Helaba Financial Centre Study: under the Sign of Corona
Oct 21 2020
Frankfurt am Main For the German banking industry, the corona pandemic is a major burdening factor that is likely to be felt soon, adding to existing challenges such as the continuing low interest rates. Credit defaults are expected to increase in Germany at the latest when the obligation to file for insolvency is reinstated at the beginning of 2021. For the German financial sector as a whole, the corona-induced effects should be manageable according to current estimates. In the medium term, however, the risks in the national and international financial system remain high.
Against this background, Helaba is changing its employment forecast for the Frankfurt banking location. This is because the positive employment effect of the brexite is likely to be somewhat more stretched over the forecast period (2020-2022: around 2,000 new jobs) and will no longer more than compensate for the consolidation that has now intensified. Helaba now expects around 62,700 bank employees in Frankfurt by the end of 2022. This is around 2,000 or 3% less than at the time of the pandemic outbreak in early 2020.
Banking sector with special role in this crisis
Thanks to temporary regulatory relief, German institutions were able to expand their capital buffers to better compensate for the burdens of the crisis, which has a stabilising effect on the economy as a whole. Thus, unlike in the global financial crisis, the banking sector is not the cause of the distortions this time. Rather, as the financial engine of an economy, it has a special role to play, supported by economic policy, in preventing liquidity bottlenecks by adjusting credit lines and channelling public aid funds.
In Germany, the support provided by the state is particularly extensive compared with the other major financial centres: the German economic stimulus package (federal and state governments) totals €427 billion and state guarantees have a volume of €827 billion. In contrast, France and the United Kingdom are providing 235 billion euro and 213 billion euro respectively for their economic stimulus packages, while the guarantees there amount to 331 billion euro and 377 billion euro respectively. Further measures or prolongations of existing aid have been announced. In addition to the national recovery packages, there is also supranational support, mainly in the form of the EU reconstruction fund (€ 750 billion). Furthermore, the European Central Bank (ECB) is extremely active with numerous measures, especially to provide liquidity.
Brexite effect: around 2,000 new jobs by the end of 2022
Meanwhile, the brexite-related restructuring is continuing: as the transition period draws to a close at the end of the year, the process adjustments in the Frankfurt brexite banks are likely to become increasingly concrete and the need for qualified local staff will increase. After the ECB’s banking supervisory authority had recently emphasised once again that the brexite banks should really provide their newly established or expanded locations with sufficient staff capacities, they have probably become active accordingly. In doing so, they must have made their preparations by the end of 2020 to the extent that they will be able to continue to operate in the event of a no deal brexit and without a comprehensive equivalence decision.
The complete financial centre study can be found here as a PDF file or on the Helaba website.