What Is a Financial Hub?

A financial hub is a jurisdiction, often a municipality, that is considered to be a key site for various types of financial services. A hub of this type may be a city that is home to a multiplicity of bank corporation headquarters that operate branches on a national or international scale, or even a location in which one or more stock or commodities exchanges are maintained. The Wall Street area in New York City is considered an ongoing financial hub, as is London. Hong Kong is another example of a location that is generally thought of in the financial community as being an important financial hub.

The identification of a jurisdiction as a financial hub normally comes about over a period of time. As more and more enterprises that focus on financial services of one type of another choose to settle in that area as a permanent headquarters, the influence of that location will exert greater influence in financial markets. This in turn will often serve as the motivation for supporting business with some connection with financial services, which only aids in generating more business activity within that given city or region.

While a financial hub may be recognized for a number of years as being an important part of the business community, there are a number of events that can impact that perception. For example, some cities in the United States that were once recognized as financial hubs during the middle to late 20th century have since lost recognition as hubs. This is due to the number of large bank corporations located within their boundaries that were acquired by corporations headquartered in other cities. This is particularly true when those mergers or buyouts resulted in the movement of core operations away from those cities and to the municipalities where the new owner was based.

There is some variance of opinion regarding what type of financial services must be concentrated within an area in order for the jurisdiction to be recognized as a financial hub. The presence of some sort of stock exchange that has wide influence in the marketplace is typically sufficient to merit the designation of a hub. A city or area that serves as the corporate headquarters for several national or international banks may also be considered a hub. Generally, if the scope of influence of several entities based on that area extends well beyond the boundaries of that jurisdiction, there is some validity in referring to that location as a financial hub.