Frankfurt Main Finance supports Federal Ministry of Finance’s Bid to host EBA in Frankfurt

Today, the German Federal Ministry of Finance submitted their bid to host the European Banking Authority (EBA) in the Financial Centre Frankfurt. Currently located in London, EBA must find a new home as a result of the United Kingdom’s withdrawal from the European Union. Applications to host the agency were due to the European Commission on 31 July 2017. The final decision is expected in November 2017.

Frankfurt Main Finance supports the Federal Ministry of Finance’s bid to host EBA in the Financial Centre Frankfurt. “We commend the Ministry on submitting a strong application. Frankfurt is home to three of the five pillars of an integrated European financial supervisory system. To relocate EBA to Frankfurt would be the logical next step and in line with an earlier recommendation by MEPs,” explains Hubertus Väth, Managing Director of Frankfurt Main Finance. In addition to hosting the European Central Bank (ECB), European Insurance and Occupational Pensions Authority (EIOPA), and the European Systemic Risk Board (ESRB), Frankfurt is also home the Deutsche Bundesbank, the German Federal Financial Supervisory Authority (BaFin) and Federal Agency for Financial Market Stabilisation (FSMA).

The Financial Centre Frankfurt is in the pole position to win banking business from London following the results of the UK’s referendum. Several banks have announced their intentions to establish or expand operations in Frankfurt as a result of Brexit, including Silicon Valley Bank, Standard Chartered, Daiwa, Nomura, Sumitomo Mitsui Financial Group, Mizuho, Goldman Sachs, Citibank, JP Morgan and Deutsche Bank. “The banks have voted with their feet for Frankfurt, now it’s on Europe to vote for financial stability and for Frankfurt,” explains Väth. Frankfurt Main Finance expects at least 12 and possibly as many as 20 banks to announce their decision for a location in Frankfurt in 2017.

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

Frankfurt becomes destination for international job seekers – HR consultants signal a clear spike in interest

Brexit is gaining momentum. Coinciding with the first official announcements from financial institutions moving business units from the Thames to the Main, movement is being observed in the labor market. “We are currently experiencing an unprecedented onslaught of unsolicited applications from London for the offices in Frankfurt,” said Christopher Schmitz, Partner, EY EMEIA Financial Services. “This is true for both internal applications from consultants from within the company, but also for external applicants, especially by people of Indian origin. The interest in Frankfurt is great.”

Dr. Rolf E. Stokburger, Managing Partner at Boyden, a global HR consultancy specializing in management, made a similar observation, “Senior bankers are among the more proactive applicants. They are eager to be part of the success story in Frankfurt and leverage the opportunities of early entry.”

Thomas Deininger, Managing Director of Deininger Consulting, a global consultancy headquartered in Frankfurt with offices in London, Dehli, Mumbai and Pune, amongst others, says, “London’s banks are behaving increasingly hesitant. Our contracts there have reduced dramatically and recruiting has declined by 30 to 50 percent. On the other hand, we have increased interest in Frankfurt. The number of unsolicited CVs has certainly increased by 20 percent. There are a lot of actors in the financial sector currently taking part in exploratory talks with us.”

“We are currently experiencing the early phases of an evolving, radical shift in Frankfurt’s labor market,” says Hubertus Väth, Managing Director of Frankfurt Main Finance. “Banks are now discussing with their teams how they implement relocations to Frankfurt,” Väth continued. “These decisions will be made well in advance and require months of preparations. This affects not only the employees, but also their families.”

The great interest in the Financial Centre Frankfurt from India is remarkable, but not surprising. According to data from the City of Frankfurt, the Indian community in the Rhine-Main region is by far the largest in Germany and the Orbis database shows more than 130 Indian companies in the region in 2017. It is the preferred investment destination for India within the Schengen zone. And not least, more than 40 Indian IT companies, 9 of the top 20 Indian IT companies, are based here.

“In our offices in Delhi, Mumbai and Pune, interest in working in Frankfurt is also increasing,” says Thomas Deininger. “The 2016 Global Innovation Index sees Frankfurt as a leading German innovation cluster at number 12 in the world, ahead of London (21) and Berlin (30). Frankfurt is a particularly attractive location for innovative companies,” adds Hubertus Väth.

Do you have any questions?

In the wake of the Brexit decision, a number of banks will be relocating. This raises a lot of questions – political ones as well as quite practical ones.

The search for an alternative location to London is currently occupying the thoughts of globally operating banks. Some have already opted for Frankfurt and are currently moving here. Others are still weighing up the pros and cons of the alternatives in the European Union (EU). Frankfurt has a number of advantages in such comparisons.

As an international financial centre, Frankfurt has a lot to offer. The residence of the European Central Bank alone lends the location a special allure. But there are more solid arguments. That’s why – not only since the ultimate Brexit resolution – the city and state governments, politicians and interest groups have been working hard to provide decision-makers in the banking world with tangible arguments and sound Information.

Core issue labour law

One of the core issues that comes up again and again in dialogues is the protection against dismissal in German labour law. This requires that alternative employment must be sounded out. If a trader loses money for his employer, the employer will not want to have to employ him elsewhere. This is because the game runs differently on the trading floors. The dealers have less security, but are paid far better. Around 80 percent of the income millionaires from EU banks are based in London. Most of them are employed in dealing. Such a deal turns out to be good for both parties: if an employer wants to dismiss an employee, he or she receives an easily calculated compensation.

The importance of this aspect is also well-known in the political community. The Hessian Finance Minister Dr. Thomas Schäfer has already taken up the topic: “Nothing has changed as far as our objective is concerned of easing protection against dismissal for employees with very high income in credit and financial service companies,” he stressed once again in recent days. He knows that he has the support of the majority of people when he says that a high-paid trader is less worthy of protection than a normal bank employee. And this hits home with the decision-makers in the major banks.

However, the Finance Minister is convinced that the solution cannot merely be derived from the income: “It has become clear that a solution in labour law tailored to the specific credit and financing companies finds much greater support.” What he means is to exclude a precisely defined group of risk carriers from the protection against dismissal – and therefore to remove the basis of one of the main criticisms of the Frankfurt location. The Hessian state government considers such a statutory amendment to be feasible and expects a bill to be introduced after the German federal elections in autumn 2018.

Dr. Thomas Schäfer, Hessian Finance Minister: “We want to ease the protection against dismissal rights for the group of risk carriers in credit and financial service companies.”

Go Frankfurt Tax

There are also questions in the UK as regards German tax law that require elucidation. A major hurdle is not only the interpretation of the law, but also the German language. In order to help all those who want to come to Frankfurt as Brexit immigrants, the Hessian Ministry of Finance has set up an English-language homepage and a hotline. This is an offer to answer the very practical questions that arise when employees and their families move to another country, to a new city where a foreign language is spoken. The Finance State Secretary Bernadette Weyland has activated the service in mid-June: “Call us, write an e-mail or visit us online. We are happy to help you in English.”

Dr. Bernadette Weyland, Hessian Finance State Secretary: “Citizen Service has a long tradition with us. We now offer this service in English as well.”

Frankfurt is being heard

From major political decisions to small-scale assistance in day-to-day issues – there’s a lot of movement going on at the moment to make Frankfurt an attractive, and also likeable, location for the employees of banks from all over the world. To do the right thing is the indispensable prerequisite in such a competition among locations. To talk about it is the essential groundwork. This is also the maxim of Hubertus Väth, who, as Managing Director of Frankfurt Main Finance, has conducted over 600 discussions with journalists from all over the world since the Brexit decision: “We have achieved that the world is talking about Frankfurt. We are in the pole position as regards major banks relocating their headquarters after the Brexit and can already record numerous successes.” That’s why he is not only meeting with representatives of large and prestigious media companies, but also with the Japanese newspaper Yomiuri Shimbun, the New Zealand channel Newstalk ZB and the Russian online platform Vestnik Kavkaza. In this way, the message of Frankfurt Main Finance can be transported into the farthest corners of the world. The fact that he is being heard is shown by the great media echo: since the Brexit decision, there have been reports in more than 200 media from 31 countries in 525 articles, which corresponds to a coverage reaching over 2.6 billion Readers.

Hubertus Väth, Managing Director of Frankfurt Main Finance: “We are in the pole position as regards major banks relocating their headquarters after the Brexit.”

Picture credits: bilder-bibliothek.blogspot.de / Skyline – Frankfurt am Main, HMdF / Sabrina Feige

Mizuho is fourth Japanese bank to confirm move to Frankfurt

The Japanese investment bank Mizuho Securities Co. Ltd., a core group company of Mizuho Financial Group, Inc., announced today that it has begun procedures to apply for a license to further expand its presence in the Financial Centre Frankfurt. In addition to Daiwa, Nomura, and Sumitomo Mitsui Financial Group, a fourth major Japanese bank has now decided to establish a hub in Frankfurt am Main.

“Frankfurt e yokoso, welcome to Frankfurt Mizuho! We see Mizuho’s decision as another show of trust in the Financial Centre Frankfurt, for which we are most grateful,” says Hubertus Väth, Managing Director of Frankfurt Main Finance. “Overall, Frankfurt’s many advantages create a convincing package. Now, four of the five leading Japanese banks and securities corporations have chosen Frankfurt for their European hubs after an extensive and thorough due diligence process. We look forward to supporting them in establishing their operations in any way possible.”

Väth futher explains that “the banks’ decisions to move their business from the Themes to the Main over the past few weeks, strengthen Frankfurt’s position as a significant financial centre, not only in Europe, but globally as well.” Frankfurt Main Finance expects at least twelve banks to announce their decision to relocate to the Financial Centre Frankfurt this year. “We are one step closer to our ambitious objective of having twenty banks placing their trust in the Financial Centre Frankfurt this year. The past weeks should alleviate any doubts concerning Frankfurt’s attractiveness to the world’s major investment banks,” says Väth.

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

The press release of Mizuho Financial Group.

 

Euro Clearing

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

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

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

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

Download the Press Release

One year after the UK referendum – a Brexit balance

The surprise came overnight, and there was a rude awakening. At 2 A.M., when the first forecasts were published, it still looked like Britain would remain in the European Union. But a next look at the news reports at 6:20 A.M. made it clear: the population of the UK decided to leave, even if the majority was only 52:48. A year has passed since TV cameras from all over the world stood in front of the ECB and journalists wanted to know what was now going to happen and what Frankfurt thinks about it all. London, Brussels and Berlin immersed themselves in consultations. Nigel Farage, the head of the UKIP party that had made Brexit its goal, stepped down. Shortly after, the British Prime Minister David Cameron followed suit.

Our message: Brexit is bad for the UK, it is bad for Europe, and it is bad for Germany. Frankfurt Main Finance (FMF), the voice of Germany’s financial centre, hoped for a different outcome to the referendum, but was also prepared for the results. When these came in, that was the moment to flick the switch. The campaign to promote and advertise our location on the River Main was ready and waiting: as soon as the official referendum result was announced, an information website about Frankfurt went online, a telephone hotline for questions about Brexit was activated, a statement was published on the FMF website, and a campaign started at the same time on Twitter and LinkedIn to spread the word about the merits and advantages of the Financial Centre Frankfurt. The message was clear and relevant: “Welcome to Frankfurt”.

 

Once-in-a-century chance for Frankfurt

On June 24th, interview requests came in from all over the world. The media struggled to understand what had happened and how it would be changing the world we live in. FMF gave interviews in 15-minute intervals: on the phone, in the microphone, on camera, and yet again on the phone… The Brexit vote dominated the news all around the globe. Being in a position to talk while others were still treading their way through channels of coordination and approval gave Frankfurt a key advantage right from the start.

Despite the obvious negative repercussions, Brexit brought the opportunity of a century for the city of Frankfurt and the region. The financial architecture of the European Union was, and up to now, is focused on London. The UK’s withdrawal from the EU – and that was clear straight away – would lead to a relocation of responsibilities and business in the direction of the EU, resulting in a more multipolar financial world. London will undoubtedly remain a major financial centre, but financial centres in the EU will gain enhanced influence – Frankfurt above all. We at Frankfurt Main Finance have never tired of pointing out that it’s not a question of weakening London as a financial centre through our efforts; rather, it’s primarily about installing a stable financial sector within the EU, about building a bridge between London and the EU that starts in Frankfurt.

EBA and Euro clearing are in focus

On day one after the referendum, FMF ventured to make the well-founded estimate of 10,000 jobs that Frankfurt could gain within five years as a result of Brexit – with two essential preconditions: the European Banking Authority (EBA) moves to Frankfurt, as does the lucrative euro clearing market. While the seat of the EBA quickly became a general topic of discussion, it took months before the exceptional importance of euro clearing became clear to the wider public – a rather unwieldy topic at first glance.

The processing of derivative transactions via central guarantee entities, so-called Central Counterparties, and their supervision by the regulator is one of the main ramifications of the financial crisis. When the financial world plunged into crisis, there was in part complete uncertainty as to where the risks were, i.e. who held the actual risks festering in their books at the time. This insecurity led to fear, and the resulting loss in confidence threatened a collapse of the entire system.

Euro clearing: Frankfurt is currently the only real alternative to London

The decision as to where euro clearing operations should be carried out has been recognised as one of the key decisions for shaping the future financial architecture of the EU and Europe, and the issue has been discussed in this vein. And once again, Frankfurt is justifiably confident that it can win the day as the location of choice. Today, in addition to London, only Frankfurt – with the EUREX Clearing subsidiary of Deutsche Börse AG – has a valid licence within the EU and possesses the technical prerequisites, tried and tested in daily operation, to take over euro clearing operations from the City of London. Currently, Frankfurt is already the market leader in the clearing of exchange-traded derivatives. On the other hand, London leads by far in the clearing of euro-denominated OTC derivatives.

This lucrative business will not be able to remain in London as it has. That’s something we stressed at the time and have stressed ever since. After all, the European Central Bank, directly after its founding, wanted the supervisory of such a critical key function for the stability of European financial markets and the euro in its sphere of influence and control. Already now, there are first signs of business moving to Frankfurt, and companies are increasingly testing the clearing opportunities in the Financial Centre Frankfurt.

More uncertainty in the wake of the UK elections

A lot has happened since June 23rd last year. To mention just a few milestones: the British Prime Minister at the time, David Cameron, resigned. He was succeeded by Theresa May. She, who for all intents and purposes counted among those in the remain camp, surprised everyone in her first policy address, with the wording used ever since to illustrate the British posture towards future negotiations with Brussels: “No deal is better than a bad deal.”

The so-called cliff-edge Brexit – the running out of the negotiations on withdrawal scheduled for two years without an agreement being reached – came into view and became the most probable outcome. On March 29th, 2017, the United Kingdom formally requested withdrawal pursuant to Article 50 of the Treaty on European Union. As a result, Theresa May set the countdown in motion for the two-year negotiation period. A few weeks later, she again shocked the world by calling new elections to the House of Commons for early June. The professed goal was to receive a strong mandate for negotiations with Brussels. The calculation didn’t pay off. May and her party are now weakened, with incalculable repercussions for the Brexit process, for financial market participants, and for financial centres.

Frankfurt and Germany offer stability

If, from a European point of view, the result of the UK parliamentary election is interpreted as “a glass half-full”, then a lot of things come into the range of possibility again: even a new referendum with an open end. And even the UK remaining in the EU is no longer completely out of the question, albeit hardly likely.

If we interpret the “glass as half empty”, we are then dealing with a weak government that is only capable of making a few compromises in the upcoming negotiations because it lacks a broad mandate and a robust majority in the UK Parliament. A breakdown of negotiations and even a new election within the two-year period are conceivable. The negotiation programme, which is already ambitious to say the least, seems simply impossible to complete. Extensions, interim solutions and deadlines will probably be the result.

One thing remains certain: the decisions made by companies and by the financial and the real economy, on both sides of the Channel, must now be made under an even greater cloud of uncertainty. This speaks for Frankfurt, and it underlines the strength of Germany and Frankfurt as a refuge of stability and predictability.

Frankfurt exploits its pole position

In a host of banks and across the financial sector, Frankfurt is frequently discussed as a potential candidate for the relocation of companies or divisions. Above all, the Financial Centre Frankfurt boasts a stable economy and stable pro-European political conditions, with an excellent infrastructure, a large number of well-trained workers – especially from the financial sector –, a relatively cheap rental index and cost of living, and a high quality of life.

Metaphorically speaking, all this has brought Frankfurt onto the pole position in the race for the chances in the wake of Brexit. And the Hessian metropolis has been doing full justice to its prominent role up to now. This is shown by the successes achieved so far. Already, a Chinese, Japanese, Indian, Korean and Swiss bank have decided in favour of Frankfurt as their main location in the EU. Goldman Sachs is planning to double its workforce in Frankfurt and Standard Chartered has recently announced its intention of expanding its office in Frankfurt due to Brexit. Around 20 banks are currently in the later stages of talks about either locating or expanding their operations in Frankfurt.

The metaphor of a race also makes another thing clear: the clear winner is uncertain until the finish line is crossed. Frankfurt must continue to promote its merits and advantages and continue to address its weaknesses, rising to the occasion to capitalize on the once-in-a-century chance before it. Ultimately, a number of financial centres will certainly profit from Brexit, but the Financial Centre Frankfurt has every opportunity to become the financial metropolis of the European Union.

Japanese investment bank Nomura opts for new location in Financial Centre Frankfurt

Another Japanese bank has applied for a banking license in Germany and chosen to base the new business unit in the Financial Centre Frankfurt. Frankfurt Main Finance (FMF) is delighted that with Nomura another Japanese bank has officially decided to come to Frankfurt. “The Japanese banks were precisely the ones, who warned early on about the consequences of Brexit, and now are among the first to decide,” says Hubertus Väth, Managing Director of the Financial Centre initiative Frankfurt Main Finance.

“We would like to thank Nomura for their trust in the Financial Centre Frankfurt and look forward to welcoming our new colleagues. Nomura is already a member of Frankfurt Main Finance. We expect their announcement to act as a signal, and that further decisions by other prominent institutes will follow in the coming weeks.”

Just a few days ago, the Japanese Daiwa Securities Group announced their decision for the Financial Centre Frankfurt.

Press Release from Nomura Bank.

Hessian delegation on Brexit tour in London – a travel report

Representatives of the Ministry of Economics, Energy, Transport and Regional Development in the Federal State of Hesse have been in Brexit mode for a number of months. Communication across all channels and preferably in a personal dialogue – when it comes to promoting the benefits of Frankfurt as the EU’s financial centre, every opportunity is exploited. As was the case during the trip made by Hessian Economics Minister Tarek Al-Wazir and his delegation to London. The journey, which was originally initiated for companies in the cultural and creative sector, was the ideal framework for a small-scale financial delegation from the ministry. Armin Winterhoff, Head of the Financial Centre Frankfurt Division at the ministry, was part of this team and knows the details and background of the three-day London tour.

Ten banks, two associations, three days. The programme in store for the financial delegation headed by Economics Minister Tarek Al-Wazir was packed to the full when they set off for London for three days from May 9th to 11th. So it goes without saying that it had already been determined in advance and in detail who would be taking part at which appointment during the busy schedule and with which priority. “We are seeking a personal dialogue with those responsible at the banks and within the organisations. We want to promote the merits of Frankfurt by providing information and offering a constructive exchange with specialists. The Financial Centre Frankfurt is to become the ‘Gateway to the EU’,” as Armin Winterhoff describes the fundamental objective. The facts speak for the advantages of the Main metropolis, he maintains, and so he never grows tired of underlining how important it is to convey well-founded information to the right places – i.e. especially to the large, internationally operating banks that are likely to be losing their access to the EU financial market in the wake of the Brexit.

The days are jam-packed with appointments and precisely scheduled – working lunches and the Hesse Evening included. All the more important that the small core team functions together effectively – up to 10 specialists from the Ministry of Economics, the Brexit Office at the Hessian State Chancellery, the Hessian Ministry of Finance, the Bundesbank, and institutions like the Verband der Auslandsbanken in Deutschland e. V. (Association of Foreign Banks in Germany), Frankfurt Rhein Main GmbH and Frankfurt Main Finance e. V. “We were already in close contact with most of the addresses before the trip,” Winterhoff explains. But it’s essential, he adds, to point out in situ and in personal conversation what makes the Financial Centre Frankfurt particularly special.

There were also reservations to be eliminated and misconceptions to be straightened out: “Those who look at Frankfurt from a global perspective are often already apprehensive when they hear the population figure of 700,000. The fact that no less than 5.6 million people live in the catchment area of the Frankfurt Rhine-Main Metropolitan Region, many of them highly qualified and with an international background, has to be elucidated.” Winterhoff can specify many such examples – because ultimately everyone is concerned about the same questions. That’s why the “Welcome to the Financial Centre Frankfurt” brochure is always part of the hand luggage on such trips. The leaflet puts “10 Points for Frankfurt” in a nutshell.

Winterhoff found it striking how openly and constructively the delegation from Frankfurt was welcomed wherever it showed up: “For us, that’s an indication that all international institutions have the greatest possible interest during this phase in carrying out a far-reaching and substantive discussion with the different financial centres in the EU.” Needless to say, he adds, every bank has its own analyses, but to underpin them with first-hand information is evidently highly rated. “In this respect, we’re certainly sought-after dialogue partners in our capacity as the official federal state representatives,” the Head of Division points out.

Even if providing information about the location and promoting its merits is at the top of the list –such a trip is time and again just as fertile and rich in insight for the representatives from Hesse themselves. “We are able to gain a vivid impression of what is being discussed in London and what the sticking points are for the companies,” Winterhoff explains. He points out that such crunch issues aren’t merely the hard location factors, the hard facts, especially with regard to existing regulation. There is also great interest in the soft factors, such as the presence of resources in the region as well as the leisure activities and cultural programmes on offer. After all, anyone considering moving with his or her company and family from the Thames to the Main would like to know what can be expected. “We attach great importance to such factors and realities because it’s ultimately not just taxes and labour law that decide where people feel comfortable,” Winterhoff is convinced. It’s much easier in a face-to-face conversation to tell people what it’s like to live in and around Frankfurt, he adds. That’s why the Hessian representatives will continue to seek every opportunity they can to present the merits of the Main metropolis.

 

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.

Financial Centre Focus: “Brexit – Let’s go Frankfurt”

Financial Centre Frankfurt the preferred destination for Brexit-induced job relocation

In a comparison of European financial centres, Frankfurt clearly ranks in second place behind London. With numerous qualities in its favour, the German banking centre is an attractive location for domestic and international players in the financial sector and has the potential of becoming the preferred destination for Brexit-related job relocations. The following assets that Frankfurt possesses are of particular benefit: The stability and strength of the German economy, the headquarters of the ECB in its dual function, a transportation hub with a good level of infrastructure, relatively low office rents as well as a high quality of life. This is the conclusion that Helaba’s economists arrived at in their Financial Centre Study “Brexit – Let’s go Frankfurt”. But it has serious competition in the shape of Paris, Dublin, Luxemburg or even Amsterdam.

Dr. Gertrud Traud, Helaba’s Chief Economist and Head of Research, stresses: “If Frankfurt really is to become the principal winner of Brexit, it will require a concerted effort on regional, national and European levels as well as a more self-confident approach.”

Forecast for banking sector employment 2018: Stable at around 62,000 jobs

In addition, a further improvement in the conditions offered by the city is essential to ensure its success. In view of Frankfurt’s excellent position in the framework of European financial centres, demonstrated by various studies, Helaba’s economists believe that it has good chances of picking up at least half the jobs in the financial sector that will be shifted from London to Frankfurt in a restructuring process lasting many years. Thus, Frankfurt now faces the task of putting the necessary prerequisites in place, e.g. in the housing market. Based on very cautious assumptions, a total of at least 8,000 employees would come to Frankfurt over a multi-year period. Since companies cannot wait for the outcome of negotiations, more than 2,000 jobs are expected to be relocated by as early as the end of 2018 already.

“This Brexit-induced effect on the labour market will act as a counterbalance to consolidation in local banks”, says the author of the study, Ulrike Bischoff. Both effects should, more or less, cancel each other out within the forecasting window. By the end of 2018, the study anticipates a total of just over 62,000 bank employees in the German financial centre.

The complete Helaba study is available for download here.