Reversing the trend: Frankfurt attracts London banks

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Frankfurt am Main (AFP)

Hubertus Vaeth was considered crazy when he launched a Frankfurt initiative to lure banks there after Brexit.

“Are you nuts?” What did you smoke? »Asked his detractors according to the managing director of Frankurt Main Finance (FMF) in an interview with AFP.

No one is laughing now.

More than four years after the vote that took Britain out of the European Union, Frankfurt is emerging as the winner among the EU’s financial capitals by attracting the coveted banking activities of London, ahead of Paris, Milan and Amsterdam.

The Bundesbank estimates that non-German banks could transfer 675 billion euros ($ 817 billion) to Europe’s largest economy.

This is just over half of the total amount of assets (€ 1.3 trillion) that the ECB says would be transferred from Britain to the eurozone before Brexit.

Since the vote, banking giants Morgan Stanley, JP Morgan and Goldman Sachs have announced they will move more than € 350 billion in combined assets from London to Germany.

More than 60 international banks have also joined the German financial regulator BaFin.

Brexit, as Vaeth put it, marks an “opportunity to turn the tide” of “30 years of continued loss of business to London”.

– ‘New London Bridge’ –

Vaeth’s campaign for Londoners was launched the day after the vote.

“At seven in the morning after the referendum, we hit the button and the campaign went on,” he said, posing as a “new London bridge”.

However, FMF’s estimates of up to 10,000 finance jobs created in Frankfurt have so far proved too certain, with local bank Helaba now predicting 3,500 jobs.

But bankers who have already moved to Frankfurt believe others will join them because on January 1, UK-based financial firms would lose their “passport rights” to do business with clients in the EU.

Martin Campbell, risk manager at a major Japanese bank, who left London in 2019, said the slow influx so far was simply due to the fact that clients had not yet migrated to branches of the EU rather than to operations in London.

“Under EU rules, it is possible for staff in London to execute transactions in the European branch from their London office. This will no longer be possible on January 1, ”he said.

Banks are also reluctant to announce their moves because “the Brexit rhetoric is so horribly toxic that there is nothing to be gained from a commercial organization that makes things public,” he said.

“In private, all of these banks tell their customers that we are in Frankfurt and we are ready for you. ”

Carsten Loll, partner at consultancy firm Linklaters, believes that if no business deal is struck, international companies will rent more office space in Frankfurt.

He believes that an influx of post-Brexit bankers would drive up residential property prices “madly”.

– ‘You cry twice’ –

Already, the change has been visible in the type of activities carried out in the city, which is also home to the European Central Bank.

Before Brexit, Frankfurt’s large financial community – around 65,000 bankers – focused on commercial banking, not investment banking, according to Campbell.

“The idea of ​​a large international investment bank in Frankfurt did not exist,” he said. “Brexit therefore created an investment banking sector in Frankfurt from scratch. ”

Vaeth believes that once they take the plunge, the bankers won’t look back.

While some see Frankfurt as boring compared to bustling London, others appreciate the city of 700,000 for its manageable size, laid-back vibe, and close access to nature.

“I used to commute over an hour to go to London. That’s how hard I had to live to find housing that I could afford and that was the size I wanted, ”Campbell said.

“Here in Frankfurt, I live in an apartment which is 20 minutes by bike or public transport from my office,” adding that his wife can come for lunch.

“When you’re posted to Frankfurt, you cry twice,” Vaeth chuckled. “Once you’re posted there, and once you’re posted. ”

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