What makes a city a financial center?
A financial center, or financial center, refers to a city with a strategic location, leading financial institutions, reputable stock exchanges, a dense concentration of public and private banks, and commercial and insurance companies. In addition, these centers are equipped with first-class infrastructure, communications and business systems, and there is a transparent and robust legal and regulatory regime supported by a stable political system. These cities are favorable destinations for professionals due to the high standard of living they offer coupled with the immense opportunities for growth.
Here’s a look at the major financial centers around the world, in no particular order.
- Cities that are concentrations of commerce, commerce, real estate, and banking tend to become global financial centers.
- These major cities employ large numbers of financial professionals and are home to stock exchanges and corporate headquarters for investment banks.
- Found throughout the world, examples include New York City, Frankfurt, and Tokyo.
Since the Middle Ages, London has been one of the most prominent commercial and business centers. The city is one of the most visited places in the world and is among the preferred places to do business. London is a well-known center for currency and bond trading, as well as banking and insurance services.
The city is a trading center for bonds, futures, currencies, and insurance. The central bank of the United Kingdom, the Bank of England, is the second oldest central bank in the world and is located in London. The bank controls the monetary system and regulates the issuance of banknotes in the UK.
London is also home to the London Stock Exchange, which is the second largest stock exchange in Europe. Another financial model is the London Bullion Market, managed by the London Bullion Market Association (LBMA), which is the world’s largest market for trading gold and silver bullion.
Due to the uncertainty of Brexit, London may finally lose its stature as a global financial center.
From a business perspective, Singapore’s appeal lies in its strong and transparent legal framework that complements its economic and political stability. The small island located in the Southeast Asian region has become one of the Four Asian Tigers and has established itself as a major financial center.
Singapore has transformed its economy despite the disadvantages of limited land and resources. Singapore is diversified and specialized in industries such as chemistry, biomedical sciences, petroleum refining, mechanical engineering and electronics.
Singapore has deep capital markets and is a leading insurance and wealth management market. It has a disciplined and efficient workforce with a population comprised of people of Chinese, Malaysian and Indian descent.
Zurich, the largest city in Switzerland, is recognized as a global financial center. The city has a disproportionately large presence of financial institutions and banks and has become a hub for insurance and asset management companies. The low tax regime makes Zurich a good investment destination and the city attracts a large number of international companies.
Switzerland’s main stock exchange, the SIX Swiss Exchange, is located in Zurich and is one of the largest in the world, with a market capitalization of $ 1.8 trillion as of July 2020.The city has a strong business environment and offers many jobs in the financial sector. Zurich is one of the cleanest, most beautiful and crime-free places to live and work.
New York, commonly regarded as the financial capital of the world, has been ranked first in the Financial Centers of the World by the Global Index of Financial Centers.New York is famous for Wall Street, the busiest stock market, and the New York Stock Exchange (NYSE), the largest stock exchange by market capitalization.
The city is a mix of various cultures from around the world providing a diverse population and workforce. It houses some of the biggest and best companies (Fortune 500 and Fortune 1000), largest banks (Goldman Sachs, Morgan Stanley and Merrill Lynch, JP Morgan) and industries.
It is difficult to find a big name in the business world that does not have a presence in the city.
Hong Kong is a key financial center with a large number of banking institutions. The former British colony also has a strong legal system for both residents and businesses and is home to many fund management companies.
Hong Kong has benefited from its strategic location. For more than a century, the city has been a conduit of commerce between China and the world. Therefore, Hong Kong is China’s second most important trading partner after the United States.
Its proximity to other countries in the region has also worked in its favor. Hong Kong has an efficient and transparent legal and judicial system with excellent telecommunications infrastructure and services. It has a favorable tax system with very few and low tax rates, which adds to its appeal. The Hong Kong Stock Exchange is the sixth largest in the world.
Chicago owes its fame to the derivatives market, which began at the Chicago Board of Trade (CBOT) in 1848 with the trading of commodity futures. It is the oldest futures exchange in the world and the second largest by volume, behind the National Stock Exchange of India.
Chicago-based Options Clearing Corporation (OCC) settles all US option contracts.Chicago is home to more than 400 major corporations, and the state of Illinois has more than 30 Fortune 500 companies, most of which are located in Chicago. These companies include State Farm Insurance, Boeing, Archer Daniels Midland, and Caterpillar.
Chicago is also one of the most diverse economies that stands out from risk management innovation to information technology, manufacturing and healthcare. Another notable financier is the Federal Reserve Bank of Chicago.
Tokyo is the capital of the world’s third largest economy and a major financial center.The city is home to many of the world’s largest investment banks and insurance companies. It is also the center of the country’s telecommunications, electronics, broadcasting and publishing industries.
The Japan Stock Exchange Group (JPX) was established on January 1, 2013 by combining the Tokyo Stock Exchange Group (TSE) and the Osaka Stock Exchange.The exchange had a market capitalization of $ 5.5 trillion as of July 2020.The Nikkei 225 and the TOPIX are the main indices following the buzz on the TSE.
Tokyo has been rated time and time again among the most expensive cities in the world.
Frankfurt is home to the European Central Bank (ECB) and the Deutsche Bundesbank, Germany’s central bank. It has one of the busiest airports in the world and is the address of many of the main companies, national and international banks.
In 2014, Frankfurt became the first renminbi payment center in Europe.Frankfurter Wertpapierbörse, the Frankfurt Stock Exchange, is among the largest stock exchanges in the world. It had a market capitalization of $ 2 trillion as of July 2020.Deutsche Börse Group operates the Frankfurt Stock Exchange.
Shanghai is the third most populous city in the world, behind Tokyo and Delhi.The Chinese government in early 2009 announced its ambition to turn Shanghai into an international financial center by 2020.
The Shanghai Stock Exchange (SSE) is the leading stock market in mainland China in terms of turnover, tradable market value, and total market value. The SSE had a market capitalization of $ 6 trillion as of July 2020.The China Securities Regulatory Commission (CSRC) directly governs the SSE.The exchange is considered restrictive in terms of trading and listing criteria.
Some financial centers that have been undisputed leaders in the past are now facing stiff competition from existing players and vibrant emerging players. The list above is indicative of where the major financial centers are located and there are many other names, including Toronto, Seoul, Boston, Geneva, San Francisco, Sydney, Luxembourg, and Dubai, which are also among the major financial centers.