Financial centre

A financial centre or financial hub is a location with a significant concentration of commerce in financial services.
The commercial activity that takes place in a financial centre may include banking, asset management, insurance, and provision of financial markets, with venues and supporting services for these activities. Participants can include financial intermediaries, institutional investors, and issuers. Trading activity often takes place on venues such as exchanges and involves clearing houses, although many transactions take place over-the-counter, directly between participants. Financial centres usually host companies that offer a wide range of financial services, for example relating to mergers and acquisitions, public offerings, or corporate actions; or which participate in other areas of finance, such as private equity, private debt, hedge funds, and reinsurance. Ancillary financial services include rating agencies, as well as provision of related professional services, particularly legal advice and accounting services.
As of the 2025 edition of the Global Financial Centres Index, New York City, London and Hong Kong ranked as the global top three.

Definitions

The International Monetary Fund classes major financial centres as:

International Financial Centres, such as New York City, London, and Tokyo;
Regional Financial Centres, such as Hong Kong, Shanghai, and Frankfurt; and
Offshore Financial Centres, such as the Cayman Islands, Dublin, Cyprus, and Luxembourg.

The IMF notes some overlap between Regional Financial Centres and Offshore Financial Centres.

International Monetary Fund approach

In April 2000, the Financial Stability Forum, concerned about OFCs on global financial stability produced a report listing 42 OFCs. In June 2000, the International Monetary Fund 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 :
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.
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/securitisation, and can include smaller locations, or city-states. Since 2010, academics consider Offshore Financial Centres synonymous with tax havens.

Offshore financial centres

The IMF noted that OFCs could be set up for "legitimate purposes", 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 non-residents 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–OECD–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, and use the term OFC and tax haven interchangeably.
In July 2017, a study by the University of Amsterdam'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.
5 Conduit OFCs: jurisdictions through which a disproportionate amount of value moves toward Sink OFCs

Sink OFCs rely on Conduit OFCs to re-route funds from high-tax locations using base erosion and profit shifting 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

The Global Financial Centres Index is compiled semi-annually by the London-based think tank Z/Yen in conjunction with the Shenzhen-based think tank China Development Institute. The 37th edition of the GFCI was published on the 20th March 2025.

Rank

Centre

Rating

Change in rank

Change in rating

SteadyIncrease

Examples

London, Paris, Amsterdam and New York have long been at the centre of the global financial system. 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 2008 financial crisis.
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. London and New York have at times exchanged places as the world's preeminent financial centre, and London has been competing for New York's crown as a financial capital and Fintech capital of the world. Some of the major RFCs, such as Paris, Frankfurt, Chicago, and Shanghai, appear as IFCs in some lists.
File:Brooklyn Bridge from the boat on the East River, New York City, 20231001 1050 0948.jpg|thumb|New York City's financial district in Manhattan viewed from Brooklyn

New York City. New York City is the largest centre for trading in public equity and debt capital markets, driven by the size and financial development of the U.S. economy and international activity that takes place there. The NYSE and NASDAQ are the two largest stock exchanges in the world. New York also leads in hedge fund management; private equity; and the monetary volume of mergers and acquisitions. Several investment banks and investment managers headquartered in New York City are important participants in other financial centres. The New York Federal Reserve Bank, the largest within the Federal Reserve System, regulates financial institutions and implements U.S. monetary policy, which in turn influences the world's economy. The three major global credit rating agencies – Standard and Poor's, Moody's Ratings, and Fitch Ratings – are headquartered or co–headquartered in New York City, with Fitch being co–headquartered in London.
London. London maintains a leading position as a financial centre 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 markets, foreign exchange markets, money markets, issuance of international debt securities, international insurance, trading in gold, silver and base metals through the London bullion market and London Metal Exchange, international bank lending and Europe's share trading capital. London has the second largest concentration of hedge funds. London benefits from its position between the Asia and U.S. time zones, and benefited from its location within the European Union, although this ended in 2020 when the United Kingdom left the European Union following the Brexit referendum of 2016. As well as the London Stock Exchange, the London Clearing House is based in the city. Although post-Brexit London has faced challenges, London has defied predictions of having its European financial capital crown stripped to cities like Paris, Amsterdam, Frankfurt and even Dublin.

File:TokyoStockExchange1144.jpg|thumb|right|The Tokyo Stock Exchange, located in Nihonbashi-Kabutocho, Tokyo, Japan, is the largest stock exchange in Asia.

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, but then declined due to the Lost Decades. As a financial centre, Tokyo has good links with New York City and London.