Frankfurt may be a major beneficiary of the UK exit from the EU, but not without many challenges
In November, Capco Institute hosted a seminar in Frankfurt where leading academics, senior financial executives and industry representatives discussed the impact of Brexit on Frankfurt’s economy and financial services. Participants included:
Holger Bonin, Chief Coordinator of Labor Policy Research, IZA – Institute of Labor Economics
Jan Mutl, Full Professor and Managing Director, EBS Real Estate Management Institute
Jürgen Matthes, Head of the Research Unit – International Economics, Institut der deutschen Wirtschaft Köln
Jürgen Ratzinger, Managing Director – International, IHK Frankfurt
Daniel Kapffer, COO-Capital Markets and Asset Management, Deka Bank
Christian Ossig, Member of the Senior Management Board, Bundesverband deutscher Banken
Reinhard Schmidt, Emeritus Professor of Finance, Goethe-Universität, Frankfurt
Many institutions have already assumed a ‘hard Brexit’ outcome in March 2019 and started planning for that. Banks are looking for alternative locations for their EU operations currently centralized in London. Frankfurt and Paris are the primary candidates for such moves, followed by Dublin.
The prospects for Frankfurt are excellent, but Brexit will also bring many challenges for the city. For example, Frankfurt must be able to offer housing for between 10,000 and 25,000 high-income families relocating from London, as well as accommodate the socio-cultural infrastructure for this group.
Frankfurt may eventually become the most international banking location in continental Europe, making the German banking market more international as a result. This will be good news for institutions such as the Bundesverband Deutscher Banken (Association of German Banks) which has recently founded a competence center for international banking. Some banks have followed suit and set up their own international competence centers in Germany.
As banks are prioritizing operations for relocation to continental Europe ahead of the UK withdrawal date in March 2019, it is not clear what proportion of the OTC derivatives market will move from London to Frankfurt. Centralizing OTC derivatives in Frankfurt is a long-term possibility.
However, despite what looks like a brilliant future for Frankfurt as an international banking hub, global financial communities are aware that London and New York will remain key centers for international banking.
To get in touch with Capco’s Brexit experts in Germany, contact Sebastian Jungck, Partner.