London, concentrated in theCity of London andCanary Wharf, is one of the main global financial centres and a leading centre of technology-enabled financial innovation.[7][8][9]
In April 2000, theFinancial Stability Forum ("FSF"),[b] concerned about OFCs on global financial stability produced a report listing 42 OFCs.[10] 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):[11]
International Financial Centre (IFC). Described by the IMF as being large international full–service centres with advanced settlement and payments systems, supporting large domestic economies, with deepmarket liquidity where both the sources and uses of funds are diverse, and where the legal and regulatory frameworks are adequate to safeguard the integrity of principal–agent relationships and supervisory functions. IFCs generally borrow short–term from non–residents and lend long–term to non–residents. Examples cited by the IMF includedNew York City,[1][12]London, andTokyo.
Regional Financial Centre (RFC). The IMF noted that RFCs, like IFCs, have developed financial markets and infrastructure and intermediate funds in and out of their region, but in contrast to IFCs, have relatively small domestic economies. Examples cited by the IMF includedHong Kong,Singapore, andLuxembourg.
Offshore Financial Centre (OFC). The IMF noted that OFCs are usually smaller, and provide more specialist services; however, OFCs still ranged from centres that provide specialist and skilled activities, attractive to major financial institutions, and more lightly regulated centres that provide services that are almost entirely tax driven and have very limited resources to support financial intermediation. The IMF listed 46 OFCs in 2000, the largest of which wasIreland, the Caribbean (including theCayman Islands, and theBritish Virgin Islands), Hong Kong, Singapore, and Luxembourg.
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).[11]
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 majorglobal cities. Offshore Financial Centres, and also some Regional Financial Centres, tend to specialise in tax-driven services, such ascorporate tax planning tools, tax–neutral vehicles,[c] andshadow banking/securitisation, and can include smaller locations (e.g.Luxembourg), or city-states (e.g. Singapore). Since 2010, academics consider Offshore Financial Centres synonymous withtax havens.[d]
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 non-residents on a scale that is incommensurate with the size and the financing of its domestic economy".[15] 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.[16]
Progress from 2000 onwards fromIMF–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 withtax havens, and use the term OFC and tax haven interchangeably (e.g. the academiclists of tax havens include all the FSF–IMF OFCs).[13][14]
24 Sink OFCs: jurisdictions in which a disproportionate amount of value disappears from the economic system (e.g. the traditionaltax havens).
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 usingbase erosion and profit shifting ("BEPS") tax planning tools, which are encoded, and accepted, in the Conduit OFC's extensive networks of global bilateraltax 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.
Prior to the 1960s, there was little data available to rank financial centres.[18]: 1 In recent years many rankings have been developed and published. Two of the most relevant are theGlobal Financial Centres Index and theXinhua–Dow Jones International Financial Centres Development Index.[19]
London, Paris, Amsterdam and New York have long beenat the centre of the global financial system.[23][24] Today there is a diverse range of financial centres worldwide.[25] While New York and London (both referred to asAlpha cities) often stand out as the leading global financial centres,[26][27] other established financial centres provide significant competition and several newer financial centres are developing.[28] 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.[29]: 24–34 Others have discussed the ongoing dominance of New York and London, and the role linkages between these two financial centres played in the2008 financial crisis.[30]
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.[31] 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".[32]
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 andFintech capital of the world.[33][34][35] Some of the major RFCs (see next section), such as Paris, Frankfurt, Chicago, and Shanghai, appear as IFCs in some lists.
London. London maintains a leading position as a financial centre and maintains the largest trade surplus in financial services around the world.[44][45][46] 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 forderivatives markets,[47]foreign exchange markets,[48]money markets,[49] issuance of internationaldebt securities,[50] internationalinsurance,[51] trading in gold, silver and base metals through theLondon bullion market andLondon Metal Exchange,[52] internationalbank lending and Europe's share trading capital.[5]: 2 [53][54][55] London has the second largest concentration ofhedge funds (847 according to one source).[56] London benefits from its position between the Asia and U.S. time zones,[57] and benefited from its location within theEuropean Union,[58]: 1 although this ended in 2020 when the United Kingdom left the European Union following theBrexit referendum of 2016. As well as theLondon Stock Exchange, theLondon 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 likeParis,Amsterdam,Frankfurt and evenDublin.
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."[59] 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.[59] 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 theLost Decades .[18]: 1 As a financial centre, Tokyo has good links with New York City and London.[60][61]
These centres appear in all FSF–IMF lists of OFCs and, except for 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 mostlists of major tax havens, and on lists of the largestConduit 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.[62] Amsterdam was a prominent financial centre in Europein the 17th and 18th centuries and several of the innovations developed there were transported to London.[5]: 24 In June 2017, a study published inNature ranked the Netherlands as the world's largestConduit OFC, a term used to describe the re-routing of fund flows to tax havens.[17][63][64] Additionally, after the UK's departure from the European Union, Amsterdam became Europe's largest share trading centre but was quickly overtaken by London again.[65]
Dublin. Dublin (via itsInternational 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.[66] It is the largest securitisation location in the EU-27,[67][68][69] 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[clarification needed] investment managers in larger Asset Management jurisdictions such as London, Frankfurt, New York and Luxembourg.[58]: 5–6 Dublin's advanced BEPS tax tools, for example thedouble Irish, thesingle malt, and thecapital allowances for intangible assets ("CAIA") tools, have led the economistGabriel Zucman to judge Ireland to be the largest corporate tax haven by virtue of its use as a conduit OFC.[70][71][72]
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.[58]: 5–6 Luxembourg is the leading private banking centre in theEurozone and the largestcaptive reinsurance centre in Europe. 143 banks from 28 countries are established in Luxembourg.[76] The country is also the third largestrenminbi centre in the world by numbers, in certain activities such as deposits, loans, bond listing and investment funds.[77] Three of the largest Chinese banks have their European hub in Luxembourg (ICBC,Bank of China,China Construction Bank).
Singapore. With its strong links with London,[78] Singapore has developed into the Asia region's largest centre for foreign exchange and commodity trading, as well as a growing wealth management hub.[79] 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.[80]
Zurich. Zurich is a significant centre for banking, asset management including provision of alternative investment products, and insurance.[81][82][83] Since Switzerland is not a member of theEuropean Union, Zurich is not directly subject to EU regulation.
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.
Dubai. The second largest emirate in theUnited Arab Emirates is a growing centre for finance in theMiddle East, including forIslamic finance. 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 wasBritish Bank of the Middle East in 1946, and the first domestic commercial bank was theNational Bank of Dubai established in 1963).[85]
Frankfurt. Frankfurt attracts many foreign banks which maintain offices in the city. It is the seat ofDeutsche Börse, one of the leading stock exchanges and derivatives markets operators, and theEuropean Central Bank, which sets the monetary policy for the single European currency, theeuro; in addition, in 2014 the European Central Bank became the central institution ofEuropean Banking Supervision for the 18 countries which form theEurozone. It is also the seat ofDeutsche Bundesbank, the German central bank,[87] as well as ofEIOPA, the EU's supervisory authority for insurances and occupational pension systems.[88]
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.[89][90]
Bolsa de Madrid. Madrid's stock exchange is the world's second-largest in number of listed companies.[91]
Madrid. Madrid is the headquarters to the Spanish company Bolsas y Mercados Españoles, which owns the four stock exchanges in Spain, the largest being theBolsa 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).[91] As a financial centre, Madrid has extensive links withLatin America and acts as a gateway for many Latin American financial firms to access the EU banking and financial markets.[92]: 6–7
Milan. Italy's main centre of banking and finance. It hosts theBorsa Italiana stock exchange, one of the larger stock exchanges in Europe, which is now part ofEuronext.[93]: 245
Seoul.South Korea's capital has developed significantly as a financial centre since thelate-2000s recession. In 2009, Seoul ranked 53rd among global financial centres; by 2012, Seoul had risen to number 9.[96] Seoul has continued to build office space with the completion of theInternational Financial Center Seoul in 2013. It ranked 7th in the 2015Global Financial Centres Index, recording the highest growth in rating among the top ten cities.
Shanghai. Official efforts have been directed to makingPudong a financial leader by 2010.[97] 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 inChina Daily.[98] 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.[99] China is generating tremendous new capital, which makes it easier to stage initial public offerings of state-owned companies in places like Shanghai.[100]
The CBD of Mumbai viewed from the Arabian Sea. Also seen is the Bandra - Worli Sea Link.Sydney's northern CBD serves as the financial and banking hub of the city.
Sydney. Australia's most populous city is a financial and business services hub not only for Australia but for theAsia-Pacific 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.[101] Sydney is also home to theAustralian Securities Exchange and an array of brokerage banks which are either headquartered or regionally based in Sydney, including Australia's largest investment bank Macquarie Group.[102][103]
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 thelate-2000s recession, helped by the stability of theCanadian banking system. Most of the financial industry is concentrated alongBay Street, where theToronto Stock Exchange is also located.[104]
Others.Mumbai is an emerging financial centre, which also provides international support services to London and other financial centres.[105][106][107] Cities such asSão Paulo,Mexico City andJohannesburg and other "would-be hubs" lack liquidity and the "skills base", according to one source.[32] Financial industries in countries and regions such as theIndian Subcontinent andMalay Archipelago require not only well-trained people but the "whole institutional infrastructure of laws, regulations, contracts, trust and disclosure" which takes time to happen.[32]
Primitive financial centres evolved in the 11th century in theKingdom of England at the annual fair of St. Giles and in theKingdom of Germany at the Frankfurt autumn fair, then developed inmedieval France during the Champaign Fairs.[108][86]
The first real international financial centre was the city state ofVenice which slowly emerged from the 9th century to its peak in the 14th century.[108] Tradablebonds as a commonly used type of security, were invented by theItalian city-states (such as Venice andGenoa) of the latemedieval and earlyRenaissance periods whileFlorence can be said to be the birthplace ofdouble-entry bookkeeping from the publication and proliferation of the work ofLuca Pacioli.
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 theLow Countries, first toBruges, and later toAntwerp andAmsterdam which acted asEntrepôt cities. They also became important centres of financial innovation,capital accumulation and investment.[citation needed] By the early 1800s,London replaced Amsterdam as the world's leading financial centre.[18]
London andParis were the world's only prominent financial centres throughout most of the 19th century.[18]: 1 After 1870,Berlin andNew York grew to become major financial centres mainly serving their national economies. An array of smaller international financial centres foundmarket niches, such as Amsterdam,Brussels,Zurich, andGeneva. London was the leading international financial centre in the four decades beforeWorld War I.[18]: 74–75 [23]: 12–15 Since then, New York and London have developed leading positions in different activities and some non-Western financial centres have grown in prominence, notablyTokyo,Hong Kong,Singapore andShanghai.
London has been a leading international financial centresince the 19th century, acting as a centre of lending and investment around the world.[18]: 74–75 [109]: 149 TheBank of England, founded as a private bank in 1694, took on the role of acentral bank with theBank Charter Act 1844.[110][111]English contract law was adopted widely forinternational finance, with legal services provided in London.[112] Financial institutions located there provided services internationally such asLloyd's of London, founded in 1686, for insurance and theBaltic Exchange, founded in 1744, for shipping.[113] During the 20th century London played an important role in the development of new financial products such as theEurodollar andEurobonds in the 1960s, international asset management and international equities trading in the 1980s, and derivatives in the 1990s.[23]: 13 [5]: 6, 12–13, 88–9 [53] Long standing as the world's largestcurrency trading hub, today London accounts for over a third of global forex trading.[114][115][116]
TheFederal Reserve System was created in 1913 by theFederal Reserve Act after a series offinancial crises, particularly thepanic of 1907, led to the desire for central control of the monetary system.[117] Since the middle of the 20th century, New York City, represented byWall Street in Manhattan'sFinancial District, has been described as a leading financial centre.[18]: 1 [29]: 25 [30]: 4–5 Over the past few decades, with the rise of amultipolar world with new regional powers andglobal capitalism, numerous financial centres have challenged Wall Street, particularly London,[118] and several in Asia, which some analysts believe will be the focus of new worldwide growth.[37]: 39–49 [119] In 2018, New York was described as extending its lead as the world's centre of finance due to the value of domestic and international financial activity like managing assets and issuing equity, which underscores the position of New York as the world's leading financial centre.[120] A recent source has shown London narrowing the gap between the two cities.[121]
The Bombay Stock Exchange is the largest in India and one of the largest in the world.
InAsia, Tokyo emerged as a major financial centre in the 1980s as the Japanese economy became one of the largest in the world.[18]: 1 Hong Kong and Singapore developed soon after leveraging their links with London and Britain.[30]: 10–11 [78] In the 21st century, other centres have grown including Sydney, Seoul, Shanghai andAstana.Astana International Financial Centre has become the fastest growing financial hub in Central Asia. Dubai has become a centre for finance in theMiddle East, including forIslamic finance. The rapid rise ofIndia has enabled Mumbai to become an emerging financial centre. India is also making an International Financial CentreGIFT 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 majorSink OFC for Asia, and 7th largest global Sink OFC), Mauritius (a majorSink OFC for South Asia, especially India, and Africa, and the 9th largest global Sink OFC).
Africa's largest financial centre is Johannesburg is it the home to Africa's largest stock exchange JSE with a market cap of approximately $1.2 tn.
The private nationwide financial system in China was first developed by theShanxi merchants, with the creation of so-called "draft banks". The first draft bankRishengchang was created in 1823 inPingyao. 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 toShanghai, mainly due to its geographical location at the estuary of theYangtze River and to the control of customs in China. After the establishment of People's Republic of China, the financial centres in China today areBeijing,Shanghai, andShenzhen.
^"Offshore" does not refer to the location of the OFC (i.e. many FSF–IMF OFCs, such as Luxembourg and Hong Kong, are located "onshore"), but to the fact that the largest users of the OFC are nonresident (i.e. the users are non-domestic).
^The FSF is a group consisting of major national financial authorities such as finance ministries,central bankers, and international financial bodies
^Tax–neutral is a term that OFCs use to describe legal structures where the OFC does not levy any taxes, duties or VAT on fund flows into, during, or exiting (e.g. no withholding taxes) the vehicle. Major examples being the IrishQualifying investor alternative investment fund (QIAIF), and the Cayman Islands SPC.
^This is since circa 2010, after the post 2000IMF–OECD–FATF initiatives on common standards, regulatory compliance, and banking transparency, which had significantly weakened the regulatory attraction of OFCs over IFCs and RFCs.[13][14]
^Huw Jones (27 January 2020)."New York surges ahead of Brexit-shadowed London in finance: survey".Reuters. Retrieved27 January 2020.New York remains the world's top financial center, pushing London further into second place as Brexit uncertainty undermines the UK capital and Asian centers catch up, a survey from consultants Duff & Phelps said on Monday.
^Thompsett, Louis (2 October 2024)."Top 10: Fintech Hubs".fintechmagazine.com. Retrieved29 March 2025.
^abJames R. Hines Jr. (2010)."Treasure Islands".Journal of Economic Perspectives.4 (24):103–125.Tax havens are also known as "offshore financial centers" or "international financial centers", phrases that may carry slightly different connotations but nevertheless are used almost interchangeably with "tax havens
^"Global Shadow Banking and Monitoring Report: 2017"(PDF).Financial Stability Forum. 5 March 2018. p. 30.Jurisdictions with the largest financial systems relative to GDP (Exhibit 2–3) tend to have relatively larger OFI [or Shadow Banking] sectors: Luxembourg (at 92% of total financial assets), the Cayman Islands (85%), Ireland (76%) and the Netherlands (58%)
^See, for example,Yoshio Okubo, Vice Chairman, Japan Securities Dealers Association (October 2014)."Comparison of Global Financial Center".Harvard Law School, Program on International Financial Systems, Japan–U.S. Symposium. Retrieved30 May 2015.{{cite web}}: CS1 maint: multiple names: authors list (link)
^"The Bank of England: History and Functions"(PDF). p. 9.These continued with little substantial change until the second quarter of the 19th century, when new ideas on the rights and duties of a central bank were expressed in laws that opened the ordinary business of banking to free competition, but concentrated exclusively in the Bank the note issue of England and Wales.
^"History".www.bankofengland.co.uk. Retrieved29 March 2025.The Bank Charter Act of 1844Opens in a new window gave the Bank of England a range of new powers and formalised the issuance of banknotes in the UK. This Act of Parliament placed restrictions on any banks, companies or persons in England and Wales that issued their own banknotes, and stopped any new banks from starting to issue notes across the UK.
^Huw Jones (4 September 2018)."United States top, Britain second in financial activity: think-tank". Thomson Reuters. Retrieved5 September 2018.Think-tank New Financial's study, which focuses on the "raw" value of actual domestic and international financial activity like managing assets and issuing equity, underscored the overall dominance of New York as the world's top financial center.
.jpeg)
New York City
6
London
Hong Kong
Singapore
Shanghai
Seoul
Frankfurt
1
Dubai
Dublin
Geneva
Luxembourg
Paris
Amsterdam
_-_2022-09-03_-_3.jpg)
