London banks are making their option to Frankfurt earlier than Brexit

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More than four years after the vote on Great Britain’s exit from the European Union, Frankfurt emerges as the winner among the EU financial metropolises when it comes to the coveted London banking business.

FRANKFURT AM MAIN: Hubertus Vaeth was considered crazy when he started a Frankfurt initiative to lure banks there after Brexit.

“Are you crazy? What did you smoke?” Asked his critics, according to the managing director of Frankfurt Main Finance (FMF) in an AFP interview.

Nobody laughs anymore.

More than four years after the vote on Britain’s exit from the European Union, Frankfurt emerged as the winner among the EU financial metropolises when it comes to the coveted London banking business, ahead of Paris, Milan and Amsterdam.

The Bundesbank estimates that foreign banks could move 675 billion euros (817 billion US dollars) into Europe’s largest economy.

That is just over half of the total amount of assets (EUR 1.3 trillion) that the ECB estimates would be transferred from the UK to the euro zone before Brexit.

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

In addition, over 60 international banks have registered with the German financial supervisory authority BaFin.

As Vaeth said, Brexit is an “opportunity to turn the tide” of “30 years of continuous business losses to London”.

– “New London Bridge” –

Vaeth’s campaign for the Londoners went live the day after the vote.

“At seven in the morning after the referendum, we pressed the button and the campaign was running,” he said, promoting as the “new London Bridge”.

However, the FMF’s estimates that up to 10,000 financial jobs will be created in Frankfurt have so far proven to be too confident; Helaba is now forecasting 3,500.

But bankers who have already moved to Frankfurt believe others will join because British financial firms would lose their “passport rights” to do business with clients in the EU from January 1st.

Martin Campbell, risk manager at a major Japanese bank that moved from London in 2019, said the slow move so far was only due to the fact that customers have not yet moved to EU subsidiaries or London operations.

“According to EU regulations, employees in London are able to conduct transactions in the European office from their desk in London. This will no longer be possible on January 1st,” he said.

Banks are also reluctant to announce their moves because “the Brexit discourse is so excruciatingly toxic that a commercial organization that makes things public cannot win anything,” he said.

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

Carsten Loll, partner of the consulting firm Linklaters, assumes that international companies will rent more office space in Frankfurt if no trade agreement is reached.

He estimates that an influx of post-Brexit bankers would “drive insane” residential property prices.

– ‘You cry twice’ –

The change is already visible in the type of business in the city where the European Central Bank is based.

Before Brexit, the big Frankfurt financial world – around 65,000 bankers – focused on commercial banking, not investment banking, Campbell said.

“The idea of ​​a large international investment bank in Frankfurt did not exist,” he said. “So Brexit created an investment banking industry in Frankfurt out of nowhere.”

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

While some dismiss Frankfurt as boring compared to pulsating London, others appreciate the 700,000-inhabitant city because of its manageable size, the relaxed atmosphere and the closeness to nature.

“I used to commute to London for over an hour. That was how far I had to live to get an apartment that I could afford, that was the size I wanted,” said Campbell.

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

“When you are sent to Frankfurt, you cry twice,” chuckled Vaeth. “As soon as you are posted there and as soon as you have been sent out.”