Israel has been called the start-up nation. It’s been called the innovation nation and the hi-tech nation.It’s been called the brain nation and the biomed nation and the would-be scale-up nation.While everyone, thankfully, agrees that Israel is a nation, is it possible that its next moniker will be the finance nation? “There is only one input in the financial-services industry.It’s human minds,” said Tal Keinan, CEO of Tel Aviv-based financial asset management company KCPS Clarity.The same factors that made the hi-tech sector in Israel boom, he said, could lead Israel to become a financial innovation hub and accrue all the relevant benefits: building a new export sector, increasing employment, secondary employment effects through accountants, lawyers and analysts, and providing a big new source of government revenues.From the get-go, Zionists tried to shed the stereotype of the Jewish banker in favor of the tough, self-sufficient laboring “new Jew” (indeed, even the word “bank” derives from the benches where Jewish and other bankers would sit in the old days). The socialist economy, complete with its focus on agriculture and kibbutzim, made little room for finance.But regulatory changes over the last decade have given new life to financial services in Israel, and that’s a good thing, Keinan said.Well-developed money management industries often emerge as a result of having large pools of pension savings that need to be invested, he said. Pension funds hire managers to make up the difference between how much people put in over their lives and how much they expect to get back in retirement. In Israel’s early days, the Histadrut labor federation owned most of the funds and simply turned to the government for earmarked bonds, which ensured they would get a certain inflation- adjusted return. At the end of the day, it was the taxpayers who were on the hook to pay off those bonds.In 2004, then finance minister Binyamin Netanyahu passed a law to phase out the earmarked government bond by 2025, bringing $300 million to $400m. in new cash onto the market. That has led to a new wave of financial companies, including Keinan’s own. Opening up the intended sovereign-wealth fund, which will manage Israel’s natural-gas money, and part of the Bank of Israel’s reserve system could help push that trend.“I don’t see any reason why Israel couldn’t be a major financial hub,” said Susquehanna Growth Equity’s Amir Goldman. “There’s a lot of knowledge transfer, with technology and financial- markets people coming to Israel. It’s slow but sure.”High-frequency trading centers, hedge funds and financial technology are starting to pop up among Israel’s start-up companies.“I think we’re starting to get a cluster,” Goldman said.A survey released last week by Tzur Management, for example, found that the number of hedge funds in Israel has increased by 50 percent from 2011 to 2013, and that the assets under hedge-fund management have grown 15% annually, reaching $2.66 billion by December.“It is our belief that this growth will continue and Israel will become a recognized center of global hedge fund activity over the next decade and beyond,” the survey said.But not everyone agrees that Israel is ripe for becoming a financial hub.When The Jerusalem Post asked then Bank of Israel senior adviser Barry Topf last October about the prospect of Israel as a financial hub, he voiced skepticism.“As far as I know, every country in the world from Grenada to Fiji to Trinidad and Tobago has at one time or another decided that they want to become an international financial center,” he said. Israel simply lacks the specific conditions needed to become an international financial center, he said.Although Hong Kong and Singapore are both small places with major financial activity, they serve as regional hubs, an unlikely prospect for Israel in the Middle East.“It would be very nice, but you just don’t have the conditions here – be they population, be they market size, be they geopolitical position – that you need to become an international financial center,” Topf said.Niron Hashai, a professor at the Hebrew University’s School of Business Administration, agreed.“Usually, financial centers are found where there is a lot of business,” he said. “Israel is small, the region is fragmented, it’s not a center of trade, investment or exports.”Heavy regulation, high taxes and insufficient infrastructure don’t make it any more appealing, Hashai said.Given the tense security situation, there is an extra risk in putting money in Israel, he added.To Hashai, even the hi-tech comparison seems off.“Entrepreneurship, originality and creativity are needed in hi-tech, but not in finance, where it’s about knowing techniques and all sorts of procedures to maximize returns under certain levels of risk,” he said. “I actually think discipline is much more important for finance than creativity. I don’t see any of these ingredients here.”But Keinan sees a more narrow, promising definition.Even if Israel does not become a financial center like London or New York, with their booming stock markets, it could be a hub of asset management, private banking and brokerage.“Those are totally realistic goals,” he said.One area in the financial world that everyone agreed Israel could excel is financial technology.Both Barclays and Citi opened research and development centers in Israel in 2011, and many of Israel’s promising start-ups are in the financial technology field.“There is some real innovation in terms of fin-tech coming out of Israel,” said Simon Gelpin, director-general of Investment Promotion at Invest Hong Kong.