A financial center is a location, often a city, that is recognized for its concentration of financial services, such as corporate banking headquarters or stock exchanges. The presence of financial institutions and their influence on the market determines a jurisdiction’s status as a financial center.
A financial center is a jurisdiction, often a municipality, that is considered a key site for various types of financial services. Such a hub may be a city that is home to a multiplicity of corporate banking headquarters that operate branches on a national or international scale, or even a location where one or more stock or commodity exchanges are maintained. The Wall Street area of New York City is considered a continuous financial center, as is London. Hong Kong is another example of a location that is generally considered by the financial community to be a major financial center.
The identification of a jurisdiction as a financial center typically occurs over a period of time. As more and more companies that focus on financial services of one type or another choose to establish themselves in that area as their permanent headquarters, the influence of that location will exert a greater influence on the financial markets. In turn, this will often serve as motivation to support businesses with some connection to financial services, which only helps drive more business within that given city or region.
While a financial center may be recognized for several years as an important part of the business community, there are a number of events that can affect that perception. For example, some cities in the United States that were once recognized as financial centers during the mid to late 20th century have lost their recognition as centers. This is due to the number of large banking corporations located within its boundaries that were acquired by corporations based in other cities. This is particularly true when those mergers or purchases resulted in the movement of core operations out of those cities and into the municipalities where the new owner was located.
There is some variation of opinion regarding what type of financial services must be concentrated within an area for the jurisdiction to be recognized as a financial center. The presence of some type of stock exchange that has great influence on the market is usually enough to merit designation as a center. A city or area that serves as the corporate headquarters for several national or international banks may also be considered a hub. In general, if the reach of influence of various entities based in that area extends well beyond the limits of that jurisdiction, there is some validity to referring to that location as a financial center.
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