Financial Centre Focus: Frankfurt advances to become capital of European banking supervision

The financial centre of Frankfurt is increasingly sharpening its profile as the European hub of financial supervision. In the current development of the European system of regulation and supervision, Germany’s leading financial centre, which is already the location of a number of supervisory institutions, has a crucial role to play.

The assumption by the European Central Bank (ECB) of its new task as the top-level European supervisory authority for financial institutions at the end of the year is decisive for this trend. It will send out a strong signal for the financial centre of Frankfurt, strengthening its profile and leading to an ever-broader network of supervisors. In this way, the upgrading of the ECB as an institution will also reinforce Frankfurt’s position in the international financial community, since both of its financial centre competitors, London and Paris, do not possess any equivalent “institutional cluster”. At the same time, additional demand for staff as a result of regulatory issues at supervisory authorities will soften the blow of redundancies in the financial sector as a whole. This is the conclusion of the latest Helaba Financial Centre Focus, which is published today.

However, Helaba’s chief economist Dr. Gertrud R. Traud cautions that “Frankfurt will only be able to strengthen its position on an international level if regulation is pursued with a sense of proportion. If financial institutions are regulated “to death” they will not be able to fulfil their original tasks. Then supervision would just be an empty shell”. In terms of the future development of the European supervisory mechanism, the existing structure of institutions should be re-examined in order to organise supervisory structures as efficiently as possible and in consultation with the banks. It may be possible to leverage considerable synergies by concentrating more strongly on fewer institutions at one central financial location. As an internationally significant financial centre with an outstanding focus on supervision, Frankfurt is predestined for the bundling of these forces.