Fostering Franco-German dialogue at the Financial Centre Frankfurt

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Amid an unbeknownst Brexit outcome, cooperation between Financial Centres in continental Europe is essential in tackling the challenges of European integration. On December 10th, L’Agefi, one of the leading French press groups, will host the European Investors Day at the Financial Centre Frankfurt to facilitate the debate amongst the German and French financial industry. The following aspects will be part of the agenda

  • The future of monetary policy: is a stronger consensus possible under Lagarde’s presidency?
  • What role will the Franco-German relationship play in sustainable finance?
  • Is infrastructure investment the key to future growth?

We discussed the event with Philippe Mudry, L’Agefi, in an interview.

What role does the Franco-German relationship play in fostering cooperation in the continental European financial sector?

If and under which circumstances the UK will be leaving the European Union is still unknown. However, the continental European financial sector is already engaged in the process of transition. It knows that it will have to draw on its own resources to overcome the current difficulties to reassert itself on the world stage. And once again, as soon as it comes to thinking about and building the future of Europe, Germany and France stand shoulder to shoulder, partners and competitors at the same time, in a dialogue with their European partners. True to its tradition and convictions, L’Agefi wants to facilitate this debate.

 Why did L’Agefi decided to establish a new event in Europe?

On the 10th of December 2019, we will be holding the second European Investors Day (EID) at the Financial Centre Frankfurt. The aim of the event – inaugurated in June in Brussels – is to involve all of those who want to foster an integrated investment and finance industry in Europe, and to sketch out a vision for the future of such an industry. A few simple questions will build the basis for discussion: What consensus on monetary policy can be achieved? Can a relaunch of European integration give an impetus for renewing infrastructures in continental Europe, including, of course, the now core issue of tackling the challenges created by global warming in each of the countless dimensions? What role can European financial stakeholders, from institutional investors to portfolio management companies, regulators, politicians, banks, and insurance companies play in contributing to the common goal?

Why did L’Agefi decide to host the event at the Financial Centre Frankfurt?

Being a French media outlet, our decision to host the event at the Financial Centre Frankfurt in the wake of crucial European elections is by no means a coincidence; it reflects our strong belief that the Franco-German dialogue can once again crystallize ideas currently circulating in Europe.  In our opinion, one of the questions that need to be answered to support the financial sector in continental Europe in becoming aware of its full potential is: “Can the Paris-Frankfurt axis assert itself in the field of sustainable finance?” Considering that in 2019, L’Agefi has launched the new English-speaking, Europe-oriented media outlet “Asset News” hosting the EID in Frankfurt seemed to be the best way to participate in the emergence of an integrated finance and investment union European professionals are calling for.

 

Please register on L’agefi’s Website.

CFS survey on Facebook’s planned digital currency Libra

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German financial industry does not expect Libra to be introduced next year. Major concerns about potential threats to financial stability

Facebook and a group of partners are planning to introduce a digital currency that can be used worldwide, the Libra coin. Shortly before the official launch, prominent supporters such as Mastercard, Visa and PayPal have pulled out of the project. Nevertheless, Facebook is sticking to its plans to roll out Libra next year. On 15 October 2019, the Charter of the Libra Association was signed by a total of 21 founding members.

Numerous politicians and regulators have voiced their concerns about the project since it was announced in June 2019. Central bank governors and finance ministers of the leading economies (G20) also oppose Libra on the grounds of potential risks to global financial stability.

The CFS survey on Libra reveals that the vast majority of respondents regard the concerns of central banks and supervisory authorities as justified. 76.8% of respondents expect Libra to reduce the effectiveness of monetary policy measures. 61.4% of respondents even consider Libra a threat to global financial stability.

In light of this, the majority of respondents (57.1%) do not expect Libra to actually be introduced in the coming year; only 38% believe this will happen.

“It is no surprise that there are significant concerns about Libra. These are also fuelled by Facebook’s failure to publicly address Libra’s long-term expansion plans,” Professor Volker Brühl, Managing Director of the Center for Financial Studies, interprets the survey results. “Moreover, Facebook’s reputation, which has been tarnished by past data protection scandals, is not exactly conducive to such a project,” Brühl adds.

In spite of all the concerns, a majority of respondents (61.1%) oppose a general ban on Libra and advocate constructively accompanying the project in order to promote innovation in the financial sector. “The mood in the financial sector towards Libra is very ambivalent. On the one hand, the idea of a global settlement platform for payments is fascinating; on the other hand, there are fears of incalculable risks,” explains Volker Brühl.

“Once again, the survey proves that the financial sector is open to innovation but then again keeps a close eye on the risks,” says Hubertus Väth, Managing Director of Frankfurt Main Finance e.V. He points out: “The idea of a uniform, globally valid digital currency is fundamentally attractive and has considerable potential. However, there is a lack of convincing answers to larger questions.”

 

 

 

 

The results are based on a quarterly management survey in the German financial sector.

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.

CFS Index remains stable

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The CFS Index, which measures the business climate of the German financial sector on a quarterly basis, maintains a stable level of 109.9 points. The overall unchanged level can be attributed to the steady to positive development of revenue, earnings and investment growth in the financial sector. However, these positive reports are offset by more severe job cuts at the financial institutions and slower growth in employee numbers at the service providers.

“Taken together, the sub-indices signal a cautious upward trend in productivity – and thus also in profitability in the longer term if this trend continues,” Professor Jan Pieter Krahnen, Director of the Center for Financial Studies, interprets the results.

In terms of the future international importance of the Financial Centre Germany, there is now a wide gap between the assessments of the financial institutions and the service providers, in contrast to their tentative positions in the previous quarter. For the financial institutions, this index value falls by -10 points to 107.6 points. Conversely, the value for the service providers rises by 7.9 points. Overall, the index value remains at a good level, with a slight decline of -1.0 points to 118.7 points.

Hubertus Väth, Managing Director of Frankfurt Main Finance e.V., explains: “So far only the service providers have profited. In 2018, over one billion euros flew into the service sector to prepare banks for Brexit. With regards to the banks, the still little earnings from a relocation of assets do not outweigh the costs of a transfer. Only a third of the expected 750 to 800 billion Euros were transferred. Most Banks are delaying the relocation until there is more clarity. Not least in order to prevent the straining of their equity capital.”

Rising revenue growth in the financial industry

The surveyed financial institutions and service providers were able to expand their revenues/business volume a little more than in the previous quarter, when growth was weak. The corresponding sub-index for the financial institutions rises by 2.7 points to 114.7 points in the third quarter. The service providers increase their revenue growth by 1.8 points to 112.7 points. Both segments of the financial industry are optimistic that they will continue to build their revenues in the current quarter.

Earnings growth of financial institutions is barely down / Service providers report rising earnings growth / Positive expectations for the current quarter

The earnings growth of the financial institutions sees a significantly smaller decline in the third quarter than had been expected. The sub-index falls just slightly, by -0.9 points to 103.5 points. Having reported declining earnings growth in the previous quarters, the service providers now see their positive expectations fulfilled. The corresponding sub-index climbs 4.9 points to 108.3 points. Both groups are anticipating a further increase in the current quarter.

Growth in investment volume is steady to positive

As with earnings, the financial institutions report little change in the growth of their investment volume in product and process innovations. The corresponding sub-index for the financial institutions falls just slightly, by -0.4 points to 105.8 points. In line with expectations, the service providers record a significant increase of 4.2 points to 114.1 points. The financial institutions are anticipating a slight upturn in the current quarter, while the service providers are less optimistic.

Large-scale job cuts at financial institutions / Weaker growth in employee numbers at the service providers

Job cuts at the financial institutions are significantly more severe than they predicted in the previous quarter. The employee numbers sub-index falls accordingly by -8.2 points to 90.5 points. Only a slight easing of job cuts is expected in the current quarter. The service providers are also hiring fewer employees than in the previous quarters. The corresponding sub-index is down -3.7 points to 108.7 points. This level is expected to be maintained in the current quarter.

 

The results are based on a quarterly management survey in the German financial sector.

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.

Statement on the agreement between the EU and Great Britain

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The European Union and the United Kingdom have agreed on a Brexit extension until January 31st, 2020.

Hubertus Väth, Managing Director of the Financial Centre initiative Frankfurt Main Finance, says:

“Frankfurt Main Finance welcomes the European Union’s decision to agree to an extension of the United Kingdom’s withdrawal from the EU. The chances of an unregulated Brexit to occur are now considerably reduced after the approval of the current agreement. We understand this to be a victory of reason.”

FMF welcomes agreement between the European Union and the United Kingdom

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“Frankfurt Main Finance welcomes the agreement reached between the European Union and the United Kingdom. This forms a basis for limiting the economic damage that could be caused by the withdrawal, creates clarity and reduces associated risks. At today’s annual meeting of the IMF and the World Bank, there is a palpable sense of relief in Washington amongst the banks who’ve long hoped for an agreement.

The compromise demonstrates that diplomacy between Brussels and London is intact, despite the intense arguments concerning an agreement over the past weeks and months. However, it remains to be seen whether the current agreement can be implemented.

The question of the backstop makes it clear that pragmatic solutions in the interests of both sides can be reached. This gives reasons to hope that that yet another victory in the negotiations can be reached in the near the future.”

Hubertus Väth, Managing Director of Frankfurt Main Finance

Eschborn – the up-and-coming start-up location in the Financial Centre Frankfurt Rhine-Main

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The Financial Centre Frankfurt Rhine-Main has plenty to offer, including an excellent start-up ecosystem. As part of the dynamic and international Rhine-Main region, the City of Eschborn is an ideal breeding ground for FinTechs and start-ups, attracting a growing number of companies. In our interview, Dong-Mi Park-Shin, Head of Economic Development of the City of Eschborn, explains why so many innovative companies and start-ups pick Eschborn as their preferred business location.

Eschborn is currently experiencing an enormous boost as a top location for businesses. Many innovative companies take up residence in the city, expanding the variety of industries based in Eschborn. What advantages is that trend creating for the City of Eschborn and the Financial Centre Frankfurt Rhine-Main?

Dong-Mi Park-Shin, Head of Eschborns Economic Development Agency

Dong-Mi Park-Shin, Head of Eschborns Economic Development Agency

The strengthening of Eschborn economic capacity is a major benefit. The increasing number of successful and innovative companies – which create and make use of synergies between companies and industries – allows the city to be positioned even more broadly in the future. By doing so, Eschborn can guard itself against industry-specific risks such as a financial crisis.

Due to the latest newcomers to the business scene and consequentially growing opportunities for cooperation and networking, the existing corporate landscape becomes increasingly attractive. Moreover, the fact that Eschborn is a key business location for well-known and high-profile companies – especially from the Pharma and Life Science sector – makes the city even more appealing.

Intensive cooperation between companies and surrounding universities – such as knowledge-sharing and financial support of research and development projects – creates further opportunities for all stakeholders involved. Besides fostering innovation, this also puts companies in a leading position in the “war for talents”: highly qualified talents can be effectively tied to the company and the region at an early career stage.

How are the City of Eschborn and the wider region benefiting from that?

The city generates a high trade taxes income, which is not only of benefit to the people living and working in Eschborn but also to the Financial Centre Frankfurt Rhine-Main. Due to municipal allocations and compensation, revenue generated by Eschborn is distributed and reinvested in various infrastructure measures. In addition to expanding schools, kindergartens, hospitals, and ambulances, the city supports cultural institutions such as English Theatre, the Städel and Dialogue Museum, the Opel Zoo as well as the preservation of the Eschborn-Frankfurt cycle race.

All these aspects contribute to a high quality of life in Eschborn and the Financial Centre Frankfurt Rhine-Main, which increases the attractiveness of the entire region and is a competitive advantage in the global competition – especially with regards to various Brexit scenarios.

Many start-ups opt for Eschborn as their business location. What are the decisive factors attracting up-and-coming companies?

Young entrepreneurs – at least in my experience – think, live and work nationally or globally. As part of the dynamic, international and successful Frankfurt Rhine-Main region, Eschborn has all the advantages the region has to offer.

What does this mean precisely?

Great mentors, networks, financially strong companies or venture capitalists (VC) with the necessary know-how are fundamental factors to the success of young companies – they are able to assess, evaluate and support start-up ideas. As an established financial hub, the Financial Centre Frankfurt Rhine-Main provides start-ups with a large number of committed business angels and VCs that have international networks.

In addition, many sponsors and partners such as the TechQuartier, Ernst & Young, Deutsche Börse, Deutsche Bank and GFT Technologies SE are based in Eschborn. This proximity allows for getting in touch with local companies much faster.

How does the City of Eschborn support young companies? How can start-ups and established companies foster mutual knowledge-transfer?

In cooperation with the RKW Kompetenzzentrum, the city of Eschborn advises start-ups free of charge. Furthermore, the city enables participation in various networking events such as Startup meets Mittelstand, Startup Safari, the Founder Summit, the Fintech Forum, and the EY Academy. Moreover, young entrepreneurs and companies have access to contacts and established networks of Eschborn’s Economic Development Agency. We are committed to the start-up economy of the Frankfurt Rhine-Main region and hence, are becoming more and more active. Promoting the cities start-ups in the local magazine “Standortmagazin” draws the regional founder’s attention to the business location Eschborn.

How will the business location Eschborn look like in the coming years?

The integrative urban development plan “Eschborn 2030+” is currently being worked on. It contains a management plan for the future of the city and the business location Eschborn. Thus, it is a prerequisite and framework laying out the conditions for companies and start-ups. Eschborn’s Economic Development Agency actively engages with political decision-making bodies in order to bring attention to the interests of the companies while taking the global megatrends into account. Only if these interests are taken into consideration, companies and the closely associated city and region can continue to develop in a positive direction.

 

 

 

CFS survey: German financial industry now clearly expecting a “no-deal” Brexit

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The new UK government under Prime Minister Boris Johnson is preparing to leave the EU on 31 October, with no agreement in place. Now the majority of the German financial industry is also expecting a “no-deal” Brexit. This was shown in a recent survey by the Center for Financial Studies. Of those surveyed, 55% consider a disorderly Brexit to be probable, and 31% even see it as very probable. Only 11% are more optimistic in this regard.

The majority of respondents (63%) believe the German financial sector is sufficiently prepared for a “no-deal” Brexit, while 36% see a need for further measures.

“Considering how likely a ‘no deal’ Brexit has become, the survey results are rather worrying, as there is little time left for market participants to make adjustments,” Professor Volker Brühl, Managing Director of the Center for Financial Studies, interprets the survey results.

The EU has ruled out any renegotiation of the Brexit deal and should not offer any further compromises in the hope of avoiding a “no-deal” Brexit. This opinion is held by the majority (70%) of the German financial sector. Nonetheless, the respondents also agree (61%) that the financial markets have not yet fully anticipated a “no-deal” Brexit scenario and that market distortions may therefore occur.

“The survey indicates that the financial industry is prepared to accept the potential drawbacks of a ‘no deal’ Brexit if it means finally obtaining clarity about future framework conditions,” Professor Brühl adds.

There is also a broad consensus among respondents (88%) that if the UK leaves the EU in a disorderly fashion, more business activities and employees will be relocated to continental Europe.

Hubertus Väth, Managing Director of Frankfurt Main Finance e.V., highlights: “Should there be a Hard Brexit, which the majority of respondents assumes is the most likely scenario, it will be important for the Financial Centres in continental Europe to demonstrate their efficiency. If we succeed in cooperating across borders, Europe could emerge from the crisis even stronger.”

 

 

CFS Index remains on downward trend

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Financial industry records a significant decline in investment volume growth / Financial institutions report rising earnings growth accompanied by weaker revenue growth and fewer job cuts

The CFS Index, which measures the business climate of the German financial sector on a quarterly basis, falls by 2.5 points to 109.9 points. The index thus remains on a downward trend that began a year ago. The current decline can be attributed in particular to significantly lower growth in the investment volume of the financial industry. In addition, the financial institutions report lower revenue growth, though this is offset by higher earnings growth and fewer job cuts. The service providers also indicate a low level of revenue growth. This is coupled with a decline in earnings growth, which is at a very low level compared to the previous year. The service providers are optimistic about the current quarter.

“The declines in the core indicators of revenue, earnings and investment, with overall employment remaining unchanged, underscore the difficult situation faced by the sector, where the deteriorated outlook is now affecting the service providers as well as the banks,” Professor Jan Pieter Krahnen, Director of the Center for Financial Studies, interprets the results.

The future international importance of the Financial Centre Germany continues to consolidate, repeating its decline of 3.6 points from the previous quarter, yet remains at a positive level of 119.7 points. The latest decrease reflects the assessment of the service providers. Their index value falls by 11.8 points to 121.8 points. After dropping sharply in the first quarter, the assessment of the financial institutions has been revised upwards again. Their sub-index rises by 4.4 points to 117.6 points. This means the assessments of the financial institutions and the service providers have largely converged.

Dr. Lutz Raettig, President of Frankfurt Main Finance e.V., emphasises: “The differing trends of financial institutions and service providers appear to reflect a wait-and-see attitude. We will probably not know which direction we are heading until after 31 October – the next possible Brexit day.”

Revenue growth of financial institutions declines

The growth of revenues/business volume among the financial institutions declined in the second quarter. The corresponding sub-index falls by 3.0 points to 112.0 points. A further slight decline is expected in the current quarter. The revenues of the service providers, at 110.9 points, remain almost unchanged at the low level of the previous quarter (-0.3 points), though they remain optimistic regarding the current quarter.

Considerable earnings growth among financial institutions / Falling earnings growth among service providers accompanied by a positive outlook for the current quarter

Earnings growth among the financial institutions was positive in the second quarter, as anticipated. The sub-index rises by 3.4 points to 104.4 points. By contrast, the sub-index for the service providers falls by 3.7 points to 103.5 points, which is very low compared to one year ago (-24.2 points). As with their revenues, the service providers remain optimistic about their earnings growth in the current quarter. The financial institutions are anticipating a decline in earnings growth.

Financial industry investment volume is down

The financial industry reports lower growth in investment volume in product and process innovations in the second quarter. The corresponding sub-index for the financial institutions falls by 5.8 points to 106.1 points. The service providers register a decline of 4.9 points to 109.9 points. For the current quarter, the financial institutions are expecting another slight decline; the service providers are more optimistic.

Fewer job cuts at financial institutions / Employee growth among service providers remains constant

Job cuts at the financial institutions have eased slightly. The employee numbers sub-index therefore rises by 2.5 points to 98.7 points. An almost unchanged level of job cuts is expected in the current quarter. The service providers report stable employee growth, with the corresponding sub-index remaining unchanged from the previous quarter at 112.4 points. Employee numbers among the service providers are expected to increase slightly in the current quarter.

 

Frankfurt Finance Summit 2019: Navigating in Uncertain Waters

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Since 2011, the Frankfurt Finance Summit has been held annually in the Financial Centre Frankfurt. Under this year’s motto Navigating in Uncertain Waters, more than 200 high-calibre personalities from the domestic and international financial world came together on 18 June 2019 to discuss the topics:

  • Financial Centre Germany: Strategies for Succeeding in Rough Times
  • Artificial Intelligence (AI) in Finance: Superpower or Super Risk, Revolution or Buzzword
  • Connecting values: a digital finance hub for Europe
  • Post-election Europe facing Brexit: Securing stability for functioning markets

The participants represented a broad spectrum of the financial services industry – mainly decision-makers from central banks, stock exchanges, supervisory authorities, banks, insurance companies, politics, companies and academia.

Dr. Lutz Raettig, President of Frankfurt Main Finance, opened the Frankfurt Finance Summit with a warm welcome to all participants and speakers. After the welcoming speech by Dr. Philipp Nimmermann, State Secretary in the Hessian Ministry of Economics, Energy, Transport and Housing, Dr. Jörg Kukies, State Secretary in the Federal Ministry of Finance, took the floor. Dr. Kukies referred to the need to prepare as best as possible for all Brexit scenarios. Although great success had already been achieved in the implementation of important measures, Europe had so far failed to reach a European agreement on a Sustainable Finance taxonomy. A European agreement, however, remains extremely important for a sustainable financial system.

Financial Centre Germany: Strategies for Succeeding in Rough Times

During the first panel discussion, a survey of the audience revealed that the majority of Summit participants believe that the future of the German banking sector lies in Europe. This view was also shared by the German head of BNP Paribas Paribas Lutz Diederichs. In his opinion, the German banking sector is not dependent on the domestic market, but strongly internationalised. Prof. Dr. Isabel Schnabel, Professor of Financial Market Economics at the Rheinische Friedrich-Wilhelms-Universität in Bonn, also confirmed this trend. She highlighted the weaknesses of the euro structure and confirmed that Germany needed more reforms in this respect. Cornelius Riese, co-chairman of DZ Bank, spoke in favour of a more comprehensive strategy. In addition to market capitalisation, factors such as culture and stakeholder interests are essential metrics for assessing the financial system or a financial institution.

Artificial Intelligence (AI) in the Financial Industry: Superpower vs. Super Risk, Revolution or Phrase

The discussion continued with a discussion on the use of artificial intelligence in the financial industry in which Prof. Dr. Martin Hellmich, Partner at Deloitte, Carsten Mürl, Director Product Management at Mastercard, Dr. Holger Rommel, Head Research and Digital Transformation at ti&m, Vahe Andonians, Senior Lecturer at the Frankfurt School of Finance & Management, and Chris Boos, founder of Arago, participated. First and foremost, Chris Boos, an AI pioneer from Germany, cleared up prejudices about the topic. The general fear of AI is completely unfounded. Although AI has developed even more rapidly in the last five years than the last 50 years combined, man would not be dominated by the machine in the future. Accordingly, understanding and trust are the decisive keys to the use of AI in the financial industry.

Connecting values: a digital financial hub for Europe

During the subsequent power talk between Prof. Dr. Joachim Wuermeling, Member of the Board of Deutsche Bundesbank, and Hubertus Väth, Managing Director of Frankfurt Main Finance, the Financial Centre Frankfurt was closely examined. Prof. Wuermeling stated that after the Brexit referendum a competition was triggered between European financial centres in advertising for business, jobs and employees from London. It wasn’t just about who got a piece of the cake, but how big it was. The Financial Centre Frankfurt had to decide whether it wanted to take over a cooperative or a competition-oriented approach. His advice would be to follow the cooperative approach, since cooperation could win a bigger piece of the cake. Wuermeling also expressed confidence that Frankfurt would assume leadership in the European finance sector five years after Brexit.

Post-election Europe facing Brexit: Securing stability for functioning markets

In the concluding panel discussion, John Berrigan, Deputy Director General of the EU Commission, similarly advocated a banking union. This could increase the EU’s weight at the global level. With regard to Brexit, Mr Berrigan said that all those involved should do everything in their power to minimise the risks as far as possible. Matthias Graulich, member of the Executive Board of Eurex Clearing AG, cited the indispensability of incentives so that each individual would be motivated to contribute to stability. Felix Hufeld, President of the Federal Financial Supervisory Authority (BaFin), drew attention to the general fatigue surrounding the issue of Brexit. Although Brexit is complex and unpredictable, he also warned against viewing the world only through the lens of Brexit. After all, it was not about London against the rest of the world. Looking back on the developments of the past years, according to Felix Hufeld it should not be forgotten that in the financial sector at the European level many important improvements were made in a very short time.

The 9th Frankfurt Finance Summit ended with a summary of the day’s keynote speeches and a closing remarks by Michael Speth, Member of the Board of DZ Bank.

  • Dr. Lutz R. Raettig, Chairman of the Executive Committee, Frankfurt Main Finance e.V

  • Dr. PhilippNimmermann, State Secretary, Hessen Ministry of Economics, Energy, Transport and Housing

  • Dr. Jörg Kukies, State Secretary, Federal Ministry of Finance

  • Prof. Dr. Uwe StegemannSenior Partner, McKinsey & Company, Lutz Diederichs, CEO, BNP Paribas Germany

  • Prof. Dr. Isabel Schnabel, Member of the German Council of Economic Experts, Professor of Financial Economics, University of Bonn

  • Frank Strauß, Member of the Management Board, Head of Private & Commercial Bank, Deutsche Bank

  • Dr. Cornelius Riese, Co-Chief Executive Officer, DZ BANK AG

  • Inken Schönauer, Editor-in-Chief, EURO FINANCE magazin, Chris Boos, CEO & Founder, arago

  • Vahe Andonians, Senior Lecturer, Frankfurt School of Finance & Management, Chris Boos, CEO & Founder, arago, Prof. Dr. Martin Hellmich, Partner, Deloitte, Carsten Mürl, Director Product Management, Mastercard, Dr. Holger Rommel, Head Research & Digital Transformation, ti&m

  • Prof. Dr. Joachim Wuermeling, Member of the Executive Board, Deutsche Bundesbank, Hubertus Väth, Managing Director, Frankfurt Main Finance e.V.

  • Stephan Lutz, Partner, Capital Markets Leader, PwC Germany, John Berrigan, Deputy Director General Directorates B, C, D and E, DG Financial Stability, Financial Services and Capital Markets Union, European Commission, Maria Demertzis, PhD, Deputy Director, Bruegel, Matthias Graulich Member of the Executive Board, Eurex Clearing; Global Head of Fixed Income, Funding and Financing Strategy and Development, Deutsche Börse Group, Felix Hufeld, President, Federal Financial Supervisory Authority (BaFin), Boštjan Jazbec, PhD, Member of the Board and Director of Resolution Planning and Decisions, Single Resolution Board

  • Ram Shoham, Founder of Accelerator Frankfurt and Andreas Glänzel, Managing Director of Frankfurt Main Finance

  • Michael Speth, Member of the Executive Board, FIRM; Member of the Executive Board, DZ BANK

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“Navigating in uncertain waters”

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Speech by Dr. Philipp Nimmermann, Frankfurt Finance Summit, 18 June 2019

“Navigating in uncertain waters” was the title of this year’s Frankfurt Finance Summit. In his opening speech, Dr. Philipp Nimmermann, State Secretary at the Ministry of Economics, Energy, Transport and Housing of the State of Hesse, addressed four challenges arising from this topic: Artificial Intelligence, Climate Change and Sustainability and Brexit. Read the opening speech of the Frankfurt Finance Summit 2019 below:

Dr. Philipp Nimmermann, State Secretary at the Ministry of Economics, Energy, Transport and Housing of the State of Hesse

“The title of today’s summit, „Navigating in uncertain waters“, leaves us plenty of room for discussions. Please allow me to concentrate on three topics: Artificial Intelligence, Climate Change and Sustainability, as well as BREXIT.

Let me start with my personal political guiding principle, which helps me navigate in uncertain waters. It is an adaptation of the ethical imperative, the Austrian born Cybernetician and Physicist, Heinz von Foerster, once formulated. It goes like this: “I shall try to act always so as to increase society’s total number of choices”. But how do we keep our options open or even increase our choices? By remaining open minded and flexible, by not putting all our eggs in one basket, and by thinking in non-linear rather than linear terms.

If uncertainty is high or even increasing, if the world appears to be getting more and more complex, it probably helps to leave beaten tracks and to broaden ones mind, by using a new type of intelligence one has not used before.

So let’s talk about artificial intelligence: In my opinion, artificial intelligence is both a source of uncertainty as well as a method to navigate through uncertain waters. Yes it is true, that we cannot precisely predict how deeply machine learning and self-improving algorithms will actually change the world as we know it. But I do not think that one has to fear this development, at least as long as we share a common consensus that all technology, old or new, should always serve the people. That’s why I actually prefer the term “Augmented Intelligence” over “Artificial Intelligence”.

Machine intelligence can help us better understand big data and complex systems, e.g. by structuring previously unstructured data. By allowing so called “unsupervised machine learning” to help us identify clusters or anomalies we have not identified or thought of before, we can definitely broaden our choices.

So what is the State of Hessen, in this case, the Ministry for Economic Affairs, doing in this respect?

We initiated the foundation of the so called TechQuarter more than two years ago, as a start-up hub, especially for fintechs. This is the corner stone of our startup ecosystem-strategy. The current coalition treaty has also put a special focus on artificial intelligence and technological innovation.

Additional to expanding the TechQuarter, we want to establish a TechCampus with around 20 Professorships. With this lighthouse project, we want to help transforming the already excellent research successes in Hessen into applied technologies and startups.

Together with the TechQuarter and other interested partners, we want to establish an AI- and Big- Data-Lab, where researchers, supervisory bodies and fintech-start-ups can use big-data from various sources to develop and verify machine-learning tools. I am convinced, that this data-lab will significantly strengthen the Frankfurt financial centre.

Let me come to another source of uncertainty: climate change and sustainable development. There might be different views on whether climate change is man-made, or, on which measures are the right ones to slow down this development.

There might even be the question, whether the state should play an active role. But to all the doubters out there: Do you really want to take the responsibility for not having acted in a timely manner? What is your plan B, in case you have been wrong?

As long as we do not discover a Planet B, we should keep our options open or even increase future choices for subsequent generations. Hence, we should do everything possible to keep this planet alive and to foster an environmentally and socially sustainable development throughout the world.

Again, what are we doing in this respect?

With the Ministry for Economic Affairs being responsible, both, for implementing the so-called “Energiewende” in the State of Hessen and for Frankfurt’s role as a leading financial centre, we took an active role in the formation of the Green and Sustainable Finance Cluster Germany.

This cluster is a very important element of our strategy to transform this region in a truly green and sustainable financial centre, by helping to develop a common taxonomy and by defining common standards.

And we have already seen some success:

On a European level, two members of the cluster were selected to be part of the Technical Expert Group on Sustainable Finance, which supports the EU Commission in the implementation of the Action Plan.

On a national level, as recently as two weeks ago, the inaugural meeting of the advisory council on sustainable finance to the German federal government took place, chaired by Karsten Löffler, who is one of our cluster‘s executive directors.

And a few weeks ago, the majority of the state secretaries of the Länder Ministries of Economic Affaires voted in favour of a resolution, introduced by Hessen, which asked the federal government to develop general guiding principles for a sustainable finance sector in Germany.

We are looking forward to further developments in this direction and perhaps Jörg Kukies can elaborate on that subject later on.

Last but not least, there is the BREXIT. Or is it? We are all eagerly awaiting who will lead the UK out of the European Union. But we are prepared: Right after the BREXIT vote, we started an intensive exchange with the financial institutions and the non-financial corporates in Hessen. We traveled abroad to promote Hessen as an excellent business location, supportet by local stake holders and federal representatives such as Jörg Kukies, Sabine Mauderer and Joachim Nagel. Thank you very much again, for your support. I do not think we can do much more on that front. Life after BREXIT is difficult to predict.

But to keep our options open, we should keep our communication channels open and start discussing with our old and new partners in the UK, on how we all can manage the new situation for our mutual benefit.

Before that, I would like to wish you all an inspiring summit and fruitful discussions, which will certainly help us all to navigate in these uncertain waters.”

Titel photo: © HMWEVW – Oliver Rüther.

Photo of Frankfurt Finance Summit: © dfv Euro Finance Group GmbH I Photographer: Axel Gross