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Focus: Frankfurt - A growing centre with European and global reach

by OMFIF Analysis

Focus: Frankfurt - A growing centre with European and global reach

This second report in the OMFIF series on European financial centres after the UK European Union vote goes beyond the issue of financial innovation and capital markets discussed in September’s Luxembourg analysis.

We focus on the crucial juxtaposition of the real economy and Europe’s financial sector, giving Frankfurt and the surrounding Rhine-Main area – known as the FrankfurtRheinMain region – a pivotal place in the overall European economy.

As the heart of European manufacturing, Germany provides traditional emphasis on financing larger and smaller businesses, including the legendary Mittelstand category of smaller, often familyowned firms that form the country’s economic backbone. Frankfurt is a nexus for this interplay between finance and industry, as well as an important regulatory, financial and monetary policymaking centre. The city is home to the European Central Bank and the Deutsche Bundesbank, the ECB’s most important and often most vocal shareholder.

Frankfurt and its hinterland provide the crucible for fast-developing financial technology companies, as well as expanding foreign investment and trade that have been one of the mainsprings of German growth since the 19th century. Benefiting from roots in German industry, Frankfurt has global reach, seen in the international activities of Deutsche Börse and the growing role of renminbi clearing and settlement, as well as the city’s experience in connecting start-up companies to European and international investors.

The potential for interlinked EU projects such as the Commission’s strategic investment plan and capital markets union points to further possible extension of Frankfurt’s role in raising funds and mobilising capital. Brexit vicissitudes provide opportunities for Frankfurt expansion, not least its ability to attract international financial institutions and regulatory bodies, including those which may move from London. This is not a zero sum game; there is plenty of room for growth- and revenue-generating co-operation between Frankfurt and London, as the planned merger of Deutsche Börse and the London Stock Exchange (whatever the post-UK-referendum uncertainties) demonstrates.

Germany and the Frankfurt region have a vital position bridging the needs of European households and businesses and the exigencies of dynamic banking and financial markets. In the new structures emerging after the UK vote, Frankfurt looks set to forge a still more important European path.

For the pdf of the Focus report please click here