FRANKFURT — While the French have tried to win the hearts of bankers fleeing Brexit, Germans focused on wooing their bosses — and it seems to be paying off.

Germany's skyscraper-filled financial capital is emerging as the front-runner to host bankers relocating from London as the U.K. prepares to exit the EU.

On Thursday, Citigroup became the latest to announce it will move some of its U.K.-based trading operation to Frankfurt, and the German city expects to welcome staff from 20 banks relocating from London by the end of the year, with nine already committed. Banks like the U.K.'s Standard Chartered and Japanese bank Nomura have already decided to make the city their legal base in the EU and Goldman Sachs has leased additional floors at the top of Frankfurt's signature MesseTurm, the city's second-tallest tower. Morgan Stanley will reportedly double its Frankfurt workforce.

"Frankfurt is our first choice for headquartering our EU broker-dealer based on the existing infrastructure, and the people and expertise we already have on the ground," Citigroup's CEO for Europe, Middle East & Africa Jim Cowles wrote in a memo to employees seen by POLITICO.

Authorities in Frankfurt were well-prepared for Brexit.

Paris has rolled out the red carpet, with promises of tax breaks of up to 50 percent designed to lure London's high earners across the channel. "Tired of the fog? Try the frogs!" chirped posters promoting Paris’ business district, La Défense. Frankfurt, on the other hand, is letting numbers do the talking, with the city's marketing arm Frankfurt Main Finance producing listicles setting out "8 reasons to invest in Frankfurt," touting the city as the "only location worldwide with two central banks (ECB and Deutsche Bundesbank)."

“The competency and scope of the regulator play an extremely big role, and that is playing to Frankfurt’s advantage,” said a London-based banker at a large U.S. investment bank, adding that alternative destinations such as Dublin are seen as lacking in size while Paris' ability to court banks may be weaker than its political will to try.

Or as Hubertus Väth, managing director of Frankfurt Main Finance, put it: Hard-nosed bankers are much more impressed by expertise than pomp.

Planning ahead

Authorities in Frankfurt were well-prepared for Brexit.

Although the rest of the world was shell-shocked to find that Britain had voted to leave the EU when they awoke on June 24, 2016, the state of Hessen where Frankfurt is located, put up a website the same day to promote the city as the place to be for U.K.-based banks looking for a new home.

“Preparation allowed us to form clear positions on key Brexit-related issues and thereby boost our credibility,” Väth said, citing, for example, how they zeroed in early on the importance of seemingly technical topics such as the transfer of euro-clearing operations into the eurozone.



Frankfurt's authorities also assumed that decisions to move operations would be made in New York or Tokyo by unsentimental executives with little attachment to a particular European city for its cuisine or nightlife and a focus on the ease of doing business, rather than by staff in London themselves.

“Most questions we have received [from banking clients] are related to the business side,” said Verena Ritter-Doering, a senior associate at the Frankfurt office of Hogan Lovells, a law firm.

Banks are particularly interested in the local financial supervisor, Bafin, and its use of English, she said. Bafin offers briefings to banks mulling relocation in English, backing up the city's claim in promotional material that "English is our 2nd mother tongue." Similar briefings at the regulator in Paris were held in French.

Other frequently asked questions for the regulator include the length of the authorization process and how many managers would have to relocate.



“When it comes to customer business, Frankfurt is where the clients are,” said Michael Horn, a spokesperson for the Hessian minister for European and federal affairs. He noted that Germany accounts for about a quarter of the EU27's GDP, and Frankfurt is strategically located in the center of Europe with all the major European cities within two hours or less of flight from its massive airport.

Now, thanks to Brexit, Frankfurt may be on the cusp of being hip as well as rich.

On July 7, the French government rolled out a package of tax measures squarely aimed at Brexiting banks, including scrapping the top bracket of a payroll tax on financial sector workers. But for now, corporate taxes are lower in Germany (29.7 percent) than in France (33.3 percent), although above that of Ireland (21.5 percent). At least until last year, high earners in Germany were also clearly better off than in either of the other two locations, data from economic research and consultancy institute BAK Basel showed.

Boomtown

Even before Britain’s EU referendum, Frankfurt was booming on the back of the thriving German economy. The city’s skyline is changing beyond recognition and almost a dozen new high-rises are currently in the works.

Markus Kullmann, who is in charge of office leasing at JLL Frankfurt, said 525,000 square meters of office space was leased last year. Projections for take-up this year currently stand at 450,000 square meters more. This equates to space for more than 22,000 additional workers — and that's before you take into account any Brexit influx.

Now, thanks to Brexit, Frankfurt may be on the cusp of being hip as well as rich.

Locals used to living at a relatively slow pace are aghast to notice that they need reservations to get a table at their favorite restaurants and that the New York Times last year declared the emerging bar and club scene "cool," although in keeping with Frankfurt's unassuming style, its edgy bars don't advertise much and "are purposely hidden in courtyards or on upper floors of nondescript buildings," the Times noted.

Despite the city's growing élan and more multifaceted profile, city authorities insisted that they will continue to stress its serious side to Brexiting banks. “Frankfurt is not a mega-city like London or Paris,” said Rainer Waldschmidt, head of the state’s economic development company Hessen Trade & Invest. "We are competing rather in terms of quality than of quantity."

The ambition of this quietly self-confident city of 730,000 people — almost 30 percent of whom are foreigners — is to become a truly European financial center. To get there, according to the London-based investment banker, it doesn't need to "enter into a beauty contest with European capitals but to focus on hard facts."