11 May 2017

POLITICO: Bundesbank won’t fight to attract Brexiting financial institutions

Germany’s mighty central bank will not join the fight for U.K.-based banks and institutions fleeing London after Brexit and is even ready to offer resources to Frankfurt’s rivals, according to Bundesbank board member Andreas Dombret.

In an interview at the Bundesbank headquarters, whose austere style has turned it into a Frankfurt landmark, Dombret said the German central bank will not be drawn into campaigning for the city nor hand out perks to attract banks to move.

The reason? For the Bundesbank, a stable banking system in Europe trumps the desire to try to attract more banks to a specific location.

“You will not see us with a marketing prospectus, we will not be calling banks, we will not be giving discounts or goodies, we will not allow shell companies,” Dombret said.

The Bundesbank’s stance contrasts with that of German Finance Minister Wolfgang Schäuble, who has not been shy in promoting Frankfurt for banks seeking a new home. Frankfurt, nicknamed Mainhattan for its downtown clustered with skyscrapers next to the Main River, boasts readily available office space and a functioning infrastructure, German officials argue.

But Germany’s top bank supervisor even said the Bundesbank would offer its support in case another European city becomes the clear favorite of financial institutions moving from across the Channel.

“I herewith promise to call my colleague, the head of supervision of that country, and offer him or her resources of the Bundesbank, because it is in everybody’s interests that we don’t have a cliff-edge effect,” Dombret said. “I am enough of a European that to me, the issue of which city hosts [the relocating banks] is of secondary nature.”

Dombret said the Bundesbank also would not lobby for a relocation of the European Banking Authority (EBA) from London to Frankfurt or back the so-called “twin peaks” model pushed by the German government that would see the EBA merge with EIOPA, the European insurance supervisor, which is already in Frankfurt.

Asked if euro-clearing business could stay in London after Brexit, Dombret said “we do not know in which direction the U.K. might change their current rules after Brexit … we have no idea when this issue will actually be tabled in the negotiations, and it could be in a very late stage of negotiations.

“As far as I can see, all clearing houses are in principle able to absorb capacity, but I expect that market participants are watching this very closely. And it is an important issue, because there are very big amounts at stake. So what we need to prevent are cliff effects … The more and the earlier clarity we have would of course be the better.”

Full article on POLITICO

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