoul, ...
in 2013. It ranked 7th in the 2015
Global Financial Centres Index The Global Financial Centres Index (GFCI) is a ranking of the competitiveness of financial centres based on over 29,000 financial centre assessments from an online questionnaire together with over 100 indices from organisations such as the World ...
, recording the highest growth in rating among the top ten cities. * Shanghai. Official efforts have been directed to making
Pudong Pudong is a district of Shanghai located east of the Huangpu, the river which flows through central Shanghai. The name ''Pudong'' was originally applied to the Huangpu's east bank, directly across from the west bank or Puxi, the historic city ...
a financial leader by 2010. Efforts during the 1990s were mixed, but in the early 21st century, Shanghai gained ground. Factors such as a "protective banking sector" and a "highly restricted capital market" have held the city back, according to a 2009 opinion piece in ''
China Daily ''China Daily'' () is an English-language daily newspaper owned by the Central Propaganda Department of the Chinese Communist Party. Overview ''China Daily'' has the widest print circulation of any English-language newspaper in China. ...
''. Shanghai has done well in terms of market capitalisation but it needs to "attract an army of money managers, lawyers, accountants, actuaries, brokers and other professionals, Chinese and foreign" to enable it to compete with New York and London. China is generating tremendous new capital, which makes it easier to stage initial public offerings of state-owned companies in places like Shanghai. * Sydney. Australia's most populous city is a financial and business services hub not only for Australia but for the
Asia-Pacific Asia-Pacific (APAC) is the part of the world near the western Pacific Ocean. The Asia-Pacific region varies in area depending on context, but it generally includes East Asia, Russian Far East, South Asia, Southeast Asia, Australia and Paci ...
region. Sydney competes quite closely with other Asia Pacific hubs, however it concentrates a greater portion of Australian-based business in terms of clients and services. Sydney is home to two of Australia's four largest banks, the Commonwealth Bank of Australia and Westpac Banking Corporation, both headquartered in the Sydney CBD. Sydney is also home to 12 of the top 15 asset managers in Australia. Melbourne, on the other hand, tends to concentrate more of the Australian superannuation funds (pension funds). Sydney is using the large Barangaroo development project on its harbour to further position itself as an Asian Pacific hub. Sydney is also home to the
Australian Securities Exchange Australian Securities Exchange Ltd or ASX, is an Australian public company that operates Australia's primary securities exchange, the Australian Securities Exchange (sometimes referred to outside of Australia as, or confused within Australia as ...
and an array of brokerage banks which are either headquartered or regionally based in Sydney, including Australia's largest investment bank Macquarie Group. * Toronto. The city is a leading market for Canada's largest financial institutions and large insurance companies. It has also become one of the fastest growing financial centres following the late-2000s recession, helped by the stability of the Canadian banking system. Most of the financial industry is concentrated along
Bay Street Bay Street is a major thoroughfare in Downtown Toronto, Ontario, Canada. It is the centre of Toronto's Financial District and is often used by metonymy to refer to Canada's financial services industry since succeeding Montreal's St. James ...
, where the Toronto Stock Exchange is also located. * Others.
Mumbai Mumbai (, ; also known as Bombay — the official name until 1995) is the capital city of the Indian state of Maharashtra and the ''de facto'' financial centre of India. According to the United Nations, as of 2018, Mumbai is the secon ...
is an emerging financial centre, which also provides international support services to London and other financial centres. Cities such as
São Paulo São Paulo (, ; Portuguese for ' Saint Paul') is the most populous city in Brazil, and is the capital of the state of São Paulo, the most populous and wealthiest Brazilian state, located in the country's Southeast Region. Listed by the GaW ...
,
Mexico City Mexico City ( es, link=no, Ciudad de México, ; abbr.: CDMX; Nahuatl: ''Altepetl Mexico'') is the capital and largest city of Mexico, and the most populous city in North America. One of the world's alpha cities, it is located in the Valley o ...
and
Johannesburg Johannesburg ( , , ; Zulu language, Zulu and xh, eGoli ), colloquially known as Jozi, Joburg, or "The City of Gold", is the largest city in South Africa, classified as a Megacity#List of megacities, megacity, and is List of urban areas by p ...
and other "would-be hubs" lack liquidity and the "skills base", according to one source. Financial industries in countries and regions such as the
Indian subcontinent The Indian subcontinent is a physiographical region in Southern Asia. It is situated on the Indian Plate, projecting southwards into the Indian Ocean from the Himalayas. Geopolitically, it includes the countries of Bangladesh, Bhutan, In ...
and
Malaysia Malaysia ( ; ) is a country in Southeast Asia. The federal constitutional monarchy consists of thirteen states and three federal territories, separated by the South China Sea into two regions: Peninsular Malaysia and Borneo's East Mal ...
require not only well-trained people but the "whole institutional infrastructure of laws, regulations, contracts, trust and disclosure" which takes time to happen.


History

Primitive financial centres started in the 11th century in the
Kingdom of England The Kingdom of England (, ) was a sovereign state on the island of Great Britain from 12 July 927, when it emerged from various Anglo-Saxon kingdoms, until 1 May 1707, when it united with Scotland to form the Kingdom of Great Britain. On ...
at the annual fair of St. Giles and in the
Kingdom of Germany The Kingdom of Germany or German Kingdom ( la, regnum Teutonicorum "kingdom of the Germans", "German kingdom", "kingdom of Germany") was the mostly Germanic-speaking East Frankish kingdom, which was formed by the Treaty of Verdun in 843, espec ...
at the Frankfurt autumn fair, then developed in
medieval France The Kingdom of France in the Middle Ages (roughly, from the 10th century to the middle of the 15th century) was marked by the fragmentation of the Carolingian Empire and West Francia (843–987); the expansion of royal control by the House of ...
during the Champaign Fairs.


Italian ''city-states''

The first real international financial centre was the City State of
Venice Venice ( ; it, Venezia ; vec, Venesia or ) is a city in northeastern Italy and the capital of the Veneto Regions of Italy, region. It is built on a group of 118 small islands that are separated by canals and linked by over 400  ...
which slowly emerged from the 9th century to its peak in the 14th century. Tradable bonds as a commonly used type of security, were invented by the Italian city-states (such as Venice and
Genoa Genoa ( ; it, Genova ; lij, Zêna ). is the capital of the Italian region of Liguria and the sixth-largest city in Italy. In 2015, 594,733 people lived within the city's administrative limits. As of the 2011 Italian census, the Province of ...
) of the late
medieval In the history of Europe, the Middle Ages or medieval period lasted approximately from the late 5th to the late 15th centuries, similar to the post-classical period of global history. It began with the fall of the Western Roman Empire a ...
and early
Renaissance The Renaissance ( , ) , from , with the same meanings. is a period in European history marking the transition from the Middle Ages to modernity and covering the 15th and 16th centuries, characterized by an effort to revive and surpass ide ...
periods while
Florence Florence ( ; it, Firenze ) is a city in Central Italy and the capital city of the Tuscany region. It is the most populated city in Tuscany, with 383,083 inhabitants in 2016, and over 1,520,000 in its metropolitan area.Bilancio demografico ...
can be said to be the birthplace of
double-entry bookkeeping Double-entry bookkeeping, also known as double-entry accounting, is a method of bookkeeping that relies on a two-sided accounting entry to maintain financial information. Every entry to an account requires a corresponding and opposite entry t ...
from the publication and proliferation of the work of Luca Pacioli.


The Low Countries

In the sixteenth century, the overall economic supremacy of the Italian city-states gradually waned, and the centre of financial activities in Europe shifted to the
Low Countries The term Low Countries, also known as the Low Lands ( nl, de Lage Landen, french: les Pays-Bas, lb, déi Niddereg Lännereien) and historically called the Netherlands ( nl, de Nederlanden), Flanders, or Belgica, is a coastal lowland region in N ...
, first to
Bruges Bruges ( , nl, Brugge ) is the capital and largest City status in Belgium, city of the Provinces of Belgium, province of West Flanders in the Flemish Region of Belgium, in the northwest of the country, and the sixth-largest city of the countr ...
, and later to
Antwerp Antwerp (; nl, Antwerpen ; french: Anvers ; es, Amberes) is the largest city in Belgium by area at and the capital of Antwerp Province in the Flemish Region. With a population of 520,504,
and
Amsterdam Amsterdam ( , , , lit. ''The Dam on the River Amstel'') is the capital and most populous city of the Netherlands, with The Hague being the seat of government. It has a population of 907,976 within the city proper, 1,558,755 in the urban ar ...
which acted as Entrepôt cities. They also became important centres of financial innovation, capital accumulation and investment. By the early 1800s,
London London is the capital and List of urban areas in the United Kingdom, largest city of England and the United Kingdom, with a population of just under 9 million. It stands on the River Thames in south-east England at the head of a estuary dow ...
officially replaced Amsterdam as the world's leading financial centre.


19th–21st centuries

London and
Paris Paris () is the capital and most populous city of France, with an estimated population of 2,165,423 residents in 2019 in an area of more than 105 km² (41 sq mi), making it the 30th most densely populated city in the world in 2020. Si ...
were the world's only prominent financial centres throughout most of the 19th century. After 1870,
Berlin Berlin ( , ) is the capital and largest city of Germany by both area and population. Its 3.7 million inhabitants make it the European Union's most populous city, according to population within city limits. One of Germany's sixteen constitu ...
and New York grew to become major financial centres mainly serving their national economies. An array of smaller international financial centres found
market niche A niche market is the subset of the market on which a specific product is focused. The market niche defines the product features aimed at satisfying specific market needs, as well as the price range, production quality and the demographics that it ...
s, such as Amsterdam,
Brussels Brussels (french: Bruxelles or ; nl, Brussel ), officially the Brussels-Capital Region (All text and all but one graphic show the English name as Brussels-Capital Region.) (french: link=no, Région de Bruxelles-Capitale; nl, link=no, Bruss ...
, Zurich, and
Geneva Geneva ( ; french: Genève ) frp, Genèva ; german: link=no, Genf ; it, Ginevra ; rm, Genevra is the second-most populous city in Switzerland (after Zürich) and the most populous city of Romandy, the French-speaking part of Switzerland. Situa ...
. London was the leading international financial centre in the four decades before
World War I World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was List of wars and anthropogenic disasters by death toll, one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, ...
. Since then, New York and London have developed leading positions in different activities and some non-Western financial centres have grown in prominence, notably
Tokyo Tokyo (; ja, 東京, , ), officially the Tokyo Metropolis ( ja, 東京都, label=none, ), is the capital and largest city of Japan. Formerly known as Edo, its metropolitan area () is the most populous in the world, with an estimated 37.46 ...
,
Hong Kong Hong Kong ( (US) or (UK); , ), officially the Hong Kong Special Administrative Region of the People's Republic of China (abbr. Hong Kong SAR or HKSAR), is a List of cities in China, city and Special administrative regions of China, special ...
,
Singapore Singapore (), officially the Republic of Singapore, is a sovereign island country and city-state in maritime Southeast Asia. It lies about one degree of latitude () north of the equator, off the southern tip of the Malay Peninsula, bor ...
and
Shanghai Shanghai (; , , Standard Chinese, Standard Mandarin pronunciation: ) is one of the four Direct-administered municipalities of China, direct-administered municipalities of the China, People's Republic of China (PRC). The city is located on the ...
.


Rise of London


Rise of New York


Rise of Asian centres

In
Asia Asia (, ) is one of the world's most notable geographical regions, which is either considered a continent in its own right or a subcontinent of Eurasia, which shares the continental landmass of Afro-Eurasia with Africa. Asia covers an are ...
, Tokyo emerged as a major financial centre in the 1980s as the Japanese economy became one of the largest in the world. Hong Kong and Singapore developed soon after leveraging their links with London and Britain. In the 21st century, other centres have grown including Toronto, Sydney, Seoul, Shanghai and Astana.
Astana International Financial Centre The Astana International Financial Centre (AIFC) is a financial hub in Astana, Kazakhstan that officially launched on July 5, 2018. On 20 May 2015, the President of Republic of Kazakhstan Nursultan Nazarbayev announced the “100 Concrete Step ...
has become the fastest growing financial hub in Central Asia. Dubai has become a centre for finance in the
Middle East The Middle East ( ar, الشرق الأوسط, ISO 233: ) is a geopolitical region commonly encompassing Arabian Peninsula, Arabia (including the Arabian Peninsula and Bahrain), Anatolia, Asia Minor (Asian part of Turkey except Hatay Pro ...
, including for
Islamic finance Islamic banking, Islamic finance ( ar, مصرفية إسلامية), or Sharia-compliant finance is banking or financing activity that complies with Sharia (Islamic law) and its practical application through the development of Islamic econom ...
. The rapid rise of
India India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the List of countries and dependencies by area, seventh-largest country by area, the List of countries and dependencies by population, second-most populous ...
has enabled Mumbai to become an emerging financial centre. India is also making an International Financial Centre GIFT City from scratch. GIFT city is now functional and has already won the crown of fastest emerging International Finance Centre of South Asia. Linked to the rise of these new IFCs, has seen the rise of "partner OFCs" (offshore tax-havens to which funds are routed), such as Taiwan (a major Sink OFC for Asia, and 7th largest global Sink OFC), Mauritius (a major Sink OFC for South Asia, especially India, and Africa, and the 9th largest global Sink OFC). The private nationwide financial system in China was first developed by the
Shanxi merchants Shanxi merchants, also known as Jin merchants (), were the group of merchants from Shanxi province, China. ''Jin'' is an abbreviated name of Shanxi. Even though the history of noticeable Shanxi merchants can be dated back to as early as the Spring ...
, with the creation of so-called "draft banks". The first draft bank
Rishengchang The Rishengchang Piaohao (), was the first draft bank in China. It is located in Pingyao, Shanxi province, China. literally translates to 'Sunrise Prosperity', and means 'draft banks', the predecessors of modern banks in China. It was estimated ...
was created in 1823 in Pingyao. Some large draft banks had branches in Russia, Mongolia and Japan to facilitate the international trade. Throughout the nineteenth century, the central Shanxi region became the de facto financial centres of Qing China. With the fall of Qing Dynasty, the financial centres gradually shifted to
Shanghai Shanghai (; , , Standard Chinese, Standard Mandarin pronunciation: ) is one of the four Direct-administered municipalities of China, direct-administered municipalities of the China, People's Republic of China (PRC). The city is located on the ...
, mainly due to its geographical location at the estuary of the
Yangtze River The Yangtze or Yangzi ( or ; ) is the longest river in Asia, the third-longest in the world, and the longest in the world to flow entirely within one country. It rises at Jari Hill in the Tanggula Mountains (Tibetan Plateau) and flows ...
and to the control of customs in China. After the establishment of People's Republic of China, the financial centres in China today are
Beijing } Beijing ( ; ; ), Chinese postal romanization, alternatively romanized as Peking ( ), is the Capital city, capital of the China, People's Republic of China. It is the center of power and development of the country. Beijing is the world's Li ...
,
Shanghai Shanghai (; , , Standard Chinese, Standard Mandarin pronunciation: ) is one of the four Direct-administered municipalities of China, direct-administered municipalities of the China, People's Republic of China (PRC). The city is located on the ...
, and
Shenzhen Shenzhen (; ; ; ), also historically known as Sham Chun, is a major sub-provincial city and one of the special economic zones of China. The city is located on the east bank of the Pearl River estuary on the central coast of southern provi ...
.


See also

* Global city *
Corporate tax haven Corporate haven, corporate tax haven, or multinational tax haven is used to describe a jurisdiction that multinational corporations find attractive for establishing subsidiaries or incorporation of regional or main company headquarters, mostly du ...
*
Financial capital Financial capital (also simply known as capital or equity in finance, accounting and economics) is any economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their products or to provi ...
* Financial Development Index * Geography of finance * Global financial system * Nylonkong * Conduit and Sink OFCs * Financial district


Notes


References


External links


International Financial Centres
– news articles from ''The Banker'' magazine.
Financial Centres International
– a forum on developments in international financial services centres.

– research on global financial centres from the '' Z/Yen Group''. {{DEFAULTSORT:Centre International finance Offshore finance Foreign exchange market