Paris, Frankfort The French head of state also took his time for the inauguration of JP Morgan’s new trading floor: Last June, Emmanuel Macron welcomed around 100 employees of the major US bank who had previously handled European trading in bonds and derivatives from London. Your new place of work: the noble Place Vendôme in the heart of Paris.
JP Morgan CEO Jamie Dimon has declared the branch the bank’s “trading hub” in the European Union. Macron expressed the expectation that Paris would become “the number one financial center in Europe”. The President’s optimism is justified: At least in trading, the French capital is likely to assert itself against its major competitor Frankfurt am Main in the struggle for EU business after Brexit. After all, anyone who wants to conduct financial transactions in the European Union (EU) can no longer do so unhindered from the hitherto most important European financial center, London, since Great Britain has left the EU. Instead, they have to look for another location.
“Paris is currently ahead of cities like Frankfurt or Amsterdam in terms of trade,” says Christina Bannier, Professor of Banking and Finance at the University of Giessen. Volker Brühl, Managing Director of the Center for Financial Studies at Frankfurt’s Goethe University, also currently sees Frankfurt behind Paris: “The race has not yet been finally decided, but there is a big trend towards Paris”. A top Frankfurt banker sees it this way: “Paris is well on the way to becoming a trading hotspot in continental Europe.”
Above all, the major American banks, which used London for decades as a gateway to the financial markets on the European continent, have made a clear decision: JP Morgan wants to increase the number of employees from around 250 to 800 by the end of 2022 with its new trading hub in Paris . According to the lobby association Paris Europlace, around 400 traders are now working for Bank of America in the French capital.
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Morgan Stanley boss Emmanuel Goldstein recently announced in an interview with the newspaper “Le Figaro” that some of the activities would be relocated to Paris. “We are creating in France the most important trading platform for commodities in continental Europe,” he said. The US bank wants to double the number of its employees on the Seine by 2023.
First trading, then funds
Goldman Sachs has also expanded its Paris office since the Brexit vote and increased its staff from 100 to 250 employees. And last September, Citigroup also announced that it intends to further strengthen its location in the French metropolis.
“In the context of Brexit, there have been two relocations from London that have contributed to the growth of the Paris financial center,” says Arnaud de Bresson, Managing Director of Paris Europlace. “First the big investment banks with their trading business and now also the funds.”
Since the beginning of the year alone, the Bloomberg news agency has reported on the plans of two large hedge funds to expand their presence in Paris: Millennium Management has rented new premises for up to 100 employees. Exoduspoint Capital Management is awaiting regulatory approval to enter trading after opening a research office in the French capital two years ago.
As a result of Brexit, some bank business has shifted from London to Paris.
(Photo: dpa)
After Britain voted to leave the EU in June 2016, a number of financial centers on the continent positioned themselves as alternatives to the City of London. Paris received a lot of support from French politicians, as Macron’s appearance at JP Morgan shows. The government also tried to lure international banks and financial firms with tax breaks.
Political backing strengthens Paris
According to estimates by Paris Europlace, which represents the interests of the financial sector, 4,500 new financial jobs have been created in the French capital since Brexit. “French politicians positioned themselves much more quickly after the Brexit vote and campaigned more actively for units,” says Christina Bannier from the University of Giessen. Especially when it comes to trade, political backing makes a big difference.
For example, the European Banking Authority (Eba) did not move from London to Frankfurt, but to Paris. After Brexit, there was great hope in Frankfurt that the Main metropolis would be awarded the contract for the authority that plans, among other things, the stress tests for banks in the EU.
But instead of Frankfurt, Paris was awarded the contract. Among other things, the French promised Eba rent-free offices. Germany could not keep up with that: “One thing we could not and did not want to offer – unlike some of our competitors: rent-free office space for the Eba,” said the deputy prime minister of Hesse, Tarek Al-Wazir, in 2017. In addition to the Eba, the Europäische Wertpapier has also and market surveillance authority (Esma) is based in the French capital.
There were also some advertising activities on the German side to encourage banks to relocate their business to Frankfurt after Brexit. In 2019, for example, the federal government relaxed the protection against dismissal for bankers. Since then, employers have been able to part with bankers with an annual income of well over 200,000 euros more easily.
Hubertus Väth, Managing Director of the Frankfurt Main Finance financial center initiative, has not yet given up the race for securities trading: Amsterdam, Dublin, Frankfurt and Paris have all won as trading locations. A lot will remain in flux for quite a while. “We always talked about a marathon. Since the majority of the banks have their European headquarters in Frankfurt, there is still every chance of getting a piece of the cake,” says Väth.
Hope for Frankfurt
When it comes to the future topic of sustainable investments, Frankfurt recently won a stage: In November last year, the Main metropolis was awarded the seat of the newly founded International Sustainability Standards Board (ISSB), which is intended to play a key role in the restructuring of the global economy towards more sustainability .
For Bannier, this could strengthen Frankfurt as a location: “There is still a lot of uncertainty when it comes to sustainability. With the ISSB, Frankfurt can set new trends – and thus possibly catch up with Paris again in terms of trade.”
Despite all the competition, Bresson from Paris Europlace wants to avoid the impression that Paris is making a name for itself at the expense of Frankfurt. “In our opinion, we are not in an intra-European competition,” says the managing director of the lobby association. “We have the common goal that the EU is competitive as a financial center.” That is why we are working together with Frankfurt and other European financial centers to accelerate the creation of a capital markets union in the EU.
Despite the growing importance of the locations in Frankfurt and Paris: London will remain one of the most important financial centers in the world even after Brexit. The British capital benefits from an infrastructure of banks, asset managers, consultants and other service providers that has grown over decades. In addition, the City of London benefits from the traditionally close ties with other global trading centers in Asia and America.
More: After Brexit: The gradual erosion of the London financial center