European Financial Hubs: Focus on Frankfurt

January 9, 2024

Today’s article delves into the meaning of a financial hub city, and it will especially focus on the financial sector of Frankfurt city and its development through the recent years on the financial worldwide map.

A financial centre, or hub, refers to a strategically positioned city characterized by a clustering of top-tier financial institutions, renowned stock exchanges, both public and private banks, trading firms, and major insurance companies. Additionally, such a centre should boast exceptional infrastructure, advanced communication, and commercial systems, as well as a transparent and stable legal and regulatory framework. These cities are sought-after by professionals due to their elevated living standards, abundant growth opportunities, and their pivotal role in the heart of financial activities.

The city of Frankfurt stands as the preeminent financial hub in continental Europe, playing a crucial role in maintaining financial market stability. Boasting a distinctive concentration of European and national supervisory bodies, international banks, insurance companies, and legal practitioners, Frankfurt’s financial landscape is characterized by a robust network. The financial hub hosts an impressive array, including 202 banks (comprising 40 domestic banks, 162 international banks, and 33 representative offices), 7,900 financial services companies, and investment funds, along with significant branches of globally recognized consulting agencies, law firms, and auditing companies.

Germany features several stock exchanges with varying focal points, yet the Frankfurt Stock Exchange stands out as the most pivotal in the country, serving as the headquarters for the Deutsche Börse Group. This group operates globally, with a presence in key international financial centres such as Luxembourg, Prague, London, Zug, New York, Chicago, Hong Kong, Singapore, Beijing, Tokyo, and Sydney.

Within Frankfurt, Deutsche Börse manages the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse FWB), a leading global securities trading centre. Approximately half of its 200 market participants hail from countries beyond Germany. In addition to specialist trading, the fully electronic Xetra trading system ranks among the world’s premier electronic trading platforms, accounting for around 90% the Frankfurt Stock Exchange’s turnover. Frankfurt also serves as the hub for euro clearing for banks outside the Eurozone.

Eurex, the leading derivatives market in Europe, and Eurex Clearing, with over 175 clearing members in 17 countries and a collateral pool of approximately EUR 50 billion, contribute significantly to Frankfurt’s financial prowess. ClearStream, the central securities depository, covers more than 50 markets worldwide, processing over 10 million transactions each month, safeguarding securities totalling more than EUR 13 trillion.

Furthermore, in 2014, Frankfurt established itself as Europe’s first renminbi payment hub, underscoring its global financial significance. The Frankfurt Stock Exchange, known as Frankfurter Wertpapierbörse, is among the world’s largest stock exchanges, boasting a market capitalization of EUR 2 trillion as of September 2023.

Beyond its financial stature, Frankfurt excels in academic, scientific, and research activities, supported by 34 top-tier higher education institutions within a one-hour drive. These institutions focus on fields closely tied to banking, finance, monetary policy, international economics, and insurance systems, providing the city with a competitive edge. With over 100,000 individuals employed in the financial services sector in the Frankfurt/Rhine-Main region, the city’s appeal is further amplified by renowned research centres like the House of Finance at the Goethe University Frankfurt, the Frankfurt School of Finance and Management, the Centre for Financial Studies, and the International Centre for Insurance Regulation.

Frankfurt’s prowess extends to the digital realm, earning it the title of Europe’s digital capital. DE-CIX Frankfurt, the world’s leading Internet Exchange, manages over 5.5 terabits per second of peak traffic, connecting hundreds of Internet service providers across 19 data centres in Frankfurt. The city’s status as a global data centre hub is evident with the presence of industry giants like e-shelter, Equinix, Level 3, KDDI/Telehouse, Global Switch, and Digital Realty, ensuring high availability, redundant systems, and secure banking and financial services data storage throughout the metropolitan area.

Lastly, The Global Financial Centres Index 2023 places Frankfurt as a leading financial market worldwide by being in the 14th place in the ranking, ascending with 3 places compared to the prior year. Simultaneously, Frankfurt ranks 4th place globally on the assessment criteria of being a broad and deep centre for banks and other financial entities.

As for next week’s article, the focus will stay on the European financial hubs and it will present the city of Paris.

 

 

References

Bajpai , P. (2023, December 19). The World’s Leading Financial Cities. Preluat de pe Investopedia: https://www.investopedia.com/articles/investing/091114/worlds-top-financial-cities.asp

Germany Trade & Invest. (2024). Financial Center Frankfurt. Preluat de pe Germany Trade & Invest: https://www.gtai.de/en/invest/industries/services/financial-center-frankfurt-80228

The Global Financial Centres . (2023). The Global Financial Centres Index 34. London : Z/Yen & City of London .

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