The Financial Centres Frankfurt and Astana intend to work more closely together

Frankfurt Main Finance e.V. (FMF) and the Astana International Financial Centre (AIFC) from Kazakhstan signed a Memorandum of Understanding (MoU) on cooperation between the two financial hubs on Friday, 17.11.2017.

The AIFC Governor Kairat Kelimbetov and Dr. Lutz Raettig, President of Frankfurt Main Finance signed the MoU agreement on the premises of the company Economic Development Frankfurt in the presence of the Kazakh Ambassador Bolat Nussupov, City Councillor Markus Frank, Managing Director of Frankfurt Economic Development Oliver Schwebel, and Hubertus Väth, Managing Director of FMF.

An AIFC delegation visited Frankfurt am Main last week. In addition to holding several meetings with Frankfurt Main Finance and FMF members such as German banks, the delegation attended the Astana International Financial Centre Forum within the framework of the Euro Finance Week, where Kairat Kelimbetov and his team presented their extensive plans for the years ahead.

“Astana is a young and ambitious financial centre, with which we have enjoyed a close and friendly relationship for many years,” as Frankfurt Main Finance President Dr. Lutz Raettig described the links to the Kazakh financial centre.

Hubertus Väth sees great potential in the new agreement that has been reached: “There are many different opportunities for collaboration in the fields of infrastructure, training, or internal and external financial centre marketing.”

Frankfurt and Astana will be implementing their joint plans over the next few weeks and months and will thus be making a contribution together towards strengthening their respective financial centres.

歓迎される – Welcome

Frankfurt am Main will be the future EU location of the finance companies Mizuho Securities, Daiwa Securities, Sumitomo Mitsui Financial Group and Nomura. But why are foreign banks deciding in favour of Frankfurt? And what are the chances and challenges presented by moving? Here’s an interview with Dr. Oliver Wagner, Managing Director of the Association of Foreign Banks in Germany (VAB).

Why are foreign banks coming to Frankfurt?

Dr. Oliver Wagner: There’s a whole bundle of motives involved when banks choose Frankfurt. From the regional perspective, it’s not only the central location of the Rhine-Main area in the heart of Germany, the good transport connections thanks to the international airport and the central railway station with its ICE links, and the motorway network, it’s also the comparatively inexpensive office rents and the comprehensive IT infrastructure that count. This is supplemented by the closeness to the German stock exchange, the just under 200 banks who are represented in the Frankfurt region – including around 160 foreign banks – with their 70,000+ employees, and the presence of diverse consultants, auditors and law firms. Independent of the location Frankfurt, another decisive factor is certainly the effective, reliable and open-minded supervision of the Federal Financial Supervisory Authority (BaFin) and the Bundesbank, which also provides for dialogue and, to a major extent, documentation in the English language. That’s hardly an exhaustive list, but it’s worth stressing that Frankfurt has never promised tax reductions or other benefits and privileges, which are incentives we have certainly heard from other locations.

What are the greatest challenges faced by a company that is now relocating its EU headquarters in the wake of Brexit?

Wagner: It’s impossible to give a general answer to that question since it very much depends on the available structures that one can build upon. Banks not active in Germany before have to apply for appropriate authorisation from the supervisory authorities, and experience shows that can take around a year. That also applies to companies that have been operating up to now on the basis of the EU Passport. They also need a new permit and will be particularly expanding their back-office employees and infrastructure. If additional business domains such as broker-dealer operations are to be newly set up, this will require extensive investment. The key question is how one can continue to utilise the structures that already exist, possibly through channels of outsourcing. In general, it’s clear that a number of regulatory and tax issues will have to be faced.

And what are the greatest opportunities?

Wagner: First of all, I believe that Brexit is not a positive development, either for the European Union or for the United Kingdom. In an era of globalisation and networked markets, a mosaic of fragmented markets means additional costs and effort for almost all the parties involved. If one tries to find a positive side in this disruptive event, it might be the chance for companies to readjust themselves, question the status quo, and reassess previous practices.

What should definitely be borne in mind during the Brexit negotiations from the standpoint of the financial sector?

Wagner: Transition periods should certainly be agreed. It is foreseeable that it won’t be possible to regulate everything in the coming months up until the end of March 2019 so that a legally incontestable and smooth shift can become made on March 20th, 2019. This legal certainty for products and services is necessary, not least for the sake of financial stability.

Who is settling in the Financial Centre Frankfurt?

“Japanese banks warned very early on about the consequences of Brexit and are now among the first to react,” says Hubertus Väth, Managing Director of Frankfurt Main Finance. “Next, we’re now expecting decisions from the American and European banks, and we’re also confident as far as they are concerned.” Exactly who the financial companies are who will be coming to Frankfurt is shown below with an overview of selected key figures in comparison to the Deutsche Bank Group.

 

 

Movement in the banking world – the Brexit and its repercussions

Negotiations have started on the withdrawal of the United Kingdom from the European Union. One important issue is whether the processing of euro-denominated securities transactions (“euro clearing”) will remain in London or take place on the continent in future. Many banks are getting ready to relocate their business to other cities.

 

Deutsche Bundesbank: first applications from banks affected by the Brexit

In June, Michel Barnier, the European Commission’s Chief Negotiator, and David Davis, the UK’s Secretary of State for Exiting the European Union, met for the first time in Brussels to negotiate the withdrawal of the UK from the EU. At the same time, deliberations are well underway within the banks about relocating to other European financial centres. According to the Deutsche Bundesbank, the first financial institutions affected by the UK’s withdrawal from the EU have applied for German bank licences. Andreas Dombret, Executive Board member of the Deutsche Bundesbank with responsibility, inter alia, for banking and financial supervision, spoke in an interview about “first applications”. Dombret also said that he has conducted “two dozen talks” with banks considering relocating to the European continent, but he doesn’t assume that every one of these discussions will end up in a move to Germany. “I expect most banks to make their relocation decisions by the middle of the year. But that doesn’t mean the banks will be publicising them,” he added.

 

Standard Chartered sets up the necessary infrastructure for bank licence in Germany

One of the first institutions to expand its business location in Frankfurt following the UK vote in favour of Brexit is the major British bank Standard Chartered. “We will now be establishing the necessary infrastructure on the basis of which we can apply for a bank licence in Germany,” the bank’s German head Heinz Hilger told the news agencies dpa and dpa-AFX. “Our plan is to have the operational issues settled by the end of 2018 at the latest.” Hilger explained that the decision for Frankfurt was taken because the bank in Germany, with its current level of around 100 employees, already has the largest presence in Europe after the London headquarters. “This is bound up with the fact that we operate the so-called euro clearing from Germany. This makes the location larger and more complex, and therefore more suitable for additional tasks and activities.” In addition, the proximity to the regulatory authorities, the city’s internationality and its airport are also among the key merits and advantages of the Main metropolis. Just how many employees will join the Frankfurt location depends on how hard the Brexit will turn out to be, he points out. “As a first step, we’re talking about a very limited number of employees coming to Frankfurt, maybe 20. Nobody can reliably predict at the moment how many people will ultimately be affected.”

Goldman Sachs: “We are starting to transfer resources to Frankfurt and other European cities”

Among the big banks that already have a German banking licence is the Goldman Sachs Group. Around 200 people currently work for the company in Frankfurt’s Trade Fair Tower compared to around 6,000 employees in the City of London. Since the Brexit is now considered a certainty, Goldman Sachs will at least be doubling the number of its employees working in Frankfurt, according to Richard Gnodde, Vice-Chairman of The Goldman Sachs Group, Inc. and CEO of Goldman Sachs International. “We are starting to transfer resources to Frankfurt and other European cities. Employees with customer contact are moving closer to their clients, whether in Milan, Madrid or a different city,” said Gnodde in an interview with the Sunday paper Frankfurter Allgemeine Sonntagszeitung (FAS). Since the entire Brexit process is unpredictable, he considers it important to have “appropriate emergency plans” up one’s sleeve. He also hopes and trusts that a transitional period will follow at the end of the negotiations so that the financial sector can adapt to the new situation. “In the interest of the stability of the financial system, it’s important that the banks don’t have to move parts of their business back and forth very quickly. They need the time to build up resources; the financial supervision also needs to adapt.” In the competition to be Europe’s future financial centre, Gnodde sees a number of European cities in the running, including Paris and Dublin. But Frankfurt has the edge at the moment.

Invesco: attractiveness is falling for Great Britain and rising for Germany from the sovereign fund standpoint

Sovereign wealth funds assess the UK withdrawal from the European Union as negative, which is why the nation is now considered less attractive for investments in the long run – that’s the result of the “Global Sovereign Asset Management Study 2017” from the investment company Invesco. In view of the uncertainty about the taxation of imports or access to the EU Single Market, those surveyed also questioned “the future of Great Britain as an ‘investment hub’ for Europe”. On the other hand, according to the study, the attractiveness of Germany as an investment destination for sovereigns has continuously grown since 2015. The findings are based on face-to-face interviews with 97 leading sovereign funds, state pension funds and central bank managers, with the assets of those sampled totalling around 12 trillion US Dollars.

Delegation to Japan & Korea

On behalf of Frankfurt Main Finance, Jochen Biedermann took part in a delegation visit of the state of Hessen to Tokyo and Seoul, led by Tarek Al-Wazir, Minister for Ministry of Economics, Energy, Transport and Regional Development. The high ranking Hessian delegation met political leaders, various ministries, financial service providers and FinTech companies in both countries, Japan and South Korea.

Not only Japanese and Korean banks, but also government officials of both countries were keen to learn more about the German view on “Brexit” and about the advantages of Frankfurt as a potential headquarter for the European operations of Japanese and Korean financial service providers.

Furthermore, an initial contact was established to “FinTech Japan”, the Japanese FinTech association. There is a strong mutual interest in jointly organizing FinTech matchmaking events in course of 2017. With South Korea, already a close partner to Frankfurt in FinTech and beyond, next cooperation steps were discussed, in particular in the area of Blockchain. The FinTech community in South Korea is looking forward to the visit of a German FinTech delegation mid of January 2017, which is organized by Frankfurt Main Finance.

Renminbi Forum

FMF Leads Panel at Luxembourg Renminbi Forum

On June 15, 2016, international leaders from governments and the finance industry met for the third Luxembourg Renminbi Forum to discuss the internationalisation of the Chinese currency. Representing Frankfurt Main Finance at the Renminbi Forum, Hubertus Väth led an exciting panel discussion with leading Renminbi experts titled Stock Exchanges – New Role in RMB Internationalisation. Panelists included Kevin Rideout, Managing Director at Hong Kong Exchanges & Clearing, Robert Scharfe, CEO Luxembourg Stock Exchange, Tilman Fechter, Executive Director of Sales & Relationship Management, Investment Funds Services at Clearstream, and Jianhong Wu, Board Member at China Europe International Exchange (CEINEX). The panellists explored how European stock exchanges will support the internationalisation and growth of the Renminbi. Several initiatives are already underway, for example CEINEX, the first dedicated trading venue for China- and RMB-related investment products in international markets, was established in Frankfurt in 2015.

You can watch the entire panel discussion in the video below.

Video compliments of Luxembourg for Finance.

FMF at Globalization of FinTech in Korea Symposium

By invitation of the Global FinTech Research Institute in Seoul, Jochen Biedermann gave a keynote at the symposium Globalization of FinTech in Korea. Top-ranking Korean politicians took part in that event. He presented the results of Frankfurt’s FinTech initiative Dialogforum FinTech Frankfurt Rhein-Main and introduced Frankfurt’s new FinTech centre, which will open in October. Furthermore, he motivated next steps in strengthening the FinTech partnership with Korea. Dr Biedermann also visited several Korean FinTech companies and encouraged them to expand their business to Europe via FinTech hub Frankfurt. With Finotek, a leading Korean FinTech company has already a presence in Frankfurt Rhein-Main and will send a representative from August onwards.

In a second keynote, Dr Biedermann spoke about international developments in FinTech and Blockchain at the Korean Computer Congress in Jeju-City.

The next visit of a Korean FinTech delegation to Frankfurt is planned for October.

 

Signature Event “Think Asia, Think Hong Kong” in Frankfurt/Main

Hong Kong’s flagship overseas promotion “Think Asia, Think Hong Kong”, organised by the Hong Kong Trade Development Council (HKTDC), will be launched in Germany for the first time this year. A series of events from 27 to 29 September will be staged in Düsseldorf, Frankfurt, Hamburg and Munich to provide business people from various sectors with the chance to learn more about the business environment in Hong Kong, the Chinese mainland and Asia and to expand their networks. As part of the event series making its debut in Germany, Frankfurt Main Finance e.V. will be one of the supporting organisations for the seminar in Frankfurt. Read more

Friendly Visits Between China and Hesse

The Hessian Minister of Economics’ trips to China in 2012, 2013 and 2014 were aimed at intensifying mutual relations. They were also pivotal in establishing Frankfurt as a Renminbi hub. Read more

Korean FinTechs Visit the Financial Centre Frankfurt

To help mark the 25th anniversary of Germany’s reunification, a 14-member South Korean delegation headed by Congressman Kim Jeong Hoon (pictured with Angela Merkel during the reception) visited the financial centre, Frankfurt. The delegation included leading FinTech companies like YAP Global, Finotek, Yello Finance Group and Datastreams corp. Frankfurt Main Finance organised an exchange at the offices of Frankfurt Economic Development between Frankfurt’s universities, Germany’s leading FinTech companies and the Maininkubator.

South Korea is the world leader in mobile payment among industrialized countries with a usage rate of 40%. With more than 60 million mobile payment users, Koreans are among the world’s fastest adaptors of FinTech.

Dr. Lutz Raettig, Chairman of the Executive Committee of Frankfurt Main Finance was impressed: “In this regard, Germany needs to catch up and we want to this to happen. On the other hand, in Frankfurt we have FinTech companies, like as 360T, which are unparalleled infrastructure providers. Korea and Germany complement each other well and we therefore hope to continue to work together even more closely.”

In December 2013, the financial centres Frankfurt and Busan signed a “Memorandum of Understanding” to mutually support and strengthen one another.

Economics Minister Al-Wazir Travels with Delegation to China

The Hessian Economics Minister Tarek Al-Wazir departed Saturday for a weeklong trade mission to the People’s Republic of China. A few months after Frankfurt being named the first Renminbi first trade centre in the Eurozone, finance and economics meetings are at the centre of the trip. “The foundation has been laid, so that Frankfurt can establish itself as a central RMB trading platform in the euro area. The talks with the Chinese central bank, amongst others, will be concerned with fine tuning so that operations can get off the ground as quickly as possible. This will greatly benefit the financial centre of Frankfurt and also many SMEs in Hesse, whose business with Chinese partners will be significantly simplified, “said Al-Wazir upon his departure in Frankfurt.

“The conditions for even closer integration between Hessian and Chinese companies are good,” said Al-Wazir. China is the most important economic partner in the Asian market. The combined overall trading volume is currently over 9 billion Euros. At the same time, China is among the most active foreign investors in Hessen. “More and more Chinese technology companies, who want to invest in high-tech segment, are looking for a location in Europe. Hessen offers especially optimum conditions with its wide range of qualified professionals, high economic power and Frankfurt Airport as an international hub.” There is a great demand in China in sectors like environmental industries, energy efficiency, new materials and information and communication technologies. The Hessian economy compliments this demand with a high degree of expertise in these fields.

The delegation will stop in the capital Beijing, the financial centre of Shanghai and the Hessian partner-province of Hunan.

In Beijing, the conversations with the Chinese Ministry of Commerce (3/11) and the Ministry of Industry and Information Technology (4/11) will focus on the expansion of trade and investment.

In Shanghai (6/11) investment conditions in the Shanghai Free Trade Zone will be a focus of discussions with the local Trade Commission and Investment Authority. On the same day, the 3rd Hessen-Shanghai Business Forum will take place.

In addition to the capital Beijing and the economic hub Shanghai, the Hesse’s partner province Hunan (since 1985) is the third destination (5/11.). Economically speaking, Hunan is among the 10 strongest provinces in the PRC and since June this year is connected to Frankfurt with a direct flight. Hunan is one of the provinces with ambitious goals for improving their environmental quality and plans for resource-saving, environment-friendly development path. There project and company visits will be at the centre.

Overall, the delegation includes nearly 70 people. Their journey will last until 07/11.