Emergence and growth

Financial centres are much discussed but rarely defined. A major difficulty is that the products of the financial sector are diverse, and include markets for capital, money, debt, insurance and other financial services, and gold, silver and other precious metals. A ‘financial centre’ might include some or all of these markets. The twentieth-century financial services industry has also seen very rapid product innovation, especially since the emergence of a global capital market from the late 1950s. The upshot is that the identification – and ranking – of financial centres is a subjective matter, and a ‘financial centre’ in one time period may look very different from one in another period.

There are also marked differences in the geographical areas served by financial centres. Almost every modern economy has some kind of ‘centre’ where there is a clustering of financial services serving the requirements of the rest of the country. Bangkok has served this role in Thailand over the last one hundred years. Such ‘national financial centres’ are beyond the concern of this chapter however which focuses on centres which provide financial services for an area outside their own political boundaries: a location where there is a concentration of activity engaged in the international trade of capital and financial services.

There is general agreement that there has usually existed a hierarchy of international financial centres. Howard Curtis Reed's pioneering attempt to rank financial centres over time both surveys the variety of names given to different types of centre and develops a hierarchy of his own. In the present context, a simpler typology seems more appropriate, in which centres can be divided into three types.