Eschborn for Business

Upwardly Mobile: Eschborn for Business

The newest edition of the magazine Eschborn for Business is now available. The annual, bilingual magazine concentrates on the more than 30,000 employees and over 4,000 companies located in Eschborn, covering a wide range of commercial and economic developments in the city.

Some highlights:

  • “Upwardly Mobile” – cover article discusses the city’s commercial growth, new construction and the drivers behind this.
  • “A once-in-a-lifetime opportunity” – Frankfurt Main Finance Managing Director, Hubertus Väth explains how Brexit will positively impact the Frankfurt Rhein-Main Region and Eschborn.
  • “The most dynamic FinTech Hub” – The Frankfurt Rhein-Main Region is home to a booming FinTech ecosystem. Deutsche Börse, headquartered in Eschborn, is one of the movements biggest supporters.
  • “From London to Eschborn” – South Korean tech giant, LG has moved its European headquarters from London to Eschborn.

Eschborn: top location with high standard of living

Thanks to a combination of relevant business factors, the city of Eschborn, with its population of 21,000, has developed into an international and modern business hub. Ninety-five percent of the over 4,000 local businesses are service providers, primarily in the finance, IT, consultancy, and telecommunication sectors. About 80 high-tech companies have also settled in Eschborn, establishing the city as an important innovation hub in the FrankfurtRhineMain area.

The current edition of the Future Atlas published by the Prognos research institute ranked the Main-Taunus-area, spearheaded by Eschborn and its over 32,000 employees, 15th in its ranking of 402 German cities and administrative districts. Local companies benefit from the convenient infrastructure, the proximity to Frankfurt Airport and ICE train stations, from the business-friendly tax policy and Eschborn’s moderate lease and property prices. The location’s green surroundings, nestled in the foothills of the Taunus Mountains, add to its appealing high quality of life. There are attractive residential areas, committed schools, lots of sports facilities and parks, free-of-charge parking lots, and over 100 different clubs and cultural institutions that offer a wide range of leisure activities. In conclusion, Eschborn is a location that opens up promising perspectives for work and leisure.

Download the 2017 edition of Eschborn for Business!

Frankfurt Finance Summit 2017 – Europe Reloaded

Since 2011, prominent actors from the national and international financial world have gathered for the Frankfurt Finance Summit. Under the motto Europe Reloaded – Challenges for the Financial Sector, decision-makers from central banks, stock exchanges, supervisory authorities, banks, insurance companies, politics, business and academia met on 26 April 2017, in the Financial Centre Frankfurt to discuss current issues faced by the European economy, regulators and financial markets. This year concentrated on three key areas challenging the financial sector: Europe after Brexit, Cyber Security and Innovation, and the Transformation of Long-term Financing.

Dr. Lutz Raettig, President of Frankfurt Main Finance, opened the Frankfurt Finance Summit by celebrating the diversity of the attendees and speakers, ranging from several countries and continents and a broad range of backgrounds in the financial services industry. He explained that this year “change is the story – change in all directions,” and that fundamental changes due to Brexit and banking regulation will follow the industry for years to come. Raettig closed by thanking the sponsors of the Frankfurt Finance Summit for their generous support. Sponsors this year included Deutsche Bank, McKinsey & Company, Deutsche Börse Group, DZ Bank, ING-DiBa, the Association of German Pfandbrief Banks, and Frankfurt Economic Development GmbH.

The time for diplomacy

Baroness Catherine Ashton with Prof. Dr. Uwe Stegemann

The day’s first topic, Europe after Brexit, began with a keynote from Baroness Catherine Ashton, Former First Vice President of the European Commission and former High Representative of the EU for Foreign Affairs and Security Policy. The veteran diplomat reflected on her experiences in complex negotiations ranging from EU trade deals to the chairing the P5+1 leading to the Geneva interim agreement on the Iranian nuclear program in 2013. Lady Ashton’s insights into the intricacies and keys to success for these sorts of arbitrations resonated with the representatives of the financial sector whose organizations will certainly be touched by the forthcoming Brexit negotiations. Lady Ashton emphasized that diplomatic solutions are not always just found in negotiations, but rely on coalition building to provide a comprehensive approach to resolving complex problems. She closed by stating, and perhaps reminding the audience of the European Project’s many successes, that “diplomacy is soft power at its best. And that’s what Europe does best, soft power.”

 

Banks look for clarity in Brexit negotiations

Michael Theurer, Jens Wilhelm, Sylvie Matherat, Prof. Dr. Uwe Stegemann

Chaired by Prof. Dr. Uwe Stegemann (Senior Partner, McKinsey & Company), the following panel discussion on Europe after Brexit featured Sylvie Matherat (Chief Regulatory Officer and Member of the Management Board, Deutsche Bank AG), Michael Theurer (Member of European Parliament), and Jens Wilhelm (Member of the Executive Committee, Deutsches Aktieninstitut e.V., and Member of the Executive Board, Union Asset Management Holding AG). Diving right into the topic, Sylvie Matherat explained the potential consequences for banks, particularly the difficulties caused by the uncertainty surrounding the Brexit negotiations. Matherat explained that the large banks will prepare for the worst and hope for the best. “For front office people, if you want to deal with an EU client, you need to be based in the EU,” Matherat said. “Does it mean I have to move all the front office people to Germany or not? We’re speaking of 2,000 people.” The situation for banks is quite difficult, as two years is not very much time to move entire operations. Looking past Brexit into the future, Michael Theurer emphasized that it is important to continue with European integration and strengthening the European Union.

Cybersecurity threats a growing concern for all of society

Eugene Kaspersky, CEO of Kaspersky Lab, delivered a keynote on Cybersecurity and Innovation. He explained the scope of today’s cyber risks, detailing specific threats to four critical sectors: power, transportation, telecoms and financial services. Kaspersky Lab collects 300,000 unique malicious objects every day. The cybersecurity pioneer explained that cybercrime costs the world between 375 and 465 billion euros per year, which is almost twice the GDP of Hesse. Kaspersky advised that IT systems need to be safe, secure and immune by design. Looking forward he stated that there is “a lot of work. Starting from the government regulation, education, technologies, implementation and international cooperation.”

Dr. Andreas Dombret

For the first panel on cybersecurity, moderated by international economist Cornelia Meyer, Felix Hufeld (President of the Federal Financial Supervisory Authority (BaFin)) joined Dr. Andreas Dombret (Member of the Executive Board, Deutsche Bundesbank). The panelists discussed regulatory efforts to confront cybersecurity risks. Felix Hufeld detailed BaFin’s newest set of guidelines, BAIT (Bank Supervision Requirements for IT). He explained that “from an individual bank’s point of view managing cybersecurity is one component of what you could consider operational risk. […] Logically speaking, it’s an application of risk management procedures, strategies, governance structures, and what have you, of course applied to a uniquely new challenge.” Dr. Andreas Dombret emphasized the importance international cooperation and for organizations to learn from each other. When asked, what regulators expect from financial institutions, he stated, “if we all agree that cyber-risks are here to stay, the financial institutions we supervise should treat these risks with the same deliberation and the same whole heartedness, so to say, as all the traditional banking risks.”

Education key to creating a safer IT environment

Daniel Domscheit-Berg

Offering another view of cybersecurity, Daniel Domscheit-Berg (Author and Former Spokesperson, WikiLeaks) joined Eugene Kaspersky on the panel to discuss cybercrime and how organizations can best defend against these risks. Domscheit-Berg discussed the human factor often being the biggest weakness for an organization. He explained that “you should make sure that whoever works for you, in whatever capacity, that they not only have good rules, but they also have a good understanding of why these rules matter and why they need to stick to these rules. And if you explain that very well, […] then I think from an educational perspective you’re getting towards a more secure environment.” Kaspersky reinforced the human factor in cybersecurity, discussing the difficulties in fighting cyber criminals. He described this human versus human fight as a chess match and underscored the arduous task of predicting future risks and criminals next moves.

Banks’ critical link to the real economy

Wolgang Kirsch

The Summit’s final panel featured the heavyweights of the Financial Centre Frankfurt in a discussion on the transformation of long-term financing and the future role of banks. Panel moderator, Jens Tolckmitt (CEO, Associaton of German Pfandbrief Banks), was joined by Wolfgang Kirsch (CEO, DZ BANK AG), Michael Rüdiger (CEO, DekaBank Deutsche Girozentrale), and Roland Boekhout (Chairman of the Management Board, ING-DiBa AG). Long-term financing is one of the critical functions banks play in society and a classical area where banks serve the real economy. However, since the financial crisis, the changing regulatory environment has made it difficult for banks to gauge their appetite for taking on long-term risk. The panelists agreed that there is a mismatch in incentives from regulators for banks to provide long-term financing. To meet the credit demand in the market, new actors have become active in this field. Roland Boekhout suggested FinTechs and peer-to-peer financing platforms entering this arena are not likely to gain traction, primarily sticking to short-term products. Boekhout underscored the added value of banks expertise in the credit business and structuring the facility on a risk.

The seventh Frankfurt Finance Summit came to an end with the traditional closing remarks from Wolfgang Hartmann (Chairman of the Executive Committee of the Frankfurt Institute for Risk Management and Regulation (FIRM)). Hartmann reiterated the challenges facing the European financial sector, especially those from Brexit. Additionally, he announced that this would be his final Frankfurt Finance Summit as the Chairman of FIRM.

CFS Index

CFS Index reveals contrasting tendencies

Financial institutions limit job cuts and increase earnings growth – Service providers report slower growth in revenues, earnings and investments

The CFS Index, which measures the business climate of the German financial sector on a quarterly basis, falls by just 0.7 points to 113.6 points. The resulting persistently high level is based on contrasting tendencies. The financial institutions report unexpectedly high earnings growth and make fewer job cuts. The service providers, on the other hand, report a significant decline in revenue and earnings growth, though these levels still remain high. The investment volume of both groups remains positive, though it is not able to maintain previous peak levels.

“The stabilized economic development of the financial institutions is particularly expressed by a gradual rise in earnings expectations, coupled with a strong increase in their earnings generated in the first quarter. This is good news, as it can create the right conditions for urgently needed capital growth among the banks and thus improve financial stability,” Professor Jan Pieter Krahnen, Director of the Center for Financial Studies, interprets the results.

Rating of the future international importance of the Financial Centre Germany reaches second-highest level of all time

Having already been rated extremely positively since the Brexit vote, in the second quarter of 2017 the future international importance of the Financial Centre Germany almost reaches its historic high of 136.8 points from last year. The corresponding value rises by 4.0 points to 135 points.

Dr. Lutz Raettig, President of Frankfurt Main Finance e.V. emphasizes: “The survey clearly shows that the growing trend is intact: the financial sector sees an increasing importance of the Financial Centre Frankfurt. This is a satisfying result and the outcome of increased cooperation between all relevant actors in the financial centre.”

Service providers record significant decline in revenue growth, yet maintain a solid, high level

Growth in revenues/business volume in the financial industry declines slightly, but remains at a solid, high level. Among the financial institutions this sub-index rises by just 0.9 points to 113.9 points. The service providers record a significant decline of 4.0 points, yet remain at a very good level of 126.6 points. Both groups anticipate a further decline in growth in the current quarter.

Unexpectedly positive earnings performance among financial institutions – By contrast, service providers report a considerable decline

The surveyed financial institutions are able to significantly boost their earnings following the weak performance in the previous quarters. The corresponding sub-index rises unexpectedly by 8.0 points to 112.5 points. A year ago the sub-index was as low as 97.9 points. The service providers, on the other hand, report a decline in earnings growth of 5.5 points, though the sub-index remains at a high level of 117.9 points. Both groups, particularly the financial institutions, anticipate a decline in the current quarter.

Financial institutions clearly curtail job cuts

The trend since the start of the year among financial institutions to limit job cuts remains intact. The corresponding employee numbers sub-index shows a significant rise of 7.2 points to 97.6 points, though it still remains under the neutral threshold of 100 points. As for the current quarter, the financial institutions expect job cuts to rise slightly again. The service providers, on the other hand, continue to hire employees at almost the same rate. The corresponding sub-index falls by just 0.1 points to 113.6 points. The service providers are more optimistic regarding the current quarter.

Investment volume remains very positive, but cannot maintain previous highs

Despite a decline in growth, the investment volume in product and process innovations among both groups remains at a strong level. The corresponding sub-index for the financial institutions falls by 2.6 points to 113.5 points. The service providers report a more significant decline of 6.1 points to 111.8 points. Both groups anticipate further declines in the current quarter.

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.

Cybersecurity

Why Cybersecurity is a Concern for Financial Regulators

In March 2017, the German Federal Financial Supervisory Authority (BaFin) held their third conference covering IT supervision for banks. At the conference in Bonn, BaFin President Felix Hufeld told the more than 400 attendees that cyber-risks are one of the most substantial facing the German financial sector. Cybersecurity risks are indeed immense, as banks are susceptible to theft, data breaches and denial of service attacks. In a recent study from KPMG, 38% of responding German companies reported to having been a victim of cyber-crime in the past two years. One in twenty reported losses of more than 1 million euros due to cyber-attacks.

The monetary costs for businesses are obvious. However, for the financial sector the costs can be farther reaching. Since financial institutions, public and private, play a critical economic function, the fallout from a cyberattack on an institution can trickle down into the rest of the economy and society. For this reason, cybersecurity has become a significant concern for financial regulators around the world. At the 2017 Frankfurt Finance Summit, Felix Hufeld will join Dr. Andreas Dombret, Executive Board Member of the Deutsche Bundesbank, for a panel discussion on the challenges of cybersecurity and innovation.

At the March conference on IT security, BaFin introduced new additions that will be made to the Minimum Requirements for Risk Management (MaRisk) concerning IT Security. The German regulator worked in cooperation with Deutsche Bundesbank on the forthcoming guidelines, called Bank Supervision Requirements for IT (BAIT), which are expected for the middle of 2017. BAIT aims to help banks understand the supervisory expectations regarding cybersecurity strategy. The guidelines will place new pressure on management boards to assume responsibility for strategically managing cyber-risks. At an event in 2016, Dr. Andreas Dombret referenced these responsibilities, explaining, “We therefore demand that banks clarify what is at stake and how the risks are supposed to be governed. This is called a cyber strategy, and every bank is required to have a convincing one.”

Not just German regulators are demanding higher cybersecurity standards from the financial sector. The New York State Department of Financial Services (DFS) has outlined new cybersecurity requirements for financial services companies which came into effect in March 2017. Amongst other items, the new regulations establish requirements for formal cybersecurity programs, incident reporting, and data encryption. Additionally, the New York regulators place the ultimate responsibility for cybersecurity with management boards and requires the employment of a Chief Information Security Officer charged with overseeing and implementing the cybersecurity program and enforcing its policies. The USA’s federal regulators are following suit and currently drafting regulations that would place stricter standards on sector-critical firms.

In January 2017, Jens Weidmann, President of the Deutsche Bundesbank, clearly explained that increasing reliance of market infrastructures on digital technologies has made the global financial system even more vulnerable to cyber-risks. Weidmann maintains that “The damage unleashed by successful attacks goes beyond the financial loss incurred. Cyber-attacks can potentially undermine peoples’ trust in the financial system.” This trust is critical to banks and financial services ability to serve their important role in society. Thus, it is understandable that cybersecurity falls within the purview of financial regulators and for them to set clear requirements, just as they would capital requirements, for example. Weidmann concluded by saying, “to avoid jeopardising the positive impact of digital finance, it will be crucial to address these risks and for banks to manage their IT and cyber risks with as much diligence as they do their traditional banking risks.”

These regulatory questions regarding cybersecurity will be addressed at the seventh Frankfurt Finance Summit, titled Europe Reloaded – Challenges for the Financial Sector. Felix Hufeld and Dr. Andreas Dombret will be joined by panel moderator and international economist Cornelia Meyer to discuss the challenges of cybersecurity and innovation.

Brexit Frankfurt Finance Summit

After Brexit, financial centres confronted with a new reality

Just six weeks before the Brexit Referendum, in his keynote at the 2016 Frankfurt Finance Summit, Dr. Wolfgang Schäuble, German Federal Finance Minister, described this as possibly the biggest political decision in a generation. Schäuble stated that “I think both the EU and the UK are better served with Britain remaining,” and later posited that “Great Britain’s relationship with Europe should not be defined by splendid isolation, but by splendid integration.” Last year’s nightmare became this year’s reality. Article was triggered on March 29, 2017, and official negotiations are underway and on the clock. This year’s Summit, titled Europe Reloaded – Challenges for the Financial Sector, will seek to encourage productive dialogue on how Europe can move forward after Brexit.

With the formal declaration by the United Kingdom’s government to withdraw from the European Union, Brexit has now entered a new and decisive phase. Hubertus Väth, Managing Director of Frankfurt Main Finance e.V. states, “The beginning of the exit negotiations between the United Kingdom and the European Union are imminent. The negotiating parties are entering uncharted territory. Of the utmost importance, will be standing fast to the maxim that maintaining stability in the financial system must take precedence over individual interests. Both parties must strike the delicate balance between averting a cliff-edge scenario while still maintaining the recognizable appeal of membership in the EU.”

The United Kingdom’s withdraw from the EU is regrettable. The anticipated loss of rights, including passporting, will create a dramatic shift of banking and financial services out of London. While bad for London, and Europe in general, European financial centres are poised to profit from this exodus. “The Financial Centre Frankfurt is exceptionally situated to assume a position functioning as a bridge for London into the EU,” explains Väth, “As the home of the European Central Bank, the Europe’s insurance supervisory mechanism, Europe’s largest stock exchange and the largest internet hub for data traffic, Frankfurt offers best infrastructure for credit institutions and financial services providers active across Europe. Frankfurt’s TechQuartier and dynamic, growing FinTech ecosystem have been distinguished by the Federal Government with the Financial Centre Frankfurt’s appointment as Germany’s Digital Hub for the finance industry. Therefore, we still estimate that around 10,000 jobs will be relocated to Frankfurt in the coming years.”

These estimates of jobs moving to Frankfurt are not empty estimations. Just last week, Väth reported in the Financial Times that Frankfurt already has more than an indication from three of the five largest US banks, as well as a Swiss, Japanese, Korean and Indian bank that they have either decided to relocate operations to Frankfurt or are in the process of doing so. Clearly, Frankfurt is in the pole position to benefit from Brexit, but certainly not alone amongst European financial centres. Each financial centre is uniquely equipped to accept certain functions and business units. For example, Luxembourg and Dublin are ahead with asset managers. Warsaw’s affordable and well trained talent pool should result in an influx of back office functions. It seems certain that operations will move out of the City of London, but will be fragmented across European financial centres.

However, major questions still linger. What will the new financial centre landscape look like? Will Euro Clearing be forced under ECB jurisdiction? If so, who will win this 500 billion EUR market? Will the European Banking Authority join the other European regulatory functions in Frankfurt? The future of Europe and its financial centres will be the topic of the 2017 Frankfurt Finance Summit’s first keynote and panel discussion.

cybersecurity

Digitalization Presents New Cybersecurity Challenges for Financial Sector

As our economy embraces digitalization and countless connected devices accompany us in our professional and private lives, cybersecurity has become a key challenge, especially for the financial sector. Thus, it is appropriate that a major topic at this year’s Frankfurt Finance Summit, titled Europe Reloaded – Challenges for the Financial Sector, will focus on cybersecurity and innovation. Data breaches and cyberattacks can potentially result in millions in losses and severely damage brands. In February 2016, cyber criminals attempted to steal $951 million from the Bangladesh Bank and succeeded in absconding with $101 million. Beginning in 2015, Kaspersky Labs reported that the Carbanak group had infected computers in more than 100 financial institutions, allowing them to manipulate account balances, transfers and remotely control ATM machines resulting in the theft of up to $1 billion (Kaspersky Labs CEO, Eugene Kaspersky will be delivering a keynote at this year’s Frankfurt Finance Summit). These cyberattacks on organisations and governments are growing rapidly in both complexity and frequency, challenging them to re-evaluate their approach to safeguarding against cybersecurity threats.

Theft of funds are not the only tangible costs of an attack. Data breaches can endanger customer data, trade secrets, industrial equipment and even personnel. Cybersecurity Ventures’ analysts estimate that Cyber Crime cost $3 trillion in 2015 worldwide and expect these costs to rise to $6 trillion by 2021. Considering these massive costs, addressing these threats has become regular discussion in board rooms across the world. The same Cybersecurity Ventures’ analysts report that $120 billion will be spent in 2017 on cybersecurity products and services and expect this spending to exceed $1 trillion cumulatively from 2017 to 2021. Due to increasingly complex attacks and levels of interconnectivity of business processes, just a strong castle wall no longer offers the necessary protection.

Cameron Brown (@AnalyticalCyber), a trusted cyber defense advisor and information security strategist who consults for the risk advisory practice of EY across Germany, Austria and Switzerland. He explains that there is a paradigm shift occurring within corporations as “security incidents and data breaches are literally decimating consumer trust, irreparably damaging brands, and causing stocks to plummet overnight.” Companies who recognize this new reality are making massive investments in Security Operations Centres and Threat Intelligence to enhance early detection and proactively identify vulnerabilities. Brown observes that “boards are increasingly receptive to adopting holistic strategies to secure their informational assets. In-house security teams are being equipped with tools to enable greater visibility across the environment and foster more effective collaboration when responding to security incidents globally.” Per Brown, the risks associated with third party providers are recognized as a significant source of vulnerability. He adds that “organizations seeking to maintain their competitive edge in the market are investing in technology to detect and deflect external threats and developing the resiliency of their people to withstand and eradicate threats that have moved inside the enterprise.”

Cybersecurity is especially relevant for FinTech

Considering the tens of millions of transactions, trades, and sensitive data transferred every day, the cybersecurity challenges for the financial sector are immense. At the same time, digitalization is occurring at an unprecedented pace. Reconciling cybersecurity concerns with new, innovative applications and systems can be an especially formidable undertaking. Utilizing third-party applications and services is a common practice and these integrations can introduce potential vulnerabilities into an environment. These concerns are particularly relevant for FinTech companies whose applications are often connected through banks’ APIs. Brown says, “some players are contentiously baking robust security into their solutions, whilst others are falling short of the mark. The development lifecycle is aggressive, expansive, and highly dynamic.” The senior advisor asserts that many products are ill-equipped to withstand targeted and persistent cyberattacks; and maintains that “innovators and entrepreneurs must reprioritise security to avoid short-sighted pitfalls associated with rushing to market without sufficient product testing and evaluation.”

However, some FinTechs are also contributing to improving cybersecurity, like 2016 Golden Garage winner, WebID Solutions, who facilitates secure online-identification. Brown notes that “ongoing and proactive dialogues between entrepreneurs and regulators are critical for cross-pollinating awareness and engendering understanding of the technologies which underpin FinTech solutions and give rise to security vulnerabilities.” The cybersecurity expert explains that this collaboration also informs the development of measured regulatory frameworks which serve to enhance rather than thwart creativity and resourcefulness. “Open channels of communication can also benefit entrepreneurs by assisting them to forestall issues concerning privacy, consumer protection and the impact of trans-border complexities,” explains Brown. He strongly urges that before going to market, FinTech firms perform thorough risk assessments of their data protection needs, with emphasis on confirming where data resides and charting the course through which their data flows, including third-party facilities.

Staff and business units act as the first line of cybersecurity defence

As corporations invest in technology and human capital to mitigate and minimize potential risks, it is important to communicate with employees on how they can make a difference. Cameron Brown explains that a fundamental hurdle many organisations face is raising security awareness among staff and leadership. “The CIO is the lynchpin who must help the organization to navigate the threat landscape and leverage data movement to maximise revenue. To accomplish this task, CIOs need a multifaceted skillset to ingest operational, legal, regulatory and compliance issues which impact both IT and business environments. CIOs must predict threats and champion the implementation of new risk models.” In organisations, large and small, educating staff on potential dangers they may encounter daily could help prevent costly intrusions. Brown adds that cyber security is a whole-of-business issue which mandates a whole-of-business approach. He emphasises that “security awareness and training initiatives for staff, including exercising business continuity plans, are vital components to empower staff and business units, who are the first line of defence.”

At this year’s Frankfurt Finance Summit, the second panel and keynote by Eugene Kaspersky will focus on Cybersecurity and Innovation. Joining Kaspersky on the panel chaired by international economist Cornelia Meyer will be Felix Hufeld, President of BaFin, Andreas Dombret, Deutsche Bundesbank Executive Board Member, and Daniel Domscheit-Berg, author and former WikiLeaks spokesperson.

 

Center for Financial Studies

Financial Regulation in Europe – just science or also an art?

The fact that financial regulation is a science would hardly be argued by anyone. But looking at financial regulation as an art – this connection is not easy.

The address given by the President of the Federal Financial Supervisory Authority (BaFin), Felix Hufeld, on March 16, focused precisely on the question of whether financial regulation is a science or an art. More precisely, which part of regulatory processes are considered as science and which are considered an art. Hufeld’s address was hosted by the Center for Financial Studies (CFS) at the Financial Centre Frankfurt’s Goethe Universität, whose lecture series is well known for its top-class speakers.

Hufeld described the basic concepts, models, and quantitative methods of regulation as scientific, but, further on in his lecture, he shifted focus to shed light on the parts of regulation that transcend these scientific elements, which Hufeld designated as art. These questions and decisions which cannot be answered by mathematical models, which necessitate consideration between different regulatory objectives, which can also intersect in a tense relationship. “In short: questions that rely primarily on one’s personal judgment,” as Felix Hufeld summarizes. These difficulties are exacerbated by regulation moving towards a context of global development, by the continuous process of Europeanisation, the dynamism of the markets, as well as the fundamental changes brought by digitalisation.

Using four examples, Hufeld dove deeper into this understanding of regulation as an art: financial stability vs. profitability, risk sensitivity vs. procyclicality, principle-based vs. rule-based regulation, and consumer protection vs. credit institutions’ capacity to act. These and other areas of tension require individual, creative and pragmatic decisions from regulators based on principles of stability and continuity, which must be balanced by the tension between contradictory regulatory objectives and dynamic developments. At the end of this process, the goal of regulatory authorities is to realize a sustainable, viable order in financial markets and to avoid the vicious cycle of crisis to regulation to deregulation and back to crisis.

The full text of Felix Hufeld’s lecture can be found here (German).

Frankfurt Stock Exchange Celebrates Equity Day!

Frankfurt Main Finance Member, Deutsche Börse, has announced the third Equity Day to be held on 16 March. Germany’s leading stock exchange operator and the participating banks are hosting this event to raise public awareness of the importance of equities as a retirement-saving instrument. The traditional bell ringing will mark this day’s start of trading on the Frankfurt Stock Exchange.

Private investors can purchase DAX equities and DAX ETFs free of charge.

Michael Krogmann, member of the Management Board of the Frankfurt Stock Exchange said, “We consider it particularly important to impart financial knowledge to the public at large and to educate people about the importance of the stock exchange and thus equities trading as well. Equities turn private individuals into co-owners of companies. This kind of investment enables young enterprises to put new business ideas into practice and secures growth financing for major companies, ultimately also securing jobs. Stocks and shares have been crucial to economic and social progress for centuries – and they can also make a very important contribution to retirement saving.”

The Equity Day will feature fee-free purchases of all DAX equities and nine DAX exchange-traded funds (ETFs) to private investors placing an order volume of €1,000 or more via the Börse Frankfurt trading venue with any of the participating brokers. Deutsche Börse and brokers 1822direkt, Augsburger Aktienbank, comdirect, Consorsbank, DKB Deutsche Kreditbank, ING-DiBa and maxblue are waiving the normal fees.

Deutsche Börse offers all year round free introductory lectures and gallery visits to the Frankfurt trading hall to support everyone understand the role of stock exchange trading. Up to 40,000 visitors from around the world take advantage of this offer each year. Deutsche Börse also offers the Internet portal at www.boerse-frankfurt.de, which is specially designed to meet private investor needs. The website offers detailed explanations of share trading for beginners, the stock exchange’s role in a national economy, and how exchange trading works today. Deutsche Börse offers in-depth training via its own Capital Markets Academy. Interested parties can attend basic seminars on the financial market or stock exchange products at the academy.

Finanzplatztag 2017 – building instead of burning bridges

On March 7-8, 2017, WM Gruppe, a member of Frankfurt Main Finance and publisher of Börsen-Zeitung, hosted the tenth Finanzplatztag (Financial Centre Day) at the IHK Frankfurt in the Frankfurt Stock Exchange. Frankfurt Main Finance was well represented at Finanzplatztag, with members delivering keynotes and participating in discussions throughout the event. Among the member organizations represented were Deutsche Börse, Helaba, the State of Hessen, and, of course, WM Gruppe.

Hubertus Väth, Managing Director of Frankfurt Main Finance, moderated the panel Building Instead of Burning Bridges – the new landscape for EU financial centres which featured Arnaud de Bresson, CEO of Paris Europlace, Mark Hoban, Chairman of the International Regulatory Strategy Group, Pat Lardner, CEO of the Irish Fund Association, and Tom Theobald, Deputy CEO of Luxembourg for Finance. The representative of Europe’s leading financial centres explored what changes could be expected as financial services leave London in the wake of Brexit. While differing on some smaller points, the panelists were able to agree on the importance of maintaining stability in Europe. A significant contributor to this stability, of course, will be London maintaining its role as an important, global financial centre. The Eurozone’s financial centres will need to maintain a strong network to remain competitive with other global centres like Singapore and New York City. Building a bridge from the Eurozone to London will play a critical role for minimizing the effects of Brexit and preserving stability.

Dr. Gertrud R. Traud, Chief Economist with Helaba, spoke about structural change and Frankfurt’s position to profit from Brexit, giving an overview Frankfurt’s position as a financial centre compared to its main competitors.  Traud explained why Frankfurt’s special character sets it in the top position on the continent and introduced the findings of the recent Financial Centre Focus. The Helaba study, Brexit – Let’s go Frankfurt, shows that Frankfurt ranks in the top position on several factors, including a world-class infrastructure, high quality of life and the stability and strength of the German economy.

Following a keynote address from Deutsche Börse CEO Carsten Kengeter, Claus Döring, Editor-in-Chief at Börsen-Zeitung, took the stage to lead the podium discussion, Consequences of Brexit for the Financial Centre Frankfurt. The discussion featured Hubertus Väth, Hauke Stars, Deutsche Börse Executive Board Member, and Michael Reuther, Commerzbank Executive Board Member. Väth opened the discussion, explaining he still stands with his estimate that around 10,000 jobs will be moved to Frankfurt from London over the next five years. Given Frankfurt’s numerous locational advantages, Väth reported that there has been extensive interest from financial services and banks and that he expects to announcements to be made later in the month. While he was not in the position to provide names, he stated that, “3 of the 5 largest American banks have made decided to move to the Financial Centre Frankfurt.” Väth reiterated that Frankfurt remains “in the pole position” and remains the best alternative for banks leaving the United Kingdom. Per Väth, announcements and resettlements will happen in three waves, beginning with large investment banks, followed by commercial banks and asset managers.

Frankfurt Main Finance Executive Committee Member, Hauke Stars, expounded on Väth’s comments, noting Frankfurt’s deep talent pool and role as a regulatory hub amongst its many attractive factors. Stars explained that Frankfurt is not just an attractive location for large financial services firms, but also for small FinTech start-ups. Deutsche Börse has been an active supporter of the Frankfurt FinTech ecosystem, especially with their FinTech Hub. To this Stars hinted at expanded activities to continue advancing this important segment which will be announced in the coming weeks.

The first day of the event closed with an address from Tarek Al-Wazir, the Hessian Minister for Economics, Energy, Transport, Urban and Regional Development and Frankfurt Main Finance Executive Committee Member. Al-Wazir reflected on the events of 2016 and the ten years since the first Finanzplatztag. Stating that Brexit was very unfortunate and undesired, Al-Wazir explained that we must do what is best for the Financial Centre and the goal is keep a hand extended to the United Kingdom, and reemphasized that we must build bridges rather than tear them down. Like many of the speakers, Al-Wazir concluded the day with a message that conveyed the importance of Frankfurt and Europe’s openness in contributing to the global economy. Indeed, building bridges with the entire world, and not just the UK, no doubt reflects the character of the Financial Centre Frankfurt and this message will certainly be on everyone’s minds throughout 2017 and until the next Finanzplatztag in 2018.

Minimising Brexit risks and strengthening European capital markets

In its position paper “Exit negotiations between the European Union and the United Kingdom: Minimise Brexit Risks and Strengthen the European Capital Market”, Deutsches Aktieninstitut has identified the essential issues with relevance for capital markets and which deserve particular attention due to their significance for business and society in connection with the Brexit negotiations. Furthermore, it makes proposals how the negative impact of Brexit on the affected national economies can be minimised.

In particular, Deutsches Aktieninstitut makes an appeal to the negotiation leaders to enter into objective and constructive talks. The strong economic relationship between the United Kingdom and the European Union should be maintained despite the new framework conditions. It is absolutely essential not to damage the core of the European idea, which is manifested in the four fundamental freedoms of the single market.

“It is up to the negotiators to shape the future relationship between the European Union and the United Kingdom in such a way as to minimize the negative impacts of Brexit for both sides,” emphasizes Dr. Christine Bortenlänger, Executive Director of the Deutsches Aktieninstitut. “With our position paper and its recommendations, we are doing our part so that the start of negotiations can begin on a sound footing from a capital markets standpoint and ultimately to lead to favourable results.”

Luka Mucic, Chief Financial Officer of SAP SE and member of the Executive Board of the Deutsches Aktieninstitut, highlights the importance of the position paper for the forthcoming negotiations. “The paper clearly articulates the stance of the Deutsches Aktieninstitut and its member companies. Negotiators must do everything they can to prevent distortions of competition through tax dumping and a deregulation race between British and EU markets,” explains Mucic.

The central demands of the Deutsches Aktieninstitut are:

  • To minimize disadvantages for all stakeholders and to ensure the attractiveness of European markets;
  • To secure time through transitional arrangements and to ensure the continuity of economic relations between the European Union and the United Kingdom;
  • To expand, harmonize and more efficiently shape third country regulations concerning capital and financial market legislation;
  • Ensure continuity of established and necessary legal institutions concerning basic corporate structures.

These results were developed within the framework of the Brexit project of the Deutsches Aktieninstitut. The project identified topics relevant to the comprehensive economic relations between the European Union and the United Kingdom that will play a role in the coming Brexit negotiations. The interdisciplinary project group, consisting of representatives from member companies of the Deutsches Aktieninstitut, will closely follow the content of the negotiations and as necessary, share its position on each respective negotiating stance.