Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Where Will Banks Go After Brexit? Frankfurt Takes Early Lead

Posted by hkarner - 20. Juli 2017

Date: 19-07-2017
Source: The Wall Street Journal

Germany is favored for its well-educated workforce that speaks English, reasonable costs and a reliable regulatory environment

The Frankfurt skyline with its banking district.

Frankfurt Main Finance, the group tasked at promoting the financial center, estimates over 10,000 jobs will come to the city in the next six years as a result of Brexit. That is still a fraction of the more than 700,000 people who work in financial and related services in London.

FRANKFURT—Germany’s financial hub is taking an early lead in attracting banking businesses in anticipation of Britain exiting the European Union. Its main asset: It is predictable.

Banks from Japan’s Nomura Holdings Inc. and Sumitomo Mitsui Financial Group to Citigroup Inc. are shifting some business to Frankfurt given the possibility that the U.K. will be left out of the single market once Brexit happens. This would leave banks in London without so-called passporting rights that allow financial-services providers in the City to serve customers across the continent.Following U.K.’s Brexit referendum in June 2016, many European capitals began lining up to woo some of these firms. In meetings with local regulators and cocktails gatherings offered to visiting banking officials, those countries have been dangling big sweeteners.

France has promised changes to cut labor costs and Italy is changing its tax regime to make it less burdensome for bankers and other professionals. Spain’s markets regulator is trying to make Madrid more international by hiring native English speakers to revise and edit all communication the agency sends out in English. But it is Frankfurt with its low-key approach that has been getting the biggest response.

“Stability is the one thing all banks are looking for, and in this regard Germany, with its stable economy and politics, is a winner,” said an official at a bank that is shifting some of its business to Frankfurt.

Detmar Loff, a partner at law firm Ashurst, which is advising banks on their Brexit choices, also points to a well-educated workforce that speaks English, reasonable costs and a reliable regulatory environment as reasons for the German city’s early success. Frankfurt is home to the eurozone’s banking supervisor, the European Central Bank, which often summons bankers to discuss their businesses. Being close to the ECB, bankers say, makes that relationship easier.

Paris, which many touted as a big contender for Brexit businesses, has suffered from political uncertainty surrounding this year’s elections. Emmanuel Macron, France’s new pro-business president, is now stepping up efforts to bring firms to the capital, but so far it has only secured one heavyweight. HSBC Holdings PLC has said it would transfer about 1,000 jobs to France, where it already has a retail presence.

It is too early to tell how many financial firms—and people—will converge on the small German city of 730,000, which gets sleepy on weekends when many expat workers go home while others retreat to the residential suburbs in the surrounding hills.

Japan’s Sumitomo Mitsui Financial , Nomura and Daiwa Securities Group Inc . separately said they would set up subsidiaries in Germany, but didn’t provide staff figures. Citigroup is planning to make Frankfurt its broker-dealer business hub outside London by adding around 150 positions in its business already set up in the city, according to a person familiar with the plan.

Morgan Stanley is close to picking Frankfurt as its EU hub, according to a person familiar with the plan. But both Citigroup and Morgan Stanley are also expected to shift some jobs to other capitals, including Paris and Dublin.

Frankfurt Main Finance, the group tasked with promoting the financial center, estimates over 10,000 jobs will come to the city in the next six years as a result of Brexit, adding to the existing 75,000. That is still a fraction of the more than 700,000 people who work in financial and related services in London.

It points to plenty of high-quality office space and lower rents than in Paris and Dublin as some of the reasons banks should move in.

In its Brexit promotional booklet, the group also boasts about Germany’s exciting soccer league, nearby golf courses and “unique events like the European Cultural Days of the ECB.”

Hubertus Väth, managing director of Frankfurt Main Finance, acknowledges Frankfurt’s subdued reputation, particularly among bankers looking to spend their millions earned.

“At the end of the day, we live in a world of preconceived notions,” Mr. Väth said. “But we are also in a position where it is extremely easy to surprise positively,” he added.

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