“Frankfurt can benefit from Britain leaving the EU,” says Michael Kemmer, the Association of German Banks’ general manager. “As the seat of important European financial-sector institutions, embedded in a strong and highly innovative economy with a stable legal framework, Frankfurt is virtually predestined to be London’s continental EU partner.” Mr Kemmer is convinced that Germany and Britain will remain major trade partners even after Brexit and that London will retain its status as a global financial centre. He believes that, at the same time, Frankfurt can gain in importance as the UK’s continental partner. To allow this, a firm political commitment to Frankfurt as a financial centre is required in particular. “We need a clear signal that Frankfurt, Germany’s financial centre, is ready to take on board services and service providers from the UK. This will create new jobs and economic growth,” Mr Kemmer stresses. To strengthen Frankfurt as a financial centre in the face of European competition, national regulatory obstacles should also be identified and removed, he adds. In the Association of German Banks’ view, this means for example: •allowing companies to prepare individual financial statements solely in accordance with the International Financial Reporting Standards (IFRSs). Unlike in many other EU countries, German accounting law continues to call for additional presentation of individual financial statements complying with the provisions of the German Commercial Code (HGB); •bringing the law governing general terms and conditions of business into line with customary European standards. Germany is one of the few countries whose general terms and conditions of business apply not only to consumers but also to commercial transactions. The consequence is that certain transactions are already conducted today in other European countries rather than in Germany so as to avoid any legal disputes. •abolishing the ban on the tax deductibility of the bank levy in Germany. Like in other European countries, the bank levy should be tax-deductible as an operating expense.

1. Frankfurt as a financial centre and
Brexit
View of the Association of German Banks
Michael Kemmer
Frankfurt am Main
18 August 2016

2. ©BundesverbanddeutscherBankene.V.
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 The private banks and the
Association of German
Banks regret the result
 Despite all the
uncertainty, we assume
Brexit will happen
A divided country
Clear majority for Remain in
- Scotland (62%) and
- Northern Ireland (56%)
Around 60% of Londoners also voted Remain
Brexit voters are grey-haired
18-24 year olds: 75% Remain
25-49 year olds: 56% Remain
50-64 year olds: 44% Remain
over 65: 39% Remain
Majority for Remain Majority for Leave

3. ©BundesverbanddeutscherBankene.V.
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Association of German Banks’ position
Possible exit date
No quick solutions;
considerable
uncertainty in the
next few years
Life after Brexit as
yet unclear:
privileged access
to EU likely, but
without full
passporting
 Keep EU/UK relations as close as possible
 Ensure a level playing field and reciprocity
 Make the Frankfurt financial centre
London’s continental EU partner

4. ©BundesverbanddeutscherBankene.V.
Frankfurt highly suitable as an EU hub
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Financial centre
of the eurozone
 Frankfurt is the banking and financial centre of the eurozone
 Efficient stock market, which will become even more
important after merging with the LSE
 Centre of fintech innovation; bridge to startup capital Berlin
Banking
supervision
 Frankfurt is the seat of the European Central Bank, the SSM
and EIOPA and thus the most important centre of monetary
and financial policy in the European Union
Location factors
 Major centre of financial research and training
 Good transport and digitalisation infrastructure
 Cost of living comparatively low by European standards; office
space also comparatively inexpensive and readily available
Sound legal
environment
 Stable political system
 Governed by the rule of law with functioning legal remedies
 Legal certainty and smoothly functioning administration
Dispute
resolution in
labour law
 Dispute resolution is swift, inexpensive and predictable
 No significant “suing culture”
 Codetermination does not hamper managerial decision-making

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Political commitment
RegulationAdministration
 Clear commitment on the part of the federal and
regional governments, the city of Frankfurt and
the financial industry to promote Frankfurt as
the financial centre of the European Union
 Removal of “home-grown” regulatory
obstacles
 Administrative support for Frankfurt as a
financial centre
Prerequisites for Frankfurt’s positioning

6. ©BundesverbanddeutscherBankene.V.
Five proposals for administrative support of
Frankfurt as a financial centre
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EBA  Relocate the European Banking Authority (EBA) to Frankfurt
Language
 BaFin, the Bundesbank, and also regional and local authorities
should offer information and handle applications in English;
establish a network of dedicated contact persons
 Relevant German laws (such as the German Banking Act)
should be available in English
 More administrative processes should be conducted in English
Supervisors
 Ensure BaFin has sufficient personnel resources to deal
quickly and unbureaucratically with applications for
permission to provide or expand financial services
Location factors
 Make it easier to set up new businesses and relocate
international staff
Fintechs  Strengthen collaboration between the fintech centres of
Frankfurt and Berlin

7. ©BundesverbanddeutscherBankene.V.
Five proposals for removing home-grown
regulatory obstacles
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Legislation
governing terms
and conditions
of business
 Further enhance personal autonomy by lifting the applicability
of general business terms and conditions to commercial
transactions
Bank levy
 Remove the ban on the tax deductibility of the bank levy (in
place since 2010 in Germany and since 2016 for contributions
to the Single Resolution Fund)
Financial
transaction tax
 Abandon plans to introduce a financial transaction tax at
global, European or German level
Accounting
 Allow companies to prepare individual financial statements in
accordance with IFRSs only, without the need to prepare
German GAAP accounts as well
Venture capital  Ensure transparent taxation of private equity investors

8. ©BundesverbanddeutscherBankene.V.
Comparison of London, Frankfurt and Paris
A brief overview
London Frankfurt Paris
Population
(2014; in million)
8.5 0.7 2.2
Foreign banks as a percentage of
all banks
(%; ECB definition, as at end of 2015)
51.1 37.9 28.4
Financial centre ranking
(GFCI1, 2016)
1 18 32
Ease of Doing Business Index
(country-specific, 2015)
6 15 27
Tax burden ranking
(country-specific, 2015)
15 72 87
Market value of stock exchanges
(market capitalisation in €bn, 2015)
133 15.7 3.34
Share turnover
(EOB trades in €bn, 2015)
2,4033 1,410 1,8824
ETF turnover
(in €bn, 2015)
388.33 198.1 162.44
Sources: Helaba, World Bank, WFE, Z/Yen
1 The Global Financial Centres Index (GFCI) of the Z/Yen think tank ranks the competitiveness of financial centres based on indices analysing the business environment, development of the financial sector,
infrastructure, human capital and reputation and also on responses to a survey of financial experts.
2 The World Bank’s Ease of Doing Business Index ranks economies from 1 to 189 on their ease of doing business. A high ranking means the regulatory environment is more conducive to starting and operating a local
firm.
3 LSE with Borsa Italiana
4 Euronext, which operates in Amsterdam, Brussels, Lisbon and Paris
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