Wheels were turning in the financial world well before British Prime Minister Theresa May formally notified the EU at the end of March that she planned to lead the UK out of the 28-member bloc.
Once Brexit is finalized, financial firms could lose so-called “passporting” rules that allow them to sell financial services across the EU from London – prompting many to look to the remaining 27 states for a new base.
In Frankfurt, public- and private-sector organisations set out to woo banks to the city on the river Main, where construction workers and cranes are busily adding floors to new skyscrapers being built.
Their efforts have been crowned with success. Last week, major Korean bank Woori announced that it would apply for a German banking license, matching decisions from Japan’s Nomura, Daiwa and Sumitomo investment banks.
Meanwhile, US giant Goldman Sachs announced in mid-June that it would be doubling its staff in Frankfurt from the present number of 200.
“Frankfurt’s chances of profiting from Brexit have significantly increased in the past few months,” said Michael Kemmer, general manager of the Association of German Banks (BDB).
Advantages vs tax rates
Advocates for Frankfurt say it has advantages over competitors like Amsterdam, Dublin, Luxembourg or Paris – beyond its status as Germany’s financial hub and the presence of top eurozone regulator the European Central Bank.
“Bank chiefs visiting us here, especially from Asia, are impressed by the variety of developed fields beyond finance, whether it’s high tech, IT, health or chemistry,” said Eric Menges, director of local business FrankfurtRheinMain, which offers information about the region to foreign financial players.
He adds that there’s an “excellent” level of involvement in the city’s self-promotion campaign, visible in a weekly telephone conference he leads with representatives from the city, the region, the chamber of commerce and others.
“Other cities might press home very specific points, like taxes, while Frankfurt is attractive because it makes up a well-rounded whole” – and has prepared answers on everything down to places at international schools for bankers’ children, Menges said.
Germany has pressed hard to be welcoming to international companies, including by accepting tax returns and regulatory submissions in English.
But the country’s corporate tax rates are among the highest in Europe, and firing workers under German law is more difficult than bank bosses in London or New York might like.
Neither does Frankfurt, a city of 730,000 people, have the same global stature, glittering image or gamut of financial firms within walking distance as London, a megalopolis around ten times larger.
Nevertheless, foreign institutions already account for roughly 80 percent of the 202 banks already present in the city, employing a total of about 10,000 people.
The Association of Foreign Banks in Germany (VAB) estimated recently that Brexit could add between 3,000 and 5,000 to that figure.
“Of about 20 firms looking closely at setting up here, at least a dozen will decide wholly or in part for our city,” said Hubertus Vaeth, head of Frankfurt Main Finance, a mixed group of public and private sector organisations lobbying for the financial centre.
Vaeth expects newcomers from the United States, South Asia, Russia, South Korea, Switzerland and the UK among their number.
“These successes are particularly down to politicians’ mobilization, including at the federal level in Berlin,” said BDB chief Kemmer.
National and regional leaders have helped boost Frankfurt’s profile, most recently when Chancellor Angela Merkel argued the city was “predestined” to host the European Banking Authority (EBA), which must move away from London after Brexit.
The Hesse regional government will submit its bid for Frankfurt to the European Commission this month.
Luxembourg, Paris and Prague have also campaigned to host the EBA ahead of a November vote by EU leaders on its future location, in a sign of its perceived power as a draw for banks.
Hesse state premier Volker Bouffier took a trip to New York late last year, promising Wall Street bank bosses a haven of stability at the heart of Europe’s largest economy if they moved their operations from the City of
London to Frankfurt.
Major rival Paris only managed to send its ambassador, Economy Minister Bruno Le Maire, on a transatlantic flight last week to make the French capital’s pitch to US finance chiefs.
By Jean-Philippe Lacour