National Post (National Edition)
Frankfurt on ‘probation’ as Europe’s new banking hub
City works to hold ex-london Brexit jobs
The German city of Frankfurt has been on the receiving end of business that banks are shifting from London to other European cities because of Brexit. Now, a group touting Frankfurt as a financial hub is trying to ensure they hang on to those gains.
“I look at it as a probation,” said Hubertus Vath, managing director of Frankfurt Main Finance, a publicprivate partnership between business and government.
“They gave us the benefit of the doubt, but they want to see whether it works out, so we better make it work out.”
Vath spoke to Financial Post amid the latest Brexitrelated mayhem, which at the time was British Prime Minister Theresa May’s decision to pull a scheduled vote on the separation agreement with the EU. The uncertainty swirling around Britain’s relationship with the European Union has led banks and other financial institutions to try to prepare themselves for whatever emerges.
But banks and other businesses are not necessarily looking to leave London entirely — the city is expected to remain a major financial centre — so much as trying to maintain a presence in the EU.
“Institutions must be prepared for March 2019 (the Brexit date) and, in addition to London, must at least have the legal capacity in place to conduct business at another location in the EU,” noted a September report by Frankfurt-based lender Helaba.
Frankfurt has been one of the cities that firms have turned to to ensure their bases are covered.
Already, of the 37 or so banks and financial firms that have reportedly been working to ensure they have a presence in the EU post-brexit, 30 have tapped Frankfurt for their EU headquarters, according to Vath’s group. Frankfurt Main Finance has also estimated that more than $1-trillion in financial assets could shift from London to the German city by next year.
Vath said he began honing Frankfurt’s pitch to employers even before the final Brexit vote had taken place, after seeing an ominous newspaper headline.
“I pushed us to to prepare,” said Vath, who was in Toronto for the recent Global Forum.
“Which meant we had a call centre up, we had a website up, we had a Linkedin campaign, we had a Twitter campaign, and we had a very simple slogan, which said ‘Welcome to Frankfurt.’ ”
The city’s case for itself, according to Vath, includes its infrastructure, the size of the German economy and competitive costs. The European Central Bank is headquartered in Frankfurt as well.
Frankfurt is now trying to make sure newcomers feel at home, with Vath noting that tax filings and regulatory discussions can be conducted in English. Some of the region’s new bankers were even invited to a soccer match last month between Eintracht Frankfurt and Marseille.
“There is a transition to something different,” Vath said. “Which we actually started two weeks ago, when I said ‘well, it’s now less to get people in, it’s now more to make them feel welcome.’ ”
Other European cities have seen interest ahead of Brexit as well. Helaba’s report showed Frankfurt as the destination of choice for Swiss lender UBS Group AG, among others, but that those preferring Paris included HSBC Holdings PLC, and that those leaning toward Amsterdam included Royal Bank of Scotland.
“I don’t think it’s a good time to be in denial,” Vath said. “I think it’s a good time to face up to what’s going to happen.”
Canadian banks have had to make post-brexit preparations, too, such as Toronto-dominion Bank’s TD Securities announcing it would expand operations in Ireland, saying it would help “respond to the changing business environment as a result of Brexit.”
A spokesperson for Royal Bank of Canada said they are in the process of setting up new regulated entities in France and Germany. However, RBC stressed it still has an “established” investment banking business based in London that it has been growing, “and we have no plans to dramatically change our approach.”
Even with a so-called “hard” Brexit, the number of employees that would likely need to be relocated would be small, RBC said, numbering in the “tens of employees, not hundreds or thousands.”