Support for Planned Merger between Deutsche Börse and London Stock Exchange from Majority of German Financial Industry

According to a recent survey of financial institutions and service providers by the Center for Financial StudiesCenter for Financial Studies, 63% of the companies surveyed are fundamentally in favor of the planned merger between London Stock Exchange (LSE) and Deutsche Börse. However, 35% of respondents would only support the merger in case of a Brexit if the holding’s headquarters were to remain in Frankfurt and therefore in the euro area. 18% of respondents only view the merger positively provided that Britain does not leave the EU. Just 9% support the planned merger unreservedly. By comparison, 25% of the respondents are against a merger in any case.

Financial industry expects the stock exchange merger to negatively impact the Financial Centre Frankfurt if the holding is based in London

A majority of the financial industry agrees that a combined stock exchange holding with its headquarters in London would negatively impact the Financial Centre Frankfurt. The consequences are rated as negative by 64% in case of a Brexit, and by 57% in case Britain remains in the EU.

“The financial industry is convinced by the industrial logic of the merger, although negative impacts on the Financial Centre Frankfurt are foreseen if the holding is based in London,” Professor Volker Brühl, Managing Director of the Center for Financial Studies, interprets the results.

The Financial Centre Frankfurt would benefit from a Brexit, despite negative expectations for the EU and UK economies

In case the majority of the British public votes to exit the EU on 23 June, the impacts on economic growth are expected to be negative in all affected countries. A large majority of the respondents (82%) believe the British will be hit hard. By comparison, only half (48%) anticipate negative consequences for the EU. By contrast, 69% of respondents expect the Financial Centre Frankfurt to emerge as a major winner from a Brexit scenario.

According to polls carried out in the UK, the outcome of the referendum remains entirely open. In Germany the majority of survey participants (62%) expect the British public to vote to remain in the EU.

The possibility of a Brexit leading to other countries exiting the EU is regarded as unlikely by just over half the respondents (51%), while 41% would expect other countries to follow suit.

“Of course we are not in favor of a Brexit. It would not only be detrimental for Great Britain, but also Germany and Europe as a whole. But should it come to pass, it would clearly be an opportunity for Frankfurt as a Financial Centre, as confirmed in the survey,” explains Hubertus Väth, Managing Director of Frankfurt Main Finance e.V.

Frankfurt Finance Summit: Top-level Panelists

The 6th Frankfurt Finance Summit will be held on May 12, 2016. The first panel discussion titled Redefining Banking – Regulatory and Economic Challenges will follow a conversation with Carsten Kengeter, CEO Deutsche Börse AG

 

The panel will address the following:

  • What kind of finance industry does Europe want?
  • Capital market union – state of the affairs
  • Long-term financing and refinancing revised
  • Increasing procyclicality as a result of regulation
  • The role of insurance and pension funds in substituting bank balance sheets

 

Schedule:

Conversation (10:20 – 10:50 a.m.):

Carsten Kengeter, Chief Executive Officer, Deutsche Börse AG and
 Dr. Uwe Stegemann, Director, McKinsey & Company, Inc.

 

Panel Discussion (10:50 – 11:50 a.m.):

Dr. Uwe Stegemann, Director, McKinsey & Company, Inc.

Gabriel Bernardino, Chair European Insurance and Occupational Pensions Authority

Andrea Enria, Chair European Banking Authority

Felix Hufeld, President Federal Financial Supervisory Authority

Benoît de Juvigny, Secretary General Autorité des Marchés Financiers

Sylvie Matherat, Member of the Management Board Deutsche Bank AG

Frank Westhoff, Member of the Board of Managing DirectorsDZ BANK AG

 

 

The conference is held in English. Follow along on Twitter or over our live stream on May 12th beginning at 1:00 p.m. at frankfurt-main-finance.com/stream


 

CFS Index Falls Sharply: Sentiment of Financial Institutions Reaches Low Point

Financial industry posts sharp decline in revenue and earnings growth

The CFS Index, which measures the business climate of the German financial industry on a quarterly basis, falls significantly by 4.2 points to 108.7 points in the first quarter of 2016. The decline is largely attributable to the weak development of revenues and business volume and the reduced earnings power of financial institutions and service providers. This development therefore confirms the expectations of the companies, which had already forecast declining growth in the previous quarter. In particular, the sentiment of the financial institutions has now reached a low point at 97.9 points, although they are expecting earnings to take an upturn in the current quarter. The investment volume of the financial institutions increased in the first quarter, while the number of employees remains stable at a low level.

“The expectations of the financial institutions regarding future earnings performance this year remain modest and illustrate the level of uncertainty on the capital market,” Professor Jan Pieter Krahnen, Director of the Center for Financial Studies, interprets the results. Dr. Lutz Raettig, Chairman of the Executive Committee of Frankfurt Main Finance e.V. adds, „Growing investment volumes and stable employment levels in financial institutions are a positive signal for the Financial Centre Frankfurt.”

In line with the financial industry’s expectations in the previous quarter, revenues/business volume took a downturn in the first quarter. The corresponding sub-index for the financial industry falls by 11.4 points to 110.5 points. The revenues of the financial institutions, at 104.5 points, are significantly lower than in the first quarter (-12.9 points). Service provider revenues, at 116.5 points, are down 9.9 points on the previous quarter, and a sustained decline in growth is expected in the current quarter. The financial institutions, on the other hand, are anticipating a slight upturn.

Earnings growth also declined in the first quarter, as forecast by the survey participants. In particular, the earnings sentiment of the financial institutions has hit a low point. The corresponding sub-index falls by 10.3 points to 97.9 points, although they are anticipating an upturn in the current quarter. The sub-index for service providers stands at 112.8 points, down 8.5 points from the first quarter. A slight downward trend is expected to persist in the current quarter.

Financial institutions increase investment volume and keep employee numbers stable at a low level

The financial institutions raised their investment volume in product and process innovations in the first quarter of 2016 and they plan to continue this positive trend in the current quarter. The corresponding sub-index rises by 3.9 points to 112.5 points. The service providers, on the other hand, show a small decline in investment growth of 1.6 points to 113.6 points. This slight downturn is expected to become more pronounced.

The financial institutions kept their employee numbers almost unchanged at a low level. The sub-index for this group falls by just 1.0 points to 99.0 points. The service providers hired fewer new employees in the first quarter of 2016 than in the previous quarter. The corresponding sub-index falls by 4.2 points to 111 points. While the financial institutions’ outlook for the current quarter remains virtually unchanged, the service providers are anticipating a stronger decline in recruitment in the second quarter of 2016.

The international importance of Germany as a financial centre is seen to be on the decline. The corresponding value falls by 3.8 points to 116.1 points. This decrease stems from the opinion of the financial institutions. The corresponding sub-index for this group stands at 113.5 points, down 7.2 points from the last quarter. The service providers’ assessment remains almost unchanged, down just 0.4 points to 113.5 points.

About the Center for Financial Studies
The Center for Financial Studies (CFS) conducts independent and internationally-oriented research in important areas of Financial and Monetary Economics, ranging from Monetary Policy and Financial Stability, Household Finance and Retail Banking to Corporate Finance and Financial Markets. CFS is also a contributor to policy debates and policy analyses, building upon relevant findings in its research areas. In providing a platform for research and policy advice, CFS relies on its international network among academics, the financial industry and central banks in Europe and beyond.

About the CFS Index
The CFS Index is compiled from a comprehensive quarterly survey among 400 decision makers in the German financial sector (return about 50% on average). The survey contains four questions about the participant’s view on different business parameters (business volume, earnings, employment level and investment volume in product and process innovations). The answers to the questions may be given as “positive”, “neutral”, or “negative” and a response is requested for the previous and the current quarter. Due to construction, the maximum index value is 150, the minimum index value is 50; a value of 100 signalizes a neutral business sentiment. The survey-panel consists of enterprises and institutions of the financial industry and selected companies that profit from the financial sector.

Claudio Borio, Diana Rutzka-Hascher und Lutz Raettig

5th Financial Centre Breakfast: Challenges for the Global Economy

A decade after the financial crisis: economy is incapable of balanced growth

The long-term productivity growth in the real economy suffers a considerable degree from the effects of the financial crisis, according to recent research from the Bank for International Settlements (BIS). At yesterday’s Financial Centre Breakfast, BIS’s chief economist, Claudio Borio, revealed challenges faced by the global economy and actions that must be taken.

Frankfurt Main Finance and the Association of Foreign Banks in Germany hosted the breakfast in the Hessian branch of the Deutsche Bundesbank. The speaker for the event was Claudius Borio, who provided answers to the question why almost a decade after the financial crisis, the global economic system is incapable of returning to sustainable and balanced growth. “The analytical focus is often misaligned, and that is one reason why we are where we are now,” said Borio on situation analyses. He proposed several appropriate measures for dealing with today’s challenges.

The basic prerequisite is that financial cycles not be ignored. This is demonstrated in the results of recent research of BIS: “We have observed that financial cycles have become larger since the 80s. This is, inter alia, due to the financial liberalization and globalization of the real economy. Policymakers have done too little to limit financial upswings. And following the crises too much emphasis was placed on crisis management and too little on sustainable crisis solutions.”

As early as 2003, Borio warned of instability in the global financial system; thus, predicting the financial crisis. Since 1987, he has held various positions at BIS and is regarded as one of the most interesting and provocative economists dealing with monetary policy. In his 2014 publication “The Financial Cycle and Macroeconomics: What have we learned?” he warns of a new financial crisis and makes proposals for a new academic agenda.

The complete presentation of his speech at the Financial Centre Breakfast is available here.

Frankfurt Finance Summit: On the Move

The 6th Frankfurt Finance Summit will take place on May 12, 2016. This year’s theme is On the Move – the Future of Finance and renowned experts will be on location to deliver Keynotes and participate in moderated panel discussions. Amongst those attending are German Minister of Finance Wolfgang Schäuble and Günther Oettinger, the EU Commissioner for Digital Economy and Society.

The themes of the panels are:

  • Redefining Banking – Regulatory and Economic Challenges
  • Digitalisation – The Dawning of FinTechs
  • Tectonic shift – Where will finance move to?

The conference will be help in Kap Europa at the Frankfurt convention center. The programme can be found here.