How Frankfurt can extend its role as the leading financial centre of the European Union. Ten points by Gerhard Wiesheu, President of Frankfurt Main Finance
Frankfurt is competing with Luxembourg and Paris for the role of the leading financial centre in the European Union. The chances of the city on the River Main are good. There is a great deal at stake: prosperity, jobs and a good supply of financial services for people and the economy. At the same time, the requirements are changing rapidly. Digitisation and sustainability are megatrends that the financial industry must not only face up to, but must also take the lead in shaping the transformation.
This also represents an opportunity to regain confidence lost during the financial crisis. The COVID-19 crisis has shown how and that it works. Without the financial sector as a powerful transmission mechanism, state aid in Germany would not have filtered through so quickly to where it was needed. The interaction between KfW, promotional and commercial banks is considered exemplary worldwide.
Frankfurt Main Finance was founded in 2008 as the voice of the financial centre – much later than competing interest groups. Even today, the association is still struggling with a significantly lower budget. Every weekend the Bundesliga, the first national football league, shows that money scores goals, and this also holds true – figuratively speaking – for location advertising.
Nevertheless, Frankfurt Main Finance has achieved a great deal. Frankfurt has benefited enormously from the successful development work of my predecessor Lutz Raettig. More than one billion euros were invested in Frankfurt alone in the course of the resettlements that Brexit has brought and continues to bring with it. Support for the work of the association has never been any broader. The next phase is now following seamlessly – ten central tasks lie ahead of us:
- Winning trust again and again
“Banking is people”. Rational arguments for the role of banks in achieving prosperity are no longer sufficient and it is not enough to address the mind alone. Never before has a young generation demanded so much transparency and accountability. That is its right, and it is our duty to explain what we stand for. It is necessary to face up to the social discourse in its entirety in order to make financial and economic arguments more audible again.
- Actively promoting the transformation to a sustainable economy
An environmentally compatible and social economy with good governance, ESG for short, is the major societal goal of our time. For a long time now, the crucial issue has no longer been “whether”, but “how”. The Green and Sustainable Finance Cluster Germany at the Frankfurt School of Finance and Management has given Frankfurt an important competence centre – which is a good start. Yet our immediate rivals are still ahead of us. The situation is similar to the beginnings of the association. Therefore, it is necessary to catch up with modest means, but with plenty of commitment and creativity.
- Driving digitisation forward
Frankfurt has taken many good steps in the development of the digital ecosystem, e.g. by becoming a promotional and funding cluster for fintech companies, alongside Berlin. The foundations were laid with the aid of accelerators and incubators, the SDG Fintech Initiative for Sustainability, the Techquartier and the FinTech Germany Award. The objective is to support German fintechs more systematically as they go global and become the logical place for international fintech companies to enter the market. The task at hand will be to attract smart money from serial founders and venture companies to Frankfurt on a permanent basis. Just as in the field of artificial intelligence, the initiatives will only have a chance to become relevant if they join forces.
- Asserting Frankfurt’s leading role within the EU
The financial centre’s marathon run to the top of the EU will continue even after the final Brexit at the turn of the year, with numerous decisions still being open or having been postponed. Moreover, the EU will push ahead with the banking and capital market union which means that a few leading financial centres will emerge within Europe. Frankfurt has the chance to become “the” financial centre of the EU, which will call for maintaining close contacts with North America, Asia and other economically dynamic regions of the world and showing the banking and financial institutions that they can be just as successful on the River Main as on the Thames or Seine.
- Backing the supervisory and monetary authorities
The ECB, SSM, EIOPA, Deutsche Bundesbank and the Federal Financial Supervisory Authority (“BaFin”) are based in Frankfurt. Even if the “EBA” is missing from this list, because Paris was able to assert itself and has additional valuable assets such as ESMA and the OECD, Frankfurt is the undisputed centre for currency, supervision and regulation in Europe. Moreover, with the Leibniz Institute for Financial Market Research SAFE (Sustainable Architecture for Finance in Europe) in recent years the Goethe University has established a first-class think tank for regulatory issues.
- Securing the talent pool through education and research
The financial industry needs a pool of qualified junior staff in order to grow further. This makes it all the more gratifying to note that a region of knowledge on financial topics has evolved around the financial centre in the past two decades, with SAFE being embedded in the Goethe University and the House of Finance. There are also numerous other leading institutions, such as the ILF (Institute for Law and Finance). The CFS (Centre for Financial Studies) and the FIRM (Frankfurt Institute for Risk Management and Regulation) successfully bridge the divide in relation to practice.
- Intensifying networking activities with all stakeholders
Personal contact opens the door to success. Not only for individual financial transactions, but for the financial centre as a whole. The financial world, policymakers, the media and the public at large need to be addressed individually. Corona has triggered a change in thinking in this regard – digital formats have become the accepted standard within only a few weeks. Networking is multidirectional – with the WAIFC (World Alliance of Financial Centres) initiated by Frankfurt Main Finance as well as with the financial centres in Germany and the EU.
- Being a reliable partner for policymakers
Politics defines the framework conditions for the financial centre. This is why it is important to be a credible, competent and expert partner in order to overcome many a reservation. After all, today policymakers cannot win any elections by committing themselves to banks. Since the Brexit referendum, the financial centre has received a great deal of support from the federal and state governments – a good basis for the coming months and years.
- Enhancing the quality of life in the financial centre
“Soft factors” are more than just the icing on the cake in competition between locations. Awareness of life, openness, internationality, culture, nature, infrastructure, health, safety and housing determine whether employees and their families feel well and comfortable in Frankfurt. For instance, bank managers from Asia appreciate the good air in Frankfurt and the proximity to local recreation in the Rheingau, Taunus or Spessart for their children. Again, the political will to shape the future is required to ensure that Frankfurt remains in 7th place amongst the world’s most liveable cities.
- Entrenching ethics as a pillar of all action
Trust is easily gambled away and hard to win. This is also the experience of all those in the financial industry who faced blanket condemnation after the financial crisis. Even sophisticated rules of banking supervision are of limited help against lack of integrity. The best protection is an ethical framework and its continuous reflection as in the Code of Ethics of the DVFA (German Association for Financial Analysis and Asset Management) which was drawn up in co-operation with Frankfurt Main Finance and cannot be recalled or reiterated often enough.
Achieving all these goals calls for patience, stamina and the cohesion of many. Without its financial centre, Frankfurt would not have become the civic city that has demonstrated time and again for many centuries what it is capable of. Major financial dynasties began their rise from Frankfurt, just as global finance houses feel at home here. As the smallest global financial centre, with a strong stock exchange, over 70,000 employees in the financial sector and over 200 financial institutions, Frankfurt will continue to go from strength to strength, scoring points for its agility and creativity.
Also published in: Börsen-Zeitung, 29 October 2020