the Financial Centre Frankfurt

Citigroup Leads Wave of American Banks Choosing the Financial Centre Frankfurt

American investment bank Citigroup is set to expand their operations in the Financial Centre Frankfurt as a result of the UK’s withdrawal from the EU. Initial reports indicate the investment bank will relocate several hundred sales and trading jobs to Frankfurt.

Frankfurt Main Finance (FMF) welcomes the news and is proud that Citigroup, one of the so called big five, has chosen to expand operations in the Financial Centre Frankfurt. Commenting on the news, FMF Managing Director Hubertus Väth said, “It is great news for the Financial Centre Frankfurt and we look forward to welcoming our new colleagues. Citi’s decision supports our estimates of an additional 1,000 jobs moving to the Financial Centre Frankfurt this year and 10,000 jobs coming in the next five years. The reported decision by Citi also reaffirms our confidence that at least twelve banks and perhaps as many as twenty will decide for Frankfurt this year.”

For the past year, the Financial Centre Frankfurt has been in concrete discussions with nearly twenty banks interested in moving operations to Frankfurt. “Last week, Jamie Dimon announced in Paris that JP Morgan will use Frankfurt as their legal base. This was a strong, first signal from the US banks. Following last week’s submissions to the Bank of England, we expect to see the next wave of announcements coming very soon,” Väth explains.

The Financial Centre Frankfurt is in the pole position to win banking business from London following the results of the UK’s referendum. Noted for its strong economic and political stability, Frankfurt and the region offer a top infrastructure, competitively priced and plentiful modern office space, a deep talent pool and an extremely high quality of life. Financial services moving to Frankfurt will find a competent, helpful and welcoming regulator in BaFin, who will accept large portions of applications in English. The Financial Centre is already home to more than 150 foreign banks and 75,000 people employed in financial services.

Euro Clearing

Joint Declaration of Frankfurt Main Finance and Paris EUROPLACE on Euro Clearing

The United Kingdom is leaving the European Union and will in all likelihood lose access to the common market. In light of this, Frankfurt Main Finance and Paris EUROPLACE jointly request the concerned European authorities to consider some fundamental principles regarding future oversight of Euro Clearing:

  1. Central counterparties are key to managing risk for investors. These robust structures are essential drivers of trust in the financial ecosystem.
  2. As a concentrator of risk, CCPs are systemic. In times of crisis, a diverse ecosystem of CCPs plus a clear, manageable resolution process are key prerequisites to preserving stability.
  3. In the case of resolution, the EU Supervisors and the resolution authority must be able to expeditiously reach the appropriate decisions necessary to fully protect European financial security, including its monetary policy constraints in a way that shields European tax payers from potential losses.
  4. In that context, day to day risk monitoring is crucial. It necessitates easy access to information by European supervisors, as well as efficient conditions for access to central bank liquidity based on a one-step decision making process.
  5. The legal framework in which the CCP operates must be EMIR equivalent and the CCP should fall under the jurisdiction of the European Court of Justice.

Frankfurt Main Finance and Paris EUROPLACE urge the responsible European authorities to clarify their position without delay and by doing so, bolster certainty in this systemically relevant pillar of the European financial system.

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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.

Deutsche Börse launches new online platform to inform about stock exchange trading

Explaining complex issues about the stock exchange – that’s the goal now being pursued by Deutsche Börse AG with consumer-oriented videos for both beginners and the more experienced.

Many Germans shy away from making any financial investment in shares. This is the finding of a representative study on shareholder culture in Germany conducted in January 2017. The main reason that emerged for this, in addition to a lack of financial resources and a great need for security and peace of mind, is the low level of awareness and knowledge about the subject of stocks and shares. Deutsche Börse has also recognised this deficit and has now published ten short basic videos in German on its website that are intended to educate the wider public about the stock exchange. “Germany is still a developing country when it comes to understanding stock exchange trading and investing in securities,” said Nicolas Nonnenmacher, who is also responsible for the Capital Markets Academy in his capacity as Head of Community Development at Deutsche Börse AG. “The general public looks askance at the idea of building up capital through equities and securities without having looked into the subject to an appropriate degree. Our new portal accompanies beginners on their path to the stock exchange, and also provides advanced investors with high-quality content to effectively turn themselves into stock exchange professionals.”

In the explanatory videos, the two actors Anna and Michael show viewers, for example, how to open a securities account or portfolio, what to bear in mind when selecting shares, and how stock exchange trading works in practice. The films last between 20 and 30 minutes. In the video lectures, acknowledged stock market experts explain the basics about the financial markets and exchange trading. Under the second rubric “Stock market products in detail”, experienced investors learn the functions and special features of individual types of securities in extensive online courses about exchange-traded funds (ETFs) and structured products. The free registration creates a personal learning account that documents individual learning progress; learning units can be picked up again at exactly the point where they were stopped. The German technical inspectorate TÜV Rheinland was a partner in developing the portal.

Copyright: Deutsche Börse

IRONMAN European Championship in Frankfurt IRONMAN European Championship in Frankfurt

On July 9th, 2017 the financial metropolis Frankfurt am Main is once again host to the long-distance Ironman European Championships.

Around 3,000 triathletes take part in the Ironman Frankfurt race every year. What that means for all participants is 3.8 kilometres of swimming, 180 kilometres of cycling, and then nothing less than a marathon run. The athletes start off swimming in the calm waters of the Langen Forest Lake south of Frankfurt. The following cycle route leads through Frankfurt, among other areas, and is hilly and challenging. Cheered on by thousands of spectators, the athletes will then crown their achievement by running a distance of 42.195 kilometres on a thankfully flat course along the River Main. As it is every year, the highlight of the Ironman European Championships will be the glorious finish on the historic Römerberg city square in Frankfurt.

Copyright: Getty Images for IRONMAN

FinTech Money Map: Frankfurt is catching up to the FinTech revolution

The number of start-ups settling in Frankfurt has more than doubled over 2014. As a result, the banking capital on the Main can now boast the largest growth in Germany.

Although for many years almost all FinTechs preferred Berlin as a location, Frankfurt is now catching up, as the Portal Internet World Business reports. Experts see Frankfurt’s increased commitment and support for the start-up companies as the main reason. “Frankfurt invests a great deal, not only from the public purse but above all from the private sector as well,” says Remigiusz Smolinski, for example, an innovation expert at the Commerzbank subsidiary Comdirect. Peter Barkow, whose consulting firm draws up and maintains the FinTech Money Map database, adds: “The banking sector has long been very sluggish.” That’s the reason why almost all FinTechs have been going to Berlin for a number of years, he points out. “The start-up ecosystem has only recently crystallised in Frankfurt.”

The state-supported TechQuartier hub in Frankfurt is meanwhile regarded as a central point of contact and focal access point for the FinTech Scene.

Michael Rüdiger, new Chairman of the Exchange Council

Michael Rüdiger is the new Chairman of the Exchange Council. The DekaBank CEO takes over from Lars Hille, DZ Bank.

Michael Rüdiger was unanimously elected as the new Chairman of the Exchange Council of the Frankfurt Stock Exchange on June 1st. Rüdiger is CEO of DekaBank Deutsche Girozentrale and has been a member of the body since December 1st, 2016, where he represents the public-sector credit institutions. Rüdiger takes over this office from Lars Hille, who, as Executive Board member of the DZ Bank, had succeeded the long-standing Chairman Lutz Raettig in January 2017. Since Hille will be leaving the DZ Bank at his own request in October 2017, a new appointment for this important position on the Exchange Council became necessary.

The Exchange Council is a forum for discussing key issues and developments at the Frankfurt Stock Exchange; its approval is required for all decisions of fundamental importance. Among other things, the Exchange Council is responsible for the appointment, withdrawal and supervision of the executive management. Furthermore, it issues the Exchange Rules, the Fee Regulations and the Conditions for Transactions on the Exchange. The Exchange Council has 18 members, who were most recently elected on December 1st, 2016 for a term of three years.

Copyright: DekaBank Deutsche Girozentrale

Research conference: measuring systemic risks

Scientists and practitioners discuss different approaches: This year’s Research Conference of the Frankfurt Institute for Risk Management and Regulation (FIRM) has focused on approaches to identify and measure systemic risks. More than 50 representatives from the domain of science and practice discussed new models from the research community on June 22nd in Mainz and tested these against the requirements of everyday application within the Banks.

Prof. Dr. Günter Franke, Chairman of the FIRM Advisory Board, organised the conference and invited professors from various universities and academic disciplines to Mainz. Franke explains: “Our intention with this conference was to give practitioners an insight into current research approaches, some of which are still in the development phase, and to provide researchers with direct feedback from experienced practitioners about the feasibility of their models.”

Prof. Dr. Günter Franke: “Presenting new scientific insights and being able to discuss them with practitioners is the objective of the research conference.”

Günter Franke, the research conference organiser

Prof. Dr. Gunter Löffler from the University of Ulm started off the event. His formulation: can reliable information be derived from systemic risk measurements? He outlined his approach with two examples – CoVaR and MES (Marginal Expected Shortfall) – two common risk measures among experts where there are several pitfalls to be taken into account. One of them: the dimensions occasionally tend towards excessive simplification. In the estimation model the risk of the financial system is partly only traced back to the bank. Nor is there an analysis of who actually triggers a risk in a system. Both of these can lead to misinterpretations, which must be taken into account during application in the risk measurement and management, as Löffler told the practitioners.

Prof. Dr. Gunter Löffler: “Systemic risk factors can’t simply be applied without thought, but they’re for example a sensible addition to stress tests.”

Prof. Dr. Thilo Meyer-Brandis, a mathematics professor at the Ludwig Maximilian University of Munich, developed a network-based measure that maps the risk-bearing capacity of large financial systems with regards to contagious effects. He asked whether depending on the network structure capital requirements can be placed in such a way that a resistance of the system to risks can be derived. His model analysis assumes an initial shock and calculates what effects will arise for which bank in the network and how the shock will spread throughout the system. One of his findings: when a system is not robust, even a small shock is enough to trigger a collapse. On the basis of the model, however, every bank can understand for itself which capital requirement it has to meet to make the network resistant, Meyer-Brandis explained.

Prof. Dr. Thilo Meyer-Brandis: “We can derive explicit criteria that demonstrate the resilience of a network.”

Scientists in dialogue: Gunter Löffler, Thilo Meyer-Brandis and Simon Rother

All lectures were subsequently discussed by a practitioner and a scientist. For instance, Prof. Dr. Christian Koziol from the Eberhard Karls University of Tübingen explained how the mathematical approach from Meyer-Brandis can be complemented by the addition of an economic perspective. Jochen Peppel from the consultancy Oliver Wyman showed on the basis of the Meyer-Brandis dependencies model which factors can be applied for the stability of networks besides the directly financial factors, and how such factors can be linked. “This dialogue between science and practice is proving to be highly productive because it illustrates the wide range of different perspectives. That makes it easier for those taking part to inform their banking management with the new findings from the research community,” Franke maintained.

When talking about systemic risks, the impact of so-called asset price bubbles is also important. An empirical analysis presented by Simon Rother (Friedrich-Wilhelm University of Bonn) discussed the question of how price bubbles can become systemic risks. The subsequent discussion made it clear that the systemic risk already occurs during the development of such a bubble and that most players are also aware of this. The analysis can help to make a gut feeling quantifiable.

Prof. Dr. Jan Pieter Krahnen from the Goethe University in Frankfurt devoted his lecture to interbank intermediation in Germany. He built up a picture of interbank receivables and liabilities, broken down according to different deadlines. There’s no doubt, he insisted, that the interbank market could serve as an instrument for managing the interest rate risks of a bank. Prof. Lutz Johanning from the WHU – Otto Beisheim School of Management engaged in an intensive discussion about what role the interbank market can play for risk management in future. Michael Rab from the Raiffeisen Regional Bank Lower Austria-Vienna pointed out that interbank intermediation in Austria has been largely characterised by repo transactions since the last crisis.

Prof. Dr. Jan Pieter Krahnen: “We want to take a microscopic view of the interbank markets in Germany. Do they still have any meaning in the future – and if so, what are they?”

Jan Pieter Krahnen on the role of the interbank market

The event was rounded off by a lecture from practice. With the example of his own bank, Florian Roßwog from the DZ Bank concerned himself with liquidity control in extreme market situations. His analysis showed that liabilities to non-banks have gained in importance, unsecured financing in bank balances – apart from customer deposits – have been eliminated, and contractually agreed terms on the liabilities side have been shortened.

Florian Roßwog talked about liquidity management in practice.

Franke drew a positive conclusion at the end of the research conference: “The lectures on systemic risk have very clearly elaborated the different approaches to measurement, as well as their strengths and weaknesses. In addition, new insights were conveyed into the drivers of the interbank business.” In short, a real gain in insight for the participants.

Copyright: FIRM
Financial Centre Frankfurt

Japanese Sumitomo Mitsui Financial Group to open two subsidiaries in the Financial Centre Frankfurt

Sumitomo Mitsui Financial Group, Inc. (SFMG), Japan’s third largest bank, will establish two new subsidiaries in the Financial Centre Frankfurt. The decision was announced Monday, July 03, 2017, by SMFG President and CEO, Takeshi Kunibe. According to the group’s press release, the move will allow them to continue to service EU clients after the United Kingdom’s withdrawal from the EU.

Pending regulatory approval, the Japanese financial group intends to establish a new banking subsidiary as well as a securities subsidiary in Frankfurt. The new subsidiaries should allow SMFG to avoid disruption of services to their European clients and provide flexibility given the current political and economic uncertainty.

Frankfurt Main Finance (FMF) welcomes SMFG’s decision and looks forward to welcoming them to the Financial Centre Frankfurt. “Yoku irasshaimashita, Welcome Sumitomo! Brexit starts to bite,” says Hubertus Väth, Managing Director of FMF. “Japanese banks warned early on about the consequences of Brexit and accordingly have taken the lead. With Sumitomo Mitsui, the third Japanese banking group has chosen the Financial Centre Frankfurt. Frankfurt Main Finance expects a total of at least twelve banks to announce their decision for Frankfurt this year.”

In the last two weeks, Japanese banks Daiwa and Nomura also publicly announced their decisions to establish or expand operations in the Financial Centre Frankfurt. Since the results of the UK referendum, FMF has worked to assist financial services to find a new home in the Eurozone. The Financial Centre Frankfurt has emerged as an early front runner amongst European financial centres, noted for its political and economic stability, highly available and competitively priced real estate, deep talent pool, outstanding infrastructure, and high quality of life.

Link to the press release from Sumitomo Mitsui Financial Group, Inc.: http://www.smbc.co.jp/news_e/e600418_01.html