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.

Frankfurt Main Finance

Brexit Fever – FMF on FINANCE-TV

The votes have been counted and the UK has decided to leave the EU. But how will this decision affect the Financial Centre Frankfurt? Frankfurt Main Finance’s Hubertus Väth sat down with FINANCE-TV to discuss how Brexit will affect European financial centres and what Frankfurt has been doing capitalize on this opportunity. With some experts predicting that 100,000 jobs could leave London’s financial district, there is a lot at stake and Frankfurt Main Finance had all hands on deck in the hours rigth after the announcement. In cooperation with their partners, Frankfurt Economic Development and FrankfurtRheinMain GmbH, Frankfurt Main Finance launched a website, welcometofrm.com, an information hotline and a social media campaign on LinkedIn and Twitter targeted at decision makers in London’s financial sector. Watch Hubertus Väth’s full interview in the video below (German).

Source: www.finance-magazin.de/finance-tv

Dr. Dombret, Deutsche Bundesbank: “Banks face immediate economic consequences”

In his keynote address at the Goethe University’s Center for Financial Studies on July 13, 2016, Dr. Andreas Dombret, Member of the Executive Board of the Deutsche Bundesbank (German National Bank), explained what the Brexit means for European banks. Although the conditions of the UK’s exit have yet to be negotiated, Dr. Dombret made three key conclusions:

  • Financial institutions have to prepare for a scenario in which euro-denominated trading and clearing is unlikely to have a future outside the EU.
  • Regarding the merger between Deutsche Börse and London Stock Exchange, the referendum outcome has even strengthened the economic rationale. But in order to reap the benefits, contracting partners should now invest in a well-balanced governance structure.
  • Financial actors in Europe have so far succeeded in digesting the somewhat surprising referendum result. Even ongoing volatility should not serve as an excuse to bypass the pillars of financial stability we have only just set up in the EU.

Additionally, Dr. Dombret lamented the loss of his British colleagues, explaining, “I –probably speaking for most, if not for all of my German colleagues – will greatly miss our British counterparts in European institutions; not at least because of their orientation towards stability and free market economy. But, fortunately, as central bankers, we will continue our collaboration at many other levels such as the G7, the G20, the IMF and the BIS.”

A full transcript of Dr. Dombret’s keynote address is available here.

Photo Credit: Deutsche Bundesbank / Frank Rumpenhorst

Frankfurt Real Estate

EY Study: Frankfurt Real Estate Market to Profit from Brexit

According to a recent study by EY Real Estate, surveying 555 respondents from the German real estate branch, the German and Frankfurt real estate market will be one of the main beneficiaries of the UK citizens’ vote to leave the EU.

The survey shows that 57% of respondents predict the Brexit having a positive effect on German real estate. According to the responses, the transactions volume, as well as the purchase and rental prices, are poised to increase. This increase in residential prices will specifically affect Frankfurt according to 86% of respondents. In addition, 79% predict an increase in commercial real estate prices.

These predictions are based on the expectation that Frankfurt will grow in importance following the UK vote to leave the EU. In fact, 72% of respondents expect the Financial Centre Frankfurt to benefit the most from the UK’s exit from the EU. Dublin follows in a very distant second with 13% and only 6% of respondents see Paris profiting from the Brexit.

Read the full results of the study here.

tagesschau – the Main benefits from Brexit

Following a meeting of the Financial Centre Cabinet, the German news programme reported on Brexit as an opportunity for Frankfurt. “Admittedly, Frankfurt isn’t considered as lively as London. Nevertheless, the city in Hesse estimates that the Brexit could bring 10,000 banking jobs from the Thames to the Main.” From Oliver Feldforth and Sandra Scheuring, Hessischer Rundfunk.

Watch the full story here!

BCG Study: Frankfurt Most Attractive Destination for London’s Bankers

A recent survey by the Boston Consulting Group (BCG) examines financial centres which could be viable alternatives to a post-Brexit London. Nearly 360 decision makers from banks in the United Kingdom, USA and Germany evaluated nine potential locations on fourteen criterion, including but not limited to infrastructure, business environment, stability, lifestyle factors, access to markets and institutions. The results of the online survey, conducted in June 2016 before the UK’s EU referendum, shows the Financial Centre Frankfurt am Main leading the ranks. Dr. Wolfgang Dörner, Senior Partner and Director of BCG’s Frankfurt office, explains that “the economic and political stability in Germany combined with access to a highly qualified talent pool make Frankfurt am Main a leading choice in location.” According to the study, around twenty percent London’s financial services jobs could shift to other global financial centres. Uncertainty still prevails for most in London’s financial centre, but one thing is certain: Frankfurt is ready and well positioned to welcome those in need of a new home.

 

Press release from Boston Consulting Group (German).

Topic Brexit: Frankfurt Main Finance in the Media

The coming EU referendum in the United Kingdom has been a hot topic in all media channels. A Brexit will have many consequences for the UK and Europe. When it comes to how a Brexit could affect the Financial Centre Frankfurt, Hubertus Väth, Managing Director of Frankfurt Main Finance, is a frequently requested and competent commentator.

Below is a selection of interviews over the past two months regarding Brexit.

 

Hubertus Väth clearly states, “We do not wish for a Brexit to occur. It would be terrible for Germany, Europe and Great Britain. However, should it come to pass, it would be a clear opportunity for the Financial Centre Frankfurt. We estimate that jobs relocating to Frankfurt could number in the tens of thousands.”

Frankfurt is not only a German Financial Centre, but also a major European hub. The Financial Centre is home to the European Central Bank and is considered the centre of monetary stability in Europe. The exchange platforms and IT systems in Frankfurt are internationally recognized for their reliability and security. Frankfurt is also an important centre for European Financial Supervision, home of the European Insurance and Occupational Pensions Authority (EIOPA) and the European Systemic Risk Board. Frankfurt is well-equipped as a stable Financial Centre to embrace those looking for a new base of operations within the Eurozone. Frankfurt stands ready with a high-capacity real estate market as well as an excellent range of service providers, particularly in the areas of accounting, legal, communications and IT. For example, in Frankfurt you will find the DE-CIX internet exchange hub, over which more than 40% of the European internet traffic flows. Compared to the lasting instability in Great Britain, Frankfurt represents openness, stability, capable infrastructure and favourable conditions.