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45-437: The finance industry in its most common sense concerns commercial banks that provide market liquidity , risk instruments , and brokerage for large public companies and multinational corporations at a macroeconomic scale that impacts domestic politics and foreign relations . The extragovernmental power and scale of the finance industry remains an ongoing controversy in many industrialized Western economies, as seen in

90-485: A business, helps businesses raise money from other firms in the form of bonds (debt) or share capital (equity). The primary operations of commercial banks include: The United States is the largest commercial banking services location. New York City and London are the largest centers of investment banking services. NYC is dominated by U.S. domestic business, while in London international business and commerce make up

135-469: A centre for finance in the Middle East , including for Islamic finance . The rapid rise of India 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

180-539: A common misconception known as the "bank analogy". Unlike commercial banks, central banks are not primarily focused on generating profits and cannot become insolvent in the same way as commercial banks in a fiat currency system. The name bank derives from the Italian word banco 'desk/bench', used during the Italian Renaissance era by Florentine bankers, who used to carry out their transactions on

225-680: A desk covered by a green tablecloth. However, traces of banking activity can be found even in ancient times. In the United States, the term commercial bank was often used to distinguish it from an investment bank due to differences in bank regulation. After the Great Depression , through the Glass–Steagall Act , the U.S. Congress required that commercial banks only engage in banking activities, whereas investment banks were limited to capital market activities. This separation

270-538: A financial city: "a pool of capital to lend or invest; a decent legal and taxation framework; and high-quality human resources". 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. These centres appear in all FSF–IMF lists of OFCs and, bar the Caribbean OFCs of the Cayman Islands,

315-500: 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 , 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

360-538: 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 has become the fastest growing financial hub in Central Asia. Dubai has become

405-632: A number of services to its clients; these can be split into core banking services such as deposits, loans, and other services which are related to payment systems and other financial services. Along with core products and services, commercial banks perform several secondary functions. The secondary functions of commercial banks can be divided into agency functions and utility functions. Agency functions include: Utility functions include: Financial centre A financial centre ( financial center in American English ) or financial hub

450-523: A significant portion of investment banking activity. FX or Foreign exchange services are provided by many banks and specialists foreign exchange brokers around the world. Foreign exchange services include: London handled 36.7% of global currency transactions in 2009 – an average daily turnover of US$ 1.85 trillion – with more US dollars traded in London than New York, and more Euros traded than in every other city in Europe combined. New York City

495-579: A variety of reasons. Some smaller financial centres, such as Bermuda , Luxembourg , and the Cayman Islands , lack sufficient size for a domestic financial services sector and have developed a role providing services to non-residents as offshore financial centres . The increasing competitiveness of financial services has meant that some countries, such as Japan, which were once self-sufficient, have increasingly imported financial services. The leading financial exporter, in terms of exports less imports,

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540-420: 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 , 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

585-1212: 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). 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 (e.g. Luxembourg ), or city-states (e.g. Singapore). Since 2010, academics consider Offshore Financial Centres synonymous with tax havens . The IMF noted that OFCs could be set up for legitimate purposes (listing various reasons), but also for what

630-495: Is a financial institution that accepts deposits from the public and gives loans for the purposes of consumption and investment to make a profit . It can also refer to a bank or a division of a larger bank that deals with corporations or large or middle-sized businesses, to differentiate from retail banks and investment banks . Commercial banks include private sector banks and public sector banks. However, central banks function differently from commercial banks, despite

675-458: 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

720-686: Is a location with a significant concentration of participants in banking asset management , insurance , and financial markets , with venues and supporting services for these activities to take place. Participants can include financial intermediaries (such as banks and brokers), institutional investors (such as investment managers, pension funds , insurers, and hedge funds ), and issuers (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 (OTC), directly between participants. Financial centres usually host companies that offer

765-768: Is the United Kingdom , which had $ 95 billion of financial exports in 2014. The UK's position is helped by both unique institutions (such as Lloyd's of London for insurance, the Baltic Exchange for shipping etc.) and an environment that attracts foreign firms; many international corporations have global or regional headquarters in the London and are listed on the London Stock Exchange , and many banks and other financial institutions operate there or in Edinburgh . Commercial bank A commercial bank

810-598: Is the largest center of investment services, followed by London. The United States, followed by Japan and the United Kingdom are the largest insurance markets in the world. A financial export is a financial service provided by a domestic firm (regardless of ownership) to a foreign firm or individual. While financial services such as banking, insurance, and investment management are often seen as domestic services, an increasing proportion of financial services are now being handled abroad, in other financial centres , for

855-407: Is traditionally among those to receive government support in times of widespread economic crisis. Such bailouts, however, enjoy less public support than those for other industries. A commercial bank is what is commonly referred to as simply a bank. The term " commercial " is used to distinguish it from an investment bank , a type of financial services entity which instead of lending money directly to

900-838: The Global Financial Centres Index and the Xinhua–Dow Jones International Financial Centres Development Index . The Global Financial Centres Index ("GFCI") is compiled semi-annually by the London -based think tank Z/Yen in conjunction with the Shenzhen -based think tank China Development Institute . The 36th edition of the GFCI was published in September 2024. Old finance centres such as Amsterdam, London, Paris, and New York have long histories . Today there

945-477: The Italian city-states (such as Venice and Genoa ) of the late medieval and early Renaissance periods while Florence can be said to be the birthplace of double-entry bookkeeping from the publication and proliferation of the work of Luca 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

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990-464: The Low Countries , first to Bruges , and later to Antwerp and Amsterdam which acted as Entrepôt cities. They also became important centres of financial innovation, capital accumulation and investment. By the early 1800s, London officially replaced Amsterdam as the world's leading financial centre. London and Paris were the world's only prominent financial centres throughout most of

1035-533: The United States partly as a result of the Gramm–Leach–Bliley Act of the late 1990s, which enabled different types of companies operating in the U.S. financial services industry at that time to merge. Companies usually have two distinct approaches to this new type of business. One approach would be a bank that simply buys an insurance company or an investment bank , keeps the original brands of

1080-606: The 11th century in the Kingdom of England at the annual fair of St. Giles and in the Kingdom of Germany at the Frankfurt autumn fair, then developed in medieval France during the Champaign Fairs. The first real international financial centre was the city state of Venice 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

1125-595: The 19th century. After 1870, Berlin and New York grew to become major financial centres mainly serving their national economies. An array of smaller international financial centres found market niches , such as Amsterdam, Brussels , Zurich , and Geneva . London was the leading international financial centre in the four decades before World War I . 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 , Hong Kong , Singapore and Shanghai . London has been

1170-604: The 2024 edition of the Global Financial Centres Index , New York City , London and Hong Kong ranked top 3 globally, while other well known financial centres include Singapore , Shanghai , Frankfurt and Tokyo , amongst others. 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

1215-483: The 20th century London played an important role in the development of new financial products such as the Eurodollar and Eurobonds 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

1260-477: 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 . 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

1305-668: The American Occupy Wall Street civil protest movement of 2011. Styles of financial institution include credit union , bank , savings and loan association , trust company , building society , brokerage firm , payment processor , many types of broker , and some government-sponsored enterprise . Financial services include accountancy , investment banking , investment management , and personal asset management . Financial products include insurance , credit cards , mortgage loans , and pension funds . The term "financial services" became more prevalent in

1350-549: 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. 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. Primitive financial centres started in

1395-474: 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. 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

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1440-500: 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

1485-517: The academic lists of tax havens include all the FSF–IMF OFCs). 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 : 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

1530-545: The acquired firm, and adds the acquisition to its holding company simply to diversify its earnings . Outside the U.S. (e.g. Japan ), non-financial services companies are permitted within the holding company. In this scenario, each company still looks independent and has its own customers, etc. In the other style, a bank would simply create its own insurance division or brokerage division and attempt to sell those products to its own existing customers, with incentives for combining all things with one company. The financial sector

1575-519: The borrower. Instead, they open a deposit account from which the borrower can withdraw. In other words, while sanctioning a loan, they automatically create deposits. Regulations In most countries, commercial banks are heavily regulated and this is typically done by a country's central bank . They will impose a number of conditions on the banks that they regulate such as keeping bank reserves and to maintain minimum capital requirements . They also require some capital Commercial banks generally provide

1620-416: 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 , 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

1665-599: The largest centre for trading in public equity and debt capital markets , driven in part by the size and financial development of the U.S. economy . 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 ,

1710-419: 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 (e.g.

1755-491: 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. In Asia , Tokyo emerged as

1800-551: 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 , with the creation of so-called "draft banks". The first draft bank Rishengchang

1845-693: The second largest concentration of hedge funds (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 , although this ended on 31 January 2020 when the United Kingdom left the European Union following the Brexit referendum of 2016. As well as the London Stock Exchange , the Bank of England ,

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1890-679: The second oldest central bank, is in London, although the European Banking Authority moved to Paris after Brexit. 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 with new regional powers and global capitalism , numerous financial centres have challenged Wall Street, particularly London and several in Asia, which some analysts believe will be

1935-475: 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 , and international bank lending . London has

1980-592: 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 , mainly due to its geographical location at the estuary of the Yangtze River and to

2025-407: Was mostly repealed in 1999 by the Gramm–Leach–Bliley Act . The general role of commercial banks is to provide financial services to the general public and business, ensuring economic and social stability and sustainable growth of the economy. In this respect, credit creation is the most significant function of commercial banks. While sanctioning a loan to a customer, they do not provide cash to

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