Unprecedented slump in CFS Index

The CFS Index, which measures the business climate of the German financial sector on a quarterly basis, slumps by -15.4 points to 98.8 points. This is the sharpest decline on record since the index surveys began in 2007 and the first time the index has fallen below the neutral line of 100 points since 2009. Expectations of the financial sector for the current quarter have turned especially bleak. Huge slumps in revenue, earnings and investment are expected, with service providers in particular anticipating an extreme decline in revenue and earnings, now also accompanied by job cuts. By contrast, the job cuts at financial institutions, which have been ongoing for some time now, remain almost flat, and the current quarter is not expected to bring as steep a decline as the other index values.

“There has never been such a severe deterioration in financial industry expectations of all the measured performance indicators – revenues, earnings, employee numbers, investment – since the survey began in 2007 – not even during the financial crisis of 2008. It would therefore appear crucial to pay the utmost attention to impacts on financial stability when pursuing rescue and recovery measures in reaction to the coronavirus pandemic – especially now that we have created a supervisory regime that makes a wholesale bailout difficult,” Professor Jan Pieter Krahnen, Director of the Center for Financial Studies, interprets the results.

Owing to the corona crisis, the future international importance of the Financial Centre Germany is also seen to be progressively declining. The corresponding sub-index falls by -5.8 points to 111.2 points and is now at its lowest level since 2012. The decline is increasingly driven by the assessment of the service providers. The relevant value for this group stands at 113.7 points, 7.8 points lower than in the previous quarter. The assessment of the financial institutions falls by -3.6 points to 108.8 points.

Dr. Lutz Raettig, President of Frankfurt Main Finance e.V., explains, “The slump in the rating of Germany’s future international importance as a financial centre is a result of the uncertainty surrounding, and not clearly foreseeable course of the global corona pandemic. In fact, Germany is considered to be on the cutting edge in managing the current crisis. The federal and state governments were able to rely on an efficient financial sector and get the billion-euro “corona protection shield for Germany” up-and-running in the shortest possible time without triggering negative reactions on the capital markets.”

Financial industry expects huge slumps in revenue, earnings and investment in the current quarter

The surveyed financial institutions and service providers report a significant decline in their revenues/business volume in the first quarter of 2020, with the corresponding index value dropping by
-8.2 points to 112.4 points for the financial institutions and by -13.8 points to 108.6 points for the service providers, relative to the previous quarter. With these figures for the first three months of 2020, each sector is still only 2.6 points below the previous year’s level. However, the financial industry is anticipating the sharpest drop in revenues since the surveys began in 2007 and an index value of well under 100 points for the current quarter.

The earnings of both groups developed in line with revenues in the first quarter of 2020. The corresponding sub-index for the financial institutions reached a level of 103.3 points after falling by
-8.0 points, but is still 2.3 points above the previous year’s level. The service providers report an extreme decline in revenue growth. The sub-index drops by -16.4 points to 106.4 points. Although this is still close to the previous year’s level for the first quarter, this group is anticipating an extraordinary slump to well under 100 points in the current quarter.

Growth in investment volume now below last year’s level

The growth in investment volume in product and process innovations in the financial sector also declined in the first quarter of 2020, but not to the same extent as the revenue and earnings figures. The corresponding sub-index falls by -6.9 points to 101.8 points for the financial institutions and by -4.5 points to 108.1 points for the service providers. The financial institutions are now 10.2 points below last year’s level, the service providers are 6.7 points below. With respect to the current quarter, the financial sector as a whole is expecting a strong decline in investment to a level well below 100 points. Among the service providers, however, the expected downturn in investment is less pronounced than the extreme revenue and earnings declines anticipated in this segment.

Financial institutions: job cuts almost flat in the first quarter / Current quarter slump should not be as severe as other index values / Service providers: jobs expected to be shed for the first time since 2009

Job cuts at the financial institutions, which have been ongoing for some time, are less severe in the first quarter of 2020 than in the previous quarter. The employee numbers sub-index rises accordingly by 0.7 points to 95.2 points, just 1 point under the previous year’s level. Although the service providers hired fewer employees in the first quarter of 2020 than in previous quarters, their employee numbers indicator remains in positive territory, at 105.5 points, after slipping by just -0.6 points. For the current quarter, the financial institutions are expecting a larger reduction in employee numbers, albeit less drastic than the anticipated declines in other index values. By contrast, the service providers are expecting to shed jobs for the first time since 2009.

 

 

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 survey: “Effects of the corona crisis”

German financial industry expects economic impacts to exceed those of the 2008 financial crisis – Equity capital measures broadly welcomed

A CFS survey of financial industry executives shows that around 78% of the respondents expect the economic impacts of the corona crisis to be significantly more severe than those of the 2008 financial crisis.

So far the rescue measures adopted by the German government, amounting to around €750 billion, consist largely of special loans and loan guarantees.

Over 60% of the survey participants regard the measures taken by the Federal Government as appropriate, another 24% of those surveyed would like to see even higher levels of support, while just 12% consider the current package excessive. When asked what form the assistance should take, just under 80% of respondents said they would welcome more equity measures, in addition to the loan programmes, to prevent corporate debt levels from rising further. Only 13% of those surveyed are opposed to equity measures.

“The financial industry would surely give a strong boost to the acceptance of government support in the form of equity capital – this could prove crucial to securing and regaining financial stability in Europe,” explains Professor Jan Pieter Krahnen, Director of the Center for Financial Studies.

The respondents are divided on whether financial assistance should be coordinated on a Europe-wide basis, i.e. allocated according to shared standards. This is endorsed by 54% of the financial sector respondents and opposed by 41%.

The assistance programmes in Europe vary greatly in scale – large in Germany, small in Italy. Do these differences pose a threat to the European Monetary Union/eurozone in the medium term? Respondents clearly regard the disparity in the size of assistance packages in northern and southern Europe as the main threat to the eurozone – 85% see dangers looming here.

“Since the disparity in dimensions is far more strongly identified as a problem than a lack of international coordination of support programmes, this could provide an important insight for policy-makers. It is also in the self-interest of the northern countries to counteract the asymmetry of rescue packages at European level – whether the programmes are coordinated or not,” explains Professor Krahnen.

A large majority of financial industry executives (approx. 85%) see a risk of European Monetary Union stability being jeopardized due to the extensive support programmes at EU and individual member state level. Approximately 48% of the participants oppose the introduction of joint EU debt in the form of corona bonds, while around 23% could envisage them.
A remarkably high 30% of the survey participants do not hold a firm opinion on this issue.

Hubertus Väth, Managing Director of Frankfurt Main Finance e.V., emphasises, “The current crisis demands and promotes global coordination in the fields of medicine, science and business. Although global interconnectedness eased the rapid spread of the corona pandemic, it also plays a key role in solving the crisis, which will be done much faster through cooperation. This factor still receives too little attention.“

 

 

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.

World Alliance of International Financial Centers (WAIFC) on “The role of financial centers in driving economic growth.”

In 2018, financial services leaders from around the globe assembled to announce a new strategic initiative: The World Alliance of International Financial Centers. WAIFC is an international non-profit association, which represents leading global financial centers and facilitates cooperation and the exchange of best practices.

In the context of the present uncertainties, with the consequences of the coronavirus and the slowing down of economic growth all around the world, financial centers must play an even more essential role to accompany a necessary recovery and the orientation of the economies towards sustainable development and the satisfaction of the economic needs.

Together with WAIFC member Casablanca Finance City, WAIFC has published a report in collaboration with Oxford Business Group on “the role of financial centers in driving economic growth,” which highlights the breadth and diversity of financial centers’ activities in financing their real economies.

Eleven financial centers have contributed to the report with their showcases:

    • Abu Dhabi Global Market
    • Astana International Financial Center
    • Belgian Finance Center
    • Busan International Financial Center
    • Casablanca Finance City
    • Frankfurt Main Finance
    • Hong Kong Financial Services Development Council
    • Luxembourg for Finance
    • Paris Europlace
    • TheCityUK
    • Toronto Finance International

The financial industry undergoes a process of structural change. Nowadays, the priority actions of our members concern environmental finance, technological innovation and infrastructure, as well as social and territorial financing. International financial centers are more reliant on technology, and our members have been driving innovations in the financial industry by supporting the adoption of innovative technologies from cloud computing and blockchain to artificial intelligence and big data. Also, our members are increasingly promoting all segments of sustainable finance and strive to ensure that environmental and social considerations are adequately taken into account and integrated into the financial sector moving forward.

The new report provides an overview of those activities. It is available for free download at https://frankfurt-main-finance.com/wp-content/uploads/2020/04/WAIFC-role-of-financial-centres.pdf.

Arnaud de Bresson, Chairman of the WAIFC Board of Directors and CEO of Paris Europlace, says:

“The WAIFC was created to foster collaboration among international financial centers and to build up a global network. It aims to accelerate the dialogue and exchange of best practices among them and develop communication with the general public. Our core objective is that finance should not be self-centered but rather serve the real economy all around the world. We are committed to supporting global economic transformations, fostering the combination of public and private funding, and contributing to meet the sustainable development goals all around the world.”

Said Ibrahimi, Member of the WAIFC Board of Directors and CEO of Casablanca Finance City, says:

“As a founding member of the WAIFC as well as the first financial center in Africa to join the alliance, CFC is proud to contribute an African perspective that showcases the level of international cooperation in its undertakings on the continent. We strongly believe in Africa’s potential, and the pivotal role global financial centers play in driving growth and contributing to socio-economic development. We aspire through this report to make these benefits known beyond the world of finance.”

Dr. Jochen Biedermann, Managing Director of the WAIFC, says:

“Financial centers are vital to sustaining economic growth. They provide the infrastructure for investment that drives entrepreneurial endeavors and economic growth across industries and communities and increasingly contribute to sustainable development and financial literacy. Our members embrace innovation and actively drive developments in that space. They provide fertile ground for start-ups with new ideas and innovative business models. The diversity of WAIFC members is an important strength.”

Hubertus Väth, Member of the WAIFC Board of Directors and managing Director of Frankfurt Main Finance, says: “Frankfurt Main Finance is proud to be a co-founder of the WAIFC network. Especially in times when the financial industry is facing enormous challenges, it becomes clear that solutions in an interconnected world can often only be found through international cooperation. This applies in particular to the financial sector. The financial center Frankfurt, in the heart of Europe, is a natural partner in such a cooperation.”

 

The World Alliance of International Financial Centers (WAIFC) is a non-profit association registered in Belgium, representing 16 leading international financial centers of four continents. WAIFC members are city governments, associations, and similar institutions developing and promoting their financial centers.

In an era of breakthrough technologies and rapid social change, financial centers are crucial to sustaining economic growth. Thus, the objective of the WAIFC is to create a transparent network that facilitates cooperation and sharing of best practices to further the understanding of the importance of international financial centers for national and global economies as well as social development.

Dr. Lutz Raettig: Protective Shield for Germany leverages financial centre’s efficient infrastructure

Politicians rely on an efficient financial sector for their economic protection programmes. Under KfW’s leadership, the entire breadth of the development banking system and the financial centre’s infrastructure has been deployed.

“Waste not, want not.” This proverb characterised the budgetary policy of the federal and state governments. Internationally, the “black zero,” the surplus in the budgets of the federal and state governments, has long been a hot topic. Now, however, it is precisely this room for manoeuvring that allowed politicians to get the “Protective Shield against Coronavirus in Germany,” likely in excess of 500 billion euros, up-and-running in quick order without triggering negative capital market reactions.

The largest aid package since the Second World War includes short-time work benefits, the deferral of social security contributions, tax-privileged one-time payments to employees, and a large number of aid and credit programmes for the self-employed, as well as small, medium- and large companies. The interest rates vary slightly, depending mainly on the exemption from liability for the lender.

Germany as a pioneer

Governments at the federal and state level have acted quickly, correctly and courageously. In doing so, they have relied on the financial centre’s efficient infrastructure, which has been successfully proven for decades. The state, development banks and local banks are well coordinated to quickly and efficiently process and disburse loans.

Borrowers apply for a loan from their local bank, which checks eligibility and creditworthiness, while a development bank provides the funds. Depending on the programme, the local bank can be exempt from liability up to 100%, while the development bank can refinance itself on the market with favourable terms because it has a state guarantee either explicitly or implicitly through the legally established institutional liability and guarantor liability. Moreover, due to the urgency of the situation, new programmes are usually not developed, but rather expanded and easier access to existing ones has been facilitated.

With KfW Bankengruppe and Landwirtschaftliche Rentenbank, Germany has two federally owned development banks. In addition, the federal states also have their own investment and promotional banks. For many years, KfW carried its corporate objective in its name, as it was founded in 1948 as the Kreditanstalt für Wiederaufbau as part of the Marshall Plan. After the Second World War, comparable institutions existed only in France, Italy, the Netherlands and Poland. It was not until 1989, first in the countries of Central and Eastern Europe, then increasingly in other EU countries from 2008 onwards, that comparable concepts were implemented and corresponding banks were established. Today, KfW is one of the world’s leading development banks in the world, with a AAA rating from the three most important rating agencies.

Financial stability concerns

With the loan programmes, the government mandates the German banking system to provide corporate customers with financial “medicine” for “acute care” and later “rehabilitation” based on its in-depth knowledge and experience

The corona pandemic shows how valuable a healthy finance sector can be for the real economy during a crisis. However, even the financial industry is not immune to the risks of drastic measures. Therefore, prudent principles must continue to apply to banks as well.

Against this backdrop, it is understandable when politicians and supervisors urge banks to waive bonuses and dividend payments due from 2019, at least if the banks do not receive the distributions as a capital gain. Although the banks have significantly increased their equity capital, the further course of the crisis is by no means clear enough to allow a sufficiently robust risk assessment to be made today.

BaFin and the Bundesbank have already taken far-reaching preventative measures together at the European level with the European Central Bank and the financial supervisory authorities. As BaFin President Felix Hufeld summarized, “The existing regulatory framework grants us a high degree of supervisory flexibility, of which we will fully utilise. We will relieve the burden on banks where this is possible without compromising financial stability.”

When visiting BaFin’s website on Corona, one gains an impression of the range of measures being taken. These relate to banking, insurance and securities markets, and range from waiving the planned countercyclical capital buffer, the treatment of problem loans, the postponement of Basel III standards by one year to the shortfall in pension funds and reporting obligations under the Market Abuse Regulation.

Drawing lessons from the pandemic

Just like the financial crisis in 2008, the corona pandemic in 2020 should be a point for reorientation. It should be clear that Germany, as the world’s fourth-largest economy, must have an efficient financial sector to overcome crises.

In addition to the development banks and local banks, capital markets also play an important role, as this is where the programmes are financed. In this respect, the Financial Centre Frankfurt is outstandingly positioned in Europe. Gradually, institutional investors should also be included in financing the new start, because they can leverage and thus strengthen existing programmes. The role of international financial institutions should not be underestimated either. Here, Frankfurt has scored points in recent years by bringing more than 30 international financial institutions to the Main with their new EU headquarters. These institutions can now see that their choice of location was the right one because here, challenges were solved pragmatically.

Regulation is now being put to the test as well. There is no doubt that many components will demonstrably contribute to stability. Other rules will require review in the light of the crisis, especially where complexity is unfavourable in relation to the desired outcome.

It is certainly clear that digitalisation will receive an enormous boost. It will be irreversible. Simplification and de-bureaucratization of existing regulations will ease digitalisation efforts. The criteria should be adjusted by all parties involved. Our perfectionism, which is so valued worldwide, should be pragmatically adjusted in the light of the crisis. After all, we now are experiencing how, with a little flexibility, the challenges of the lock-down can be mastered in a way that was not imaginable just a few weeks ago.

What efforts the corona pandemic will still demand of politicians, the populace and the economy cannot yet be seriously predicted. At this point, whether it is a “black swan” event or, as the author of the book of the same name, Nassim Taleb, claims – simply an expected shock, is more of an academic question. We can only hope that the medical and pharmaceutical sector will quickly find a vaccine and/or an effective therapeutic treatment for the coronavirus and that those responsible can agree on economic and public health measures to better guard against future pandemics. Hopefully, we will not waste the lessons of our current emergency and be forced to relearn them in the next.

Asahi Shimbun interviewed Hubertus Väth

Kazuo Teranishi, correspondent for Asahi Shimbun, one of the oldest and largest national daily newspaper in Japan, interviewed Hubertus Väth during his visit in Tokyo in March 2020, which took part in the FinCity Global Forum (hosted by FinCity.Tokyo).

Read more

Protective Shield against Coronavirus for Germany: Financial Industry as Partner for the Real Economy


In a very short time, the German government and the federal states have erected a protective shield worth billions, including a large number of credit programmes for companies and the self-employed. To ensure successful implementation and efficient disbursement, policymakers can rely on an efficient infrastructure with a four-tier system comprising the state, development banks, principal banks and borrowers.

Read more

CFS Index on the rise

Financial industry reports: Strong growth in revenue and earnings / Fewer jobs cut at financial institutions

The CFS Index, which measures the business climate of the German financial sector on a quarterly basis, rises by 4.3 points to 114.2 points. This positive development can primarily be attributed to high revenue and earnings growth in the financial industry in the fourth quarter of 2019. The investment volume among the financial institutions has also risen, while job cuts are lower than in the previous quarter. This positive news is offset by slightly slower growth in the investment volume and employee numbers among the service providers.

“Despite all gloomy prophecies the quarterly financial results of sector firms, both banks and financial service firms, are pointing northwards. This is even more true for numbers expected in the subsequent quarter” 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, as in previous quarters. With a change of -1.7 points, this indicator is now at a moderate level of 117.0 points. The financial institutions and service providers are unanimous in this assessment.

Dr. Lutz Raettig, President of Frankfurt Main Finance e.V., explains: “The Financial Centre Frankfurt will gain in importance due to the Brexit. This development is not self-fulfilling, but rather requires the continuous effort of all parties involved. The further consolidation of the index should be a clear signal and incentive for all responsible persons to continue and intensify their commitment to the financial centre.”

Financial industry revenues and earnings rise

The surveyed financial institutions and service providers surpassed their expected growth in revenues/business volume in the final quarter of 2019. The corresponding sub-index for the financial institutions rises by 5.9 points to 120.6 points, which is 7.9 points higher than one year ago. For the service providers, the sub-index climbs as much as 9.7 points. It is now 1.5 points higher than one year ago, at 122.4 points. The financial institutions are anticipating a decline in the current quarter, whereas the service providers expect to see a slight further increase.

The earnings of both groups also developed very positively in the fourth quarter of 2019. The corresponding sub-index for the financial institutions gains 7.9 points to reach a level of 111.4 points. The huge growth recorded by the service providers substantially exceeds even their positive outlook from the prior quarter. The sub-index for this group rises by 14.4 points to 122.8 points. The financial institutions and service providers are expecting the growth to weaken again in the current quarter.

Growth in investment volume is positive among financial institutions / Slight decline among service providers

The growth in investment volume in product and process innovations among the financial institutions climbs 2.9 points to 108.6 points in the fourth quarter of 2019, yet still remains 3.4 points below the level of one year ago. By contrast, the sub-index for the service providers sees a slight decline of -1.5 points to 112.6 points, which is the same level as one year ago. The financial industry has an optimistic outlook for investment in the first quarter of 2020.

Fewer job cuts at financial institutions

Job cuts at the financial institutions, which have been ongoing for some time, were less severe than expected in the prior quarter. The employee numbers sub-index rises accordingly by 4.1 points to 94.5 points, which is 6 points higher than one year ago. The financial institutions expect to further curtail their job cuts in the current quarter. The service providers are hiring fewer new employees than in the previous quarters, though the numbers remain positive. The corresponding sub-index falls by -2.6 points to 106.1 points. Compared to last year, this is 5.4 points lower, meaning fewer people are being hired. The service providers are anticipating a clearly more positive development 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.

CFS survey: “Outlook for the year 2020”

German financial industry expects more widespread adoption of negative interest rates for savers – Calls for stronger incentives for share ownership

Low interest rates and share ownership 

A CFS survey of financial industry executives shows that over 90% of respondents do not expect the ECB to change its monetary policy this year. Therefore, most financial experts (again over 90%) assume that the trend of banks introducing negative interest rates or deposit fees for savers will continue. Given the profound consequences for private pensions, a clear majority of those surveyed (approx. 87%) advocate stronger incentives for share ownership for the purpose of retirement planning.

“The proportion of people who own stocks or stock funds has increased in recent years. Nevertheless, only around one in six people currently invest in stocks,” says Professor Volker Brühl, Managing Director of the Center for Financial Studies. “The financial transaction tax proposed by Finance Minister Olaf Scholz would therefore be counterproductive.”

The respondents are split on the question of whether the government should adopt measures to protect retail savers against negative interest rates. This course of action is supported by 51% of the financial industry executives.

Hubertus Väth, Managing Director of Frankfurt Main Finance e.V., emphasizes that “the lack of an investment culture in Germany has been criticized for decades. If there is anything positive to be gained from negative interest rates from the investors’ point of view, it is that equity investment must now become the pillar of private pension provisions in order to avoid capital losses.”

Growth prospects and balancing the budget

Furthermore, the CFS survey makes it clear that the majority of the financial industry is not expecting a slump in economic growth this year, despite continuing uncertainties over trade disputes and geopolitical risks. Approximately 51% of those surveyed regard the federal government’s forecast of approximately 0.6% GDP growth in Germany as realistic.

The issue of balancing the federal budget is also provoking considerable debate in the financial industry. A majority of 54% are in favour of temporarily running a deficit to boost public investment or provide tax relief. 44% of respondents are opposed to this.

“The survey results show that there is no clear consensus in the financial sector regarding either the economic outlook or the need to shore up the economy with fiscal policy measures,” explains Professor Brühl.

Hubertus Väth, Managing Director of Frankfurt Main Finance e.V., adds that “the opinion reflects the delicate situation of the very open German economy. On one hand, a record foreign trade surplus, on the other a pandemic, whose course endangers value chains, which are already stressed by Brexit and the yet to be completely resolved trade conflict between the United States of America and China.”

 

 

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.

Fostering Franco-German dialogue at the Financial Centre Frankfurt

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

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.