BCG Study: Frankfurt Most Attractive Destination for London’s Bankers

A recent survey by the Boston Consulting Group (BCG) examines financial centres which could be viable alternatives to a post-Brexit London. Nearly 360 decision makers from banks in the United Kingdom, USA and Germany evaluated nine potential locations on fourteen criterion, including but not limited to infrastructure, business environment, stability, lifestyle factors, access to markets and institutions. The results of the online survey, conducted in June 2016 before the UK’s EU referendum, shows the Financial Centre Frankfurt am Main leading the ranks. Dr. Wolfgang Dörner, Senior Partner and Director of BCG’s Frankfurt office, explains that “the economic and political stability in Germany combined with access to a highly qualified talent pool make Frankfurt am Main a leading choice in location.” According to the study, around twenty percent London’s financial services jobs could shift to other global financial centres. Uncertainty still prevails for most in London’s financial centre, but one thing is certain: Frankfurt is ready and well positioned to welcome those in need of a new home.

 

Press release from Boston Consulting Group (German).

Brexit Frankfurt Finance Summit

Frankfurt Main Finance regrets the decision of the United Kingdom

Frankfurt Main Finance regrets the decision of the citizens of the United Kingdom to leave the European Union. This decision affects all of Europe and extends the period of economic uncertainty, especially for the UK. Now drawn-out negotiations will have to clarify the relationship with the European Union (EU). By leaving, the UK will forfeit the benefits of membership in the EU. The consequences are still difficult to predict.

Frankfurt is well-equipped as a stable financial centre to embrace those looking for a new base of operations within the Eurozone. Frankfurt stands ready with a high-capacity real estate market as well as an excellent range of service providers, particularly in the areas of accounting, legal, communications and IT. For example, in Frankfurt you will find the DE-CIX internet exchange hub, over which more than 40% of the European internet traffic flows. Home to the European Central Bank and the German Central Bank, Frankfurt is also the centre of currency and monetary policy in Europe. The proximity to central banks is already a decisive factor for international banks in selecting a location. Additionally, as the home of the European Insurance and Occupational Pensions Authority, or EIOPA, Frankfurt is the centre for stability in the European insurance market. Compared to the lasting instability in Great Britain, Frankfurt represents openness, stability, capable infrastructure and favourable conditions.

Topic Brexit: Frankfurt Main Finance in the Media

The coming EU referendum in the United Kingdom has been a hot topic in all media channels. A Brexit will have many consequences for the UK and Europe. When it comes to how a Brexit could affect the Financial Centre Frankfurt, Hubertus Väth, Managing Director of Frankfurt Main Finance, is a frequently requested and competent commentator.

Below is a selection of interviews over the past two months regarding Brexit.

 

Hubertus Väth clearly states, “We do not wish for a Brexit to occur. It would be terrible for Germany, Europe and Great Britain. However, should it come to pass, it would be a clear opportunity for the Financial Centre Frankfurt. We estimate that jobs relocating to Frankfurt could number in the tens of thousands.”

Frankfurt is not only a German Financial Centre, but also a major European hub. The Financial Centre is home to the European Central Bank and is considered the centre of monetary stability in Europe. The exchange platforms and IT systems in Frankfurt are internationally recognized for their reliability and security. Frankfurt is also an important centre for European Financial Supervision, home of the European Insurance and Occupational Pensions Authority (EIOPA) and the European Systemic Risk Board. Frankfurt is well-equipped as a stable Financial Centre to embrace those looking for a new base of operations within the Eurozone. Frankfurt stands ready with a high-capacity real estate market as well as an excellent range of service providers, particularly in the areas of accounting, legal, communications and IT. For example, in Frankfurt you will find the DE-CIX internet exchange hub, over which more than 40% of the European internet traffic flows. Compared to the lasting instability in Great Britain, Frankfurt represents openness, stability, capable infrastructure and favourable conditions.

BaFin Shows Support for Entrepreneurs and FinTechs

A combination of the words Financial Services and Technology form the name FinTech, the young technology start-ups specializing in technology-based financial systems and customer oriented financial services. The German Federal Financial Supervisory Authority (BaFin) has recently taken a great interest in FinTech and is exploring how they can include these young companies in a fair and level regulatory playing field. There are several different business models which may require authorization from BaFin. Currently, the most common business models are the following:

  • Payment transactions and giro business
  • Crowdfunding
  • Automated Financial Advice
  • Insurance
  • Virtual Currencies

More information about these business models and FinTech’s growing importance for BaFin can be found here.

In addition, the Federal Ministry of Finance has a dedicated information hub on financial services and technologies.

As part of their efforts to support young FinTech companies, BaFin has organized a conference on June 28, 2016 called BaFin-Tech 2016. The aim of the conference is to provide members of the financial community as well as entrepreneurs a view into the daily work of supervisors and regulators, especially with regards to FinTech. Workshops will offer deeper, more practical discussion on the individual business models. In addition, two panel discussions will explore the relationship between digitalization and regulation and whether FinTechs are inspirational or disruptive. More information can be found on the BaFin website (German).

 

 

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

Hessenschau on the Possible Outcomes of a Brexit

On June 11, 2016, hessenschau analysed the possible consequences that Brexit could have on Frankfurt and all of Hesse – Hesse would lose and Frankfurt could win out. During the television programme, Hubertus Väth, Managing Director of Frankfurt Main Finance, made it clear that Frankfurt does not want a Brexit to occur, it would be disadvantageous for Germany, Europe and Great Britain. However, should it come to pass, it would be a clear opportunity for the Financial Centre Frankfurt. He explains further, “We estimate that new jobs coming to Frankfurt could be in the tens of thousands.”

On the Move: the Future of Finance

Top masters students from the region’s business schools were invited to the Frankfurt Finance Summit. Mariam Abdelhady, Master of Finance student at Frankfurt School of Finance & Management, reflects here on her impressions from the event.

On May 12th, 2016, I had the great opportunity to attend the 6th Frankfurt Finance Summit, which is organized by Frankfurt Main Finance (FMF) in collaboration with Frankfurt Institute for Risk Management and Regulation (FIRM). The annual summit, highlights the importance of Frankfurt as the center of financials stability and bank regulations in the Euro zone. It gathers Central bankers, regulators, representatives of the supervisory authorities, academics, financial politicians and practitioners together to discuss current financial issues from different perspectives. The focus of this year’s summit was digitalization and its impact on different players in the financial market. The discussions and speeches were divided into four parts:

Digitalization – The Dawning of FinTechs

The Summit started off by Dr. Lutz R. Raetting, Chairman of the Executive Committee of FMF, expressing his pleasure with sustaining the summit for the 6th year in a raw. Refereeing to the title of the Summit, he pointed out to the fact that we are all always “On The Move”, be it voluntarily or due to someone else pushing us to. As digitalization is the main focus of this year’s summit, he mentioned that the number of FinTech companies is increasing in the region and specifically in Frankfurt. The reason for this is the ideal conditions Frankfurt provides FinTechs with, in terms of the proximity to the regulator, as well as the best environment for the internationalization of their businesses.

In support of this view, Hessian Minister of Economics, Energy, Transport and Regional Development Tarek Al-Wazir highlighted the fact that Frankfurt will open its Fintech center in four months with the goal of improving the communication between start-ups, banks and regulators. This in turn will attract investors to Frankfurt and will position the city as an “innovative location for IT-driven start-ups in the financial sector”. Additionally, Al-Wazir stated that the current financial sector is undergoing fundamental changes mainly due to the economic and regulatory conditions and the ongoing digitalization, which explains the focus of the summit.

Examining the impact of FinTechs on the banking sector, Mr. Gottfried Leibbrandt, CEO of SWIFT, explained the concepts of Blockchain and Bitcoin and how they would impact the banking sector and SWIFT. Nevertheless, he believes that banks will make it through, just like they did in the 90s during the first wave of FinTech and the rise of online banking and electronic trading. The key for banks is to make use of those innovations to facilitate their work and not allow them to take over their work, whereas the main threat remains to be cyber security. On the other hand, Hauke Stars, Member of the Executive Board of the Deutsche Börse AG, believes that only those institutions that are able to adapt to the changing environment will survive. In accordance to this view, Roland Boekhout, Chairman of the Management Board of ING-DiBA AG, stated that cooperation with FinTechs in essential, because their technologies and services may be in the interest of their customers.

Redefining Banking – Regulatory and Economic Challenges

Another interesting topic discussed in the summit was the merger deal between Deutsche Börse and the London Stock Exchange. Mr. Carsten Kengeter, CEO of Deutsche Börse, explained the completed steps towards this merger, as well as the implications of this deal on the capital market and the benefits associated with it.

Furthermore, this panel discussed the potential implications of the capital market union on the banking sector, future regulations and the impact of what is believed by some to be BASEL 4, as well as the future of some financial institutions, giving the changing regulations and the rise of digitalization. Although past regulations have resulted in a more resilient banking sector, new ones are believed to make the conduct of some activities more difficult, hence hindering banks from realizing much of the profits they used to gain. Regarding the impact of digitalization and FinTechs on the banking sector, it is believed that they will change the business models of banks. Therefore, it is essential for the supervisory authorities to find the balance between supporting innovation and protecting customers and the financial system as a whole.

Tectonic shift – Where will finance move to?

Federal Finance Minister Wolfgang Schäuble’s speech focused on the proposed referendum on the Brexit and its impact on the future of finance in the EU. Although he advocates that Britain should remain in the EU, underlying its importance to the union, but should the referendum result in otherwise, the exit phase should immediately begin. He believes that Prime Minister David Cameron had negotiated a good deal and that no further concessions and renegotiations would be possible, in case of a majority votes for the exit. Hence he stated that “in means in, and out means out” with all the implications this might have. Additionally, Federal Finance Minister Schäuble highlighted the fact that in addition to the Single Supervisory Mechanism, there are still other areas in banking regulations, as well as fiscal budget, policies and security that will continue to improve in the future, with or without Britain.

Financial Inclusion

Discussing the importance of technology to the financial sector, Mr. Diwakar Gupta, Vice President of the Asian Development Bank, explained, using India as an example, that new technologies, like mobile banking, allows the large portion of the population living in rural areas to access financial services. Additionally, governments should also make use of such technologies, for example to make sure subsidies really reach the poor. Mr. Gupta believes that the biggest challenge for technology-based financial services is getting people to use it for the first time.

Overall, attending this summit was a great experience exposing us to the main topics that might affect the financial sector as a whole and its main players in the near future, with insights from top notch practitioners, as well as financial politicians and regulators of the field. Such unique experiences that Frankfurt School provides to its students, along with academic excellence is what differentiates it from other schools and universities.

Accenture Study Shows Rapid Growth in FinTech Investment

A recent study from consulting firm Accenture shows rapid growth in investment in the FinTech sector. Venture capitalists, private equity firms, corporates and a number of other players have poured an unprecedented amount of money in the global FinTech start-ups.

“The FinTech scene’s innovative drive reaches far beyond the world’s traditional financial centres,” explains Friederike Stradtmann, Senior Manager at Accenture Strategy for the areas financial services and digital business models. According to the study, investment has reached $22.3 billion, a 75% increase compared to the previous year. The share of investment in Europe and Asia, now at 62%, has nearly doubled. Accenture’s analysis shows that the growth his being primarily driven by America, Asia and Europe. In 2015, investment in China grew by 445% to $1.97 billion, followed by India with $1.65 billion. In Germany, the investment volume grew by 840% to $770 million.

Even though there are currently more disruptive FinTechs than cooperative, the analysis does show a growing trend towards cooperation between financial institutions and the start-ups. Disruptive FinTechs brand themselves as competition for the established players in the financial sector, while the cooperative FinTechs offer innovative solutions for existing firms. Investment in collaborative FinTechs grew by 138% in 2015, now totalling 44% of all FinTech investment.

The study’s conclusions stress that banks must make short and long-term plans for transforming their business models to keep up with digital trends. The study poignantly states, “Banks should place themselves closer to the center of their customers’ digital lives, embedding customer-centric thinking at the core of the corporate strategy along with the right skillsets at every level of the organization.”

The complete study can be found on the Accenture website.
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On the Continent Financial Centre Frankfurt Pulls Ahead

Frankfurt has taken the lead amongst the financial centres in continental Europe. In their 10-year anniversary study, Financial Centre of Frankfurt – Making Further Headway, Helaba economists found Frankfurt to be ahead of other European financial centres. Frankfurt especially leads in terms of institutions like the European Central Bank, outstanding IT-infrastructure, comparably low rent and cost of living and the excellent transportation network.

The Financial Centre Frankfurt scored particularly well in two core areas. First, the city has made substantial progress in terms of financial research and teaching, even gaining in international stature. The combination of Frankfurt’s Goethe University and Frankfurt School of Finance & Management offers a top-quality range of teaching and research opportunities. Next, concerning trends in the financial sector, digitalisation is the dominating theme. Technological change in the finance industry is being primarily by FinTechs and large internet corporations. Efforts in the continued expansion of Frankfurt and the surrounding region as a German and European FinTech hub have not gone unnoticed. Helaba’s Chief Economist and Head of Research, Dr. Gertrud Traud explains, “For Frankfurt to maintain and develop its position, expanding the city’s status as the German and Continental European fintech hub as well as further strengthening its intellectual infrastructure in respect of a financial centre’s capacity for innovation will be of crucial importance.” One significant achievement in this area will be the forthcoming FinTech hub, slated to open in September 2016.

In their current assessment of the financial centres of Frankfurt, Paris and London, Helaba’s economists applied five core criteria, which they consider indispensable for an international financial centre to position itself successfully in the long term. These are: banks, stock exchanges, finance-related teaching and research, trends in the financial sector as well as location-specific qualities.

Download the complete study.

British EU Referendum: Possibly the biggest political decision in a generation

In the eyes of Germany’s Federal Minister of Finance Dr. Wolfgang Schäuble, the up-coming referendum on EU membership is possibly the biggest political decision facing the citizens of the UK in a generation of more. Minister Schäuble expressed this in his keynote address at the Frankfurt Finance Summit. He advocated for the UK to remain in the EU, but explained that there would not be any further concessions made. If the UK were to decide for a Brexit, the exit phase would begin immediately. He also explained that the government would not campaign for the headquarters of Deutsche Börse to remain in Germany in the case of a merger with the London Stock Exchange. This will also hold in the case of a Brexit.

Watch Dr. Schäuble’s entire address below.