Die Zeit, 14 February 2002

Blissfully happy Leading bank managers leave Frankfurt am Main.

All the same, the city's finance sector keeps growing

By Marc Brost, Robert von Heusinger, John F. Jungclaussen und Marcus Rohwetter


... the fear that Frankfurt is drying up as a financial centre is simply the fear of losing status -- the anxiety that in future even fewer major strategic decisions will be made in Frankfurt. That is understandable given the changes in the three big banks that used to be the proud symbol of Frankfurt high finance. Dresdner Bank belongs to Allianz and is run from Munich. In the process of development into an international finance house, Deutsche Bank transferred responsibility for investment business to London and New York six years ago. Finally, Commerzbank is considered too small to survive on its own for long. This does not hurt Frankfurt's reputation as a financial centre -- that is determined by the volume and nature of daily business, not the number of head offices. Most of the major investment banks still have their main offices somewhere else than London, after all. And Washington is not the centre of the money universe -- even if the mighty US Federal Reserve Bank is located there.

In any case, there is no true competition between Frankfurt and London. They tend to cooperate. This is confirmed by a research team of economic geographers led by Professor Peter Taylor of Loughborough University. The location of a company's head office has long since ceased to have much significance at the international level. It is far more important to link branches in various countries and cities into a global network. The better the network is functioning, the easier it is for offices to feed one another contracts.

There's still rather a shortage of that in Frankfurt. The researchers looked at how closely bank offices are linked to one another in different cities. Complicated calculations yielded the following conclusion: London companies are the best networked. Then comes New York. Frankfurt -- as the top German city -- is at No. 7.

Skills are shifted this way and that in the global finance network, to the benefit of one city today, another city tomorrow. The investment banks JP Morgan and Salomon Smith Barney had moved their entire trading departments for Europe to London after the single European currency was first introduced, but since then have moved some operations back to Frankfurt. Goldman Sachs contemplates the economies of the Euro member states from the Messeturm in Frankfurt, Morgan Stanley from the City of London. Deutsche Bank, for its part, has distributed its stocks analysts between the two cities.

Frankfurt is only one of the world's many financial centres. The way it develops depends on people and their ideas. A small centre can succeed on its own terms too. Take Stuttgart, where stockbroker Peter Bruker recognised the growing importance of warrants at the end of the 1980s. Together with Citibank, he turned the small regional stock exchange into Germany's biggest marketplace for stock purchase warrants -- long before Frankfurt, by the way, from where Citibank had influenced the stock market in Stuttgart. Which also shows that bank head offices need not be on the spot -- as people like to insist -- in order to strengthen a financial centre.



© 2002 Die Zeit