A financial center, or a financial hub, refers to a city with a strategic location, leading financial institutions, reputed stock exchanges, dense concentration of public and private banks and trading and insurance companies. In addition, these hubs are equipped with first-class infrastructure, communications and commercial systems, and there is a transparent and sound legal and regulatory regime backed by a stable political system. Such cities are favorable destinations for professionals because of the high living standards they offer along with immense growth opportunities.
Here is a look at the top financial hubs across the globe (in no particular order):
Since the middle ages, London has been one of the most prominent trade and business centers. The city is one of the most visited places on earth and is among the most preferred places to do business. London is a well-known center for foreign exchange and bond trading in addition to banking activities and insurance services. The city is a trading hub for bonds, futures, foreign exchange and insurance. The United Kingdom’s central bank, 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 issue of currency notes in the United Kingdom. London is also the seat of the London Stock Exchange, which is the largest stock exchange in Europe. Another financial paragon is The London bullion market, managed by London Bullion Market Association (LBMA), which is the world’s largest location for gold and silver wholesale trading.
From a business perspective, Singapore’s attractiveness lies in its transparent and sound legal framework complementing its economic and political stability. The small island located in the Southeast Asia region has emerged as one of the Four Asian Tigers and established itself as a major financial center. Singapore has transformed its economy despite the disadvantages of limited land and resources. Singapore is both diversified and specialized across industries such as chemicals, biomedical sciences, petroleum refining, mechanical engineering and electronics. Singapore has deep capital markets and is a leading insurance and wealth management marketplace. It has a disciplined and efficient workforce with half of the population made up of people of Chinese, British, Indian and Malay origin.
Zurich, the largest city in Switzerland, is recognized as a financial center globally. The city has a disproportionately large presence of financial institutions and banks and has developed into 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 primary stock exchange, the SIX Swiss Exchange, is in Zurich and is the 10th largest in the world (market capitalization of $1.6 trillion as of March 2018). The city has a robust business environment and offers many finance sector jobs. Zurich is one of the cleanest, most beautiful and crime free places to live and work.
New York, commonly regarded as the finance capital of the world, has been ranked first in the World’s Financial Centers by the Global Financial Centers Index (GFCI). New York is famous for Wall Street, the most happening 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 across the globe providing a diverse population and workforce. It plays host to some of the largest and finest companies (Fortune 500 and Fortune 1000), biggest banks (Goldman Sachs, Morgan Stanley and Merrill Lynch, JP Morgan) and industries. It is difficult to find a big name in the world of business without a presence in the city.
Hong Kong is a key financial hub with the highest concentration of banking institutions in the world. The island also has most beneficial legal regulations for both residents and companies and is the home of many fund management companies. Hong Kong has benefited from its strategic geographical location; for more than a century, it has been the access route to mainland China. Hence, it is also the largest trading partner of mainland China. Its proximity to other countries in the region has also worked in its favor. Hong Kong has an efficient and transparent judicial and legal system with excellent infrastructure and telecommunication services. It has a favorable tax system in place with very few and low tax rates, which adds to its attractiveness. The Hong Kong Stock Exchange is the sixth largest in the world, according to WorldAtlas.
Chicago owes its fame to the derivative market, which started at the Chicago Board of Trade (CBOT) back in 1848 with commodity futures trading. The Chicago Mercantile Exchange is the oldest futures exchange in the world and accounts for more global derivatives trading than all exchanges in Europe and even New York. The Chicago-based Options Clearing Corporation (OCC) clears all U.S. option contracts. Chicago is the headquarters of over 400 major corporations, and the state of Illinois has more than 36 Fortune 500 companies, most of which are located in Chicago. These companies include ConAgra, Boeing, Kraft Heinz and Archer Daniels Midland. Chicago also one of the most diverse economies excelling from innovation in risk management to information technology to manufacturing to health. Another financial notable is the Federal Reserve Bank of Chicago.
Tokyo is the capital of the third-largest economy in the world and a major financial center. The city is the headquarters of many of the world’s largest investment banks and insurance companies. It is also the hub for the country’s telecommunications, electronic, broadcasting and publishing industries. Tokyo has time and again been rated among the most expensive cities in the world. The Japan Exchange Group (JPX) was established on January 1, 2013 by combining the Tokyo Stock Exchange (TSE) Group and the Osaka Securities Exchange. In terms of market capitalization, it is the third largest city in the world with a market capitalization of $6.18 trillion as of March 2018. The Tokyo Stock Exchange (TSE), which is the largest in Japan, has more has 3,500 listed companies; Nikkei 225 and the TOPIX are the main indices tracking the buzz at the TSE.
Frankfurt is home to the European Central Bank (ECB) and the Deutsche Bundesbank, the central bank of Germany. It has one of the busiest airports in the world and is the address of many top companies, national and international banks. In 2014, Frankfurt became Europe’s first renminbi payment hub. Frankfurter Wertpapierbörse, the Frankfurt Stock Exchange, is among the world’s largest stock exchanges. The exchange’s total turnover is 5.2 trillion euros per year, making it the world’s third largest market and sixth largest in terms of market capitalization. Deutsche Börse AG operates the Frankfurt Stock Exchange.
Shanghai is China’s largest city and the world’s largest city by population. The Chinese government in early 2009 announced its ambition of turning Shanghai into an international financial center by 2020. The Shanghai Stock Exchange (SSE) is mainland China’s most preeminent market for stocks in terms of turnover, tradable market value, total market value and has close to 1,500 listed companies. The SSE is ranked fourth with a market capitalization of $4.39 trillion. The China Securities Regulatory Commission (CSRC) directly governs the SSE. The exchange is considered restrictive in terms of trading and listing criteria. (Further Reading; Who Owns The Stock Exchanges)
Some financial hubs that have been uncontested leaders in the past are now facing stiff competition from existing players and emerging and vibrant entrants. 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 also among the top financial hubs.