Proximity alone isn't a sufficient location advantage
"The financial hub Germany falls short of its economic significance," according to Lutz Diederichs, head of the German branch of the French multinational bank BNP Paribas. Diederichs made this observation during the kick-off event for "Finanzplatz Deutschland" ("Financial Hub Germany"), which is organized by Börsen-Zeitung. The aim of the initiative is to increase visibility for the financial industry in Germany, both in public discourse and in direct interaction with policymakers. The initiative receives support from Frankfurt Main Finance e. V., the location marketing agency FrankfurtRheinMain, and Deloitte.
Despite Germany being one of the world's largest economies, Diederichs noted that the financial hub within Europe is just one of several. He points out that, globally, none of the European financial hubs rank among the top 5. Yet, the industry holds immense economic weight, as illustrated by a comparison with neighboring France: "The sight deposits of German credit institutions amount to €2.8 trillion, equivalent to the entire gross domestic product of France."
In light of these factors, he called for more support from policymakers to promote the financial hub. The financial community had been surprised by how aggressively French President Emmanuel Macron courted financial service providers following Brexit, while German politics remained relatively reserved. Many service providers had sought new locations within the European Union under regulatory pressure.
The restraint of German politics is believed to have contributed to Frankfurt losing the bid for the European Banking Authority (EBA). The argument that Frankfurt is an attractive location due to its manageable size and relatively high concentration of financial service providers and international institutions does not hold weight in Diederichs's view. He argues that it's desirable for regulatory authorities and other international institutions, such as the green standard-setter ISSB, to be based in the banking metropolis. However, he emphasizes that the convenience of reaching regulators on foot is not relevant for their daily work.
"We assess the financial market differently than the industry," believes Diederichs. Despite Germany being ahead of France in terms of privatization overall, there persists a "privatization-unfriendly mindset" in the financial sector. He attributes this partly to the financial crisis. In the aftermath, it took nearly a decade for German politicians to resume dialogue with representatives from the financial industry. "In France, the situation was undoubtedly different," Diederichs observes.
Diederichs also highlights cultural differences, noting that France has a different tradition of networking between the state and industry. French banks benefit from continued support from their government. This is evident in the career paths of French bank managers, as many of them started in public service. Such backgrounds prove helpful, especially in times of crisis when orchestrating support measures.
Securitization not solely a banking issue
Regarding the promotion of the financial hub, Diederichs also suggests that the industry's communication has room for improvement. He criticizes the portrayal of the revival of the securitization market as solely a banking issue. Instead, he emphasizes that it's a societal matter as it creates the conditions necessary to drive forward the green transformation. Given the immense financing needs and the regulatory constraints on banks in lending, a vibrant securitization market is essential for Germany to achieve its climate goals.