Photo credit: Maryna Yazbeck (photo reformatted)
This blog concludes our “Smooth Landing Frankfurt” series. We hope our previous interviews and informational posts have given you a good idea of how employees and companies in the financial sector can prepare for an upcoming relocation to Frankfurt. (Catch up on parts 1, 2 and 3 of Smooth Landing Frankfurt.)
Joining us as an interviewee today is Dr Stefan Brügmann, general counsel at Helaba Landesbank Hessen-Thüringen. Stefan relocated to Frankfurt in 2015 and has been living happily in the city ever since. Stefan sat down with us to talk about the legal and cultural implications of a bank moving to Frankfurt.
EnglishBusiness: From a legal perspective, for a bank considering a move to Frankfurt, what are some of the general advantages to Frankfurt over other locations?
Stefan: Frankfurt is by far the biggest financial centre in continental Europe and it will continue to grow as a continental banking hub. Also, a big advantage for any bank moving to Frankfurt is that some of the country’s regulators are situated in Frankfurt, as well as the European Central Bank (ECB). (To the disappointment of many Frankfurt financial institutions, however, it was decided in November that the European Banking Authority will move to Paris.) But otherwise, most international banks that have a presence in Europe outside London already have a presence in Frankfurt. In that sense, it should be an easy process for banks to use their infrastructure and existing network to expand their Frankfurt presence. Frankfurt is simply the place to be. There is no alternative to Frankfurt within continental Europe.
EnglishBusiness: What are some of the legal hurdles that banks have to overcome when moving here? For example, I know that in order for a bank to hold onto their EU passporting rights, a bank located in London may have to apply for a new banking licence when moving to Frankfurt.
Stefan: Well, new banks will have to apply for a banking licence, yes. This will be more work for banks that are completely new within Europe and that haven’t obtained an EU passport during their time in London. If banks previously had an EU base in London, then moving their EU base to Frankfurt will be an effort, but it shouldn’t be a huge issue. Again, a lot of this hasn’t been clarified yet.
EnglishBusiness: And what would a new application for EU passporting rights possibly look like?
Stefan: Well, depending on their status and who is regulating them, banks will have to apply either to BaFin (the Federal Financial Supervisory Authority) or to the ECB directly. And they will have to use local counsel, that is, find a local legal advisor to help them with the application. But it is a pretty straightforward process, and BaFin is one of the most sophisticated regulatory bodies on the continent. They will be in safe hands.
EnglishBusiness: We heard in the news a few months ago that the Regional Court of Frankfurt will now allow legal proceedings to be in English. What kind of impact do you think that this will have on foreign banks in Frankfurt?
Stefan: I’m not sure whether that will really have a big impact. I think it’s a good decision to allow companies to do that, but most companies that have a presence in Frankfurt would already have German legal counsel. Perhaps, in certain cases, some multinationals might have all of their documents in English. And if they end up being sued in Frankfurt, it would be helpful for them if they don’t have to translate every single document into German and they can speak English, but I do not expect this decision to have a huge impact.
EnglishBusiness: Besides EU passporting, what are some of the other legal hurdles that people might not be prepared for when relocating to Frankfurt?
Stefan: Well, first of all, I don’t think many companies will move their entire operations from London to Frankfurt. It’s the European-focused offices that are moving. At the moment, banks are leaving UK-related business in London. They are also leaving the capital market business in London. That business needs the strength of the London financial market, which is much stronger than the Frankfurt market. And all other business dealings with clients in the EU should also be moved within the EU, so you don’t have cross-border issues there. Either way, this means they’ll have to get used to having two headquarters and managing operations across jurisdictions. Once the UK has left the EU, cross-border trade and transactions might become far more difficult. But we don’t know whether that will be the case yet, because we still don’t know what the future regime will look like. However things play out, banks will have to take cross-border concerns into account.
An additional big legal difference between Germany and the UK is the court system. Banks may make use of German courts, which, in my opinion, are home to much more straightforward and cost-effective proceedings than the English courts. So that should be an improvement.
EnglishBusiness: Can you tell me a bit about that?
Stefan: Well, the German fee structure is clearer, and fees end up being much cheaper over here. You’re looking at a fraction of the costs in a German court compared with holding the same proceedings in the UK. Now, of course, banks don’t tend to be in the business of litigation. You don’t want to end up in the courts. But if you do, at least you won’t spend as much money there! And Frankfurt is a very commercially oriented, sophisticated court. You could definitely find yourself in worse courts.
EnglishBusiness: That answers a lot of our legal questions – thank you, Stefan. Now, do you have any other tips for companies or employees of the financial sector looking to move to Frankfurt?
Stefan: Well, my biggest tip would probably be to learn German and to learn how to deal with Germans. It is Germany. It sounds simple, but it’s not always a given. Yes, Frankfurt is probably one of the most international cities, if not THE most international city in Germany. But it’s still in the good old “fatherland”, and if you’re not prepared to learn German and know what it is like to deal with Germans, then you may as well not move here.
EnglishBusiness: Spoken like a true German. What good advice! You’ve studied in London, so you know a thing or two about British culture. Can you tell me a bit more about what it means to “deal with Germans” and how that can sometimes be hard for folks from the UK to learn?
Stefan: The directness of Germans is both proverbial and correct. And you just have to admit that and learn how to handle it. So, something that would be an insult in most other cultures is often just a statement in Germany. And especially for English people, that can be a difficult lesson to learn. It can be hard for them to come to terms with being expected to say directly what they think and what they want. If you try to say something indirectly, you will find yourself being ignored because you have not been clear enough. And if a German says something is “interesting”, well, we think it is interesting, and not wrong.
It’s a very common problem that a German will speak reasonable English but not be used to the cultural nuances of the British. An English speaker might think that they’ve said something clearly to a German, when in fact, the way they have phrased it is clear enough for another British person to understand but not clear enough for a German to understand. Especially if the situation occurs that banks relocate their middle and upper management to Germany and then put these managers in charge of Germans, this could create a lot of cross-cultural misunderstandings among employees.
EnglishBusiness: How should a company prepare itself for that situation, then?
Stefan: Well, either they have to give their employees cultural training or let them be lost in translation. Those really are your only two options.
EnglishBusiness: Well said! Thank you, Stefan.
EnglishBusiness: Finally, a personal question, if you don’t mind. What’s your favourite part about living in Frankfurt?
Stefan: My favourite thing is that you are in the centre of Europe and have the availability to quickly and conveniently reach all places for business and leisure.
Other blogs you might enjoy
- Relocating to Frankfurt: four things banks need for a smooth landing
- “Distance doesn’t equal coldness”: EnglishBusiness speaks with trainer and senior consultant Michael Dawoodjee, MBA
- “It’s easy to live in Frankfurt and to be international”: EnglishBusiness speaks with Dr Gertrud Traud, chief economist and head of research at Helaba