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UK-Based Foreign Banks Tiptoe to Germany

UK-Based Foreign Banks Tiptoe to GermanyUK-Based Foreign Banks Tiptoe to Germany

Global banks are quietly building up their investment banking teams in Frankfurt as the German deals market hots up, boosting the city's chances of being one of the financial centers to benefit most from Britain's vote to leave the European Union.

A surge of Chinese investment in Europe's largest economy and an expected pick-up in merger activity across Germany's chemical, manufacturing and drugs industries have prompted banks to base more staff in Germany. This is contrary to the usual approach of putting most of their deal-makers in London, Reuters reported.

The trend puts Frankfurt in a good position to benefit from any shift of banking activity out of London after the Brexit vote, already bolstered by playing host to the European Central Bank and the EU's second biggest capital market, city and banking industry officials say.

"Germany is becoming a much more important market because it represents an increasing share of the global banking fee wallet," Alexander Doll, CEO of Barclays Germany told Reuters.

When Britain leaves the EU it is widely expected that financial firms based in London will lose their "passporting" rights—an EU system that lets them operate across the bloc but be under the supervision of just one country's regulators.

That's prompting other financial centers like Paris, Dublin and Luxembourg to encourage banks, insurers and fund managers to build up outposts in their cities and obtain "passports" there.

Unlike other European countries, Germany has so far refrained from 'rolling out the red carpet' to bankers by offering big tax breaks or sending major government officials on big promotion trips, relying instead on a more low-key approach.

Foot in the Zone

With London still expected to remain a major financial center in Europe after Brexit, Frankfurt is marketing itself as a city where firms could base some operations without encouraging a mass exodus.

"Banks are looking to keep the bulk of their operations in the UK but some are hedging their bets on Germany," said Alex Howard-Keyes, a partner at the London-based international head-hunting firm Alderbrooke.

"If they're going to have to have a foot on the ground in the eurozone, Frankfurt seems to be the best place," he said, adding: "Frankfurt is a Brexit hedge plus it's in the biggest economy in Europe."

The head of investment banking for Deutsche Bank in Europe, Middle East and Africa, Alasdair Warren, told Reuters last month that he planned to base more bankers to cover the industrial sector in Frankfurt from London.

Last month, BNP Paribas appointed two senior bankers to run its EMEA teams focused on the chemicals and car sectors in Frankfurt, roles that had formerly been in Paris.

Several banks and head-hunters who Reuters spoke to in Frankfurt said while there is no major flight out of London to the city, they are placing increased emphasis on the region.

 

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