The markets are moving -Report from the 5th Capital Markets Day of Bank Hauck & Aufhäuser in Frankfurt by Thomas Seidel

A fully attended event 5th Capital markets day of bank
Hauck & Aufhäuser  in Frankfurt/Main
(Source: Thomas Seidel)

The semi-annual event of the traditional bank owned by the Chinese Fosun Bank is addressed to independent asset managers. Due to the continuing strong demand for the event, there will be space for more than 270 participants. The central lecture will be given by the President of the Munich ifo Institute, Prof. Dr. Clemens Fuest. He is regarded as one of the most renowned economists in Germany and is also a member of the Council of Economic Experts. His statements on the development and progress of economic activity in Europe are eagerly awaited.

The event will be introduced by Michael Bentlage (CEO Hauck & Aufhäuser). Michael Bentlage can report a positive business development for his company. Following Hauck & Aufhäuser's acquisition of the Luxembourg activities of the former bank Sal. Oppenheim, Bentlage has managed a smooth integration without any fundamental impact on the processes in Luxembourg and Germany. Hauck & Aufhäuser employs around 350 staff in Luxembourg and manages around 80bn euros of assets at various levels of the value chain. All business units operate profitably in their own areas of focus. Hauck & Aufhäuser also sees itself well positioned for the coming year.

Michael Bentlage CEO Hauck & Aufhäuser
(Source: Thomas Seidel)

Global economic activity

Clemens Fuest serves his role as a favourite for the core lecture. In a precisely structured presentation, Fuest deals with currently important economic topics. From the point of view of Fuest and the ifo Institute, the traffic light is clearly yellow. The economic peak at the beginning of 2017 is long over. The economy is experiencing a considerable slowdown. In particular, the "uncertainty indicator", determined by surveys of companies, has risen from 52 to 57.

The Trump administration is trying to keep the US economy at this level until the next presidential election. But the clear turnaround in interest rates and the government deficit, which has risen sharply as a result of massive tax cuts, raise doubts about this plan.

Fuest sees the trade dispute with the US as ambivalent. It is true, that Europe has a trade surplus over the US in goods. But the situation is quite different for services. There the US is in the plus. Last but not least, large US companies are making strong profits in Europe. The trade relationship between the US and China is quite different. The Chinese sell services to the US for 506 billion dollars, while the latter only supply China for 131 billion dollars. This would put the Chinese in a worse position in the trade dispute. They simply run out of goods coming from the US, which they could still impose customs duties on. So it is hoped in Europe that the trade dispute will concentrate on China and the US.

Fuest rightly omits the subject of Brexit. New and sometimes contradictory information, virtually every hour, is not a suitable basis for development forecasts.

Prof. Dr. Clemens Fuerst ifo-Institute Munich
(Source: Thomas Seidel)

Fuest, on the other hand, is right in its choice of Italy. It begins with positive facts. There would be an economic recovery of just under two percent. The labour market is running relatively well. There would be a surplus in the trade and current account balance, as well as a primary surplus of just under two percent. But youth unemployment would be 35 percent, compared to 6 percent in Germany. The national debt has reached a level of 130 percent of the gross national product. The dynamics of export strength are now negative. Worst of all, however, is the decline in labour productivity since 1990, which is still declining compared with other European countries. One of the reasons for this is the high number of family-run companies with a strong traditional approach.

All these shortcomings would be exacerbated by radical political change. What the current government is doing is robbing itself of a better primary surplus. Without enormous growth, however, Italy could no longer hold its own in the long run. The targeted additional debt will not be spent on investments, but on pensions. Investor confidence will be lost. Ultimately, however, the EU cannot change this. The Union is a community of sovereign states that do not really have to adhere to Brussels guidelines. Only the reactions of the markets could perhaps bring the Italian government to a change of course.

The uncertainty is rising
(Source: Thomas Seidel)

Fuest gives concrete advice. Europe must not reward populist blackmail. Other countries would have to protect themselves against a crisis in Italy. Without saying how in detail, this will probably only be possible with equity capital for write-downs on Italian bonds and loans. The EU should enter into a dialogue with Italy and promote initiatives that bring European added value. For example, in migration and security policy, in the expansion of European networks and in research funding.

Fuest assumes, that the EU will remain a community of sovereign states. Under this premise, an overall political concept is needed. Fuest criticises the idea of a Euro zone budget as wrong. There would already be 260 billion euros available in the EU, but not yet called up. In principle, any risk sharing must be accompanied by more market discipline.

Controversial discussion

After this detailed analysis, a panel discussion will take place in which Fuest and Michael Bentlage from Hauck & Aufhäuser, Claus Döring, editor-in-chief of the Börsenzeitung, Prof. Dr. Christoph Schalast from the Frankfurt School of Finance an Management (FSFM), and Christoph Subbe, CEO of Frankfurter Lebensversicherung will take part. The participants engage in a heated discussion. Döring sees the stock market shrinking by 25 percent in one year. Subbe warns of severe volatility in the markets. Schalast regards Germany as the "lame duck" in Europe and foresees a new chancellorship for the coming year. He is also confident that Italy will get its act together again. Bentlage countered Döring, that the markets would not collapse so sharply. He believes that the European banks are now well positioned. The regulators had developed refined and expanded mechanisms for monitoring them. The poor performance of some German banks can be traced back to the regulatory system, which affects their equity capital and business models. Verbal fights are being fought over the problem of Italy. Döring warns, that the exposure of banks in Italy is not properly taken into account in the bank stress tests. Schalast, who is a self-confessed Italian fan, at least for groovy clothes and shoes, believes in an elegant solution to the Italian problem. While Döring considers the ECB's possibilities regarding Italy to be exhausted, Fuest believes the big question is how the financial markets would react and what liquidity problems this would lead to. Subbe doesn't believe in the big Italian crash that nobody really wants to see.

Panel discussion (f.l.t.r.: Michael Bentlage, Clemens Fuest, Claus Döring,
Christoph Schalast, Christoph Subbe

In another issue Bentlage complains about the handling of German cutting-edge technology. That would be tantamount to selling out knowledge and human resources. Schalast warns, that Germany is sealing itself off. Bentlage insists, that competitiveness suffers. However, Döring does not regard technologies as a national good. Fuest points out, that now, after the globalisation of capital, the globalisation of goods is coming, which is much more pervasive. He warns, that the key to the future is the ability to set standards. This is the only way to ensure, that the company's own products will be able to penetrate the markets in the future.

In the event, which lasted barely three hours, more substantial statements were made than in some major events of the financial sector, which last several days. Hauck & Aufhäuser has managed to bring important and interesting facts for future economic events to the point for a closed audience. We will continue to report on this exclusively.

Back to normality -A report from the Frankfurt European Banking Congress- by Thomas Seidel

The Alte Oper as venue of the European Banking Congress
There were more policemen than protesters at the location
(Source: Thomas Seidel)

For a whole week, bankers from all over Europe have been meeting and exchanging views on various topics in the financial sector. The motto was: "Back to normality". Last Friday, the closing event took place at the Alte Oper in Frankfurt. A very small group of protesters in front of the meeting place made the lack of excitement about finance business clear. Inside, there was also a lack of ideas.

Europe, according to Christian Sewing of Deutsche Bank in his opening speech, is playing with its future. The European Union, unlike the United States with its large domestic market, is still too fragmented. There are about 27 markets with e.g. different consumer protection rules. Sewing claimed to have an European agenda again. Alternatives to American and Chinese technology platforms must be developed. At the same time, one must remain attractive for young people, both in terms of wages and opportunities for entrepreneurship. All this, however, presupposes a larger single European market.

Christian Sewing CEO Deutsche Bank
(Source: Thomas Seidel)

Risk Management and Digitalization

In a panel discussion, Sewing focuses on the banks' actual core competence, their ability to manage risk. The banks should also make this ability available to their customers. The banking industry in Europe continues to be the catalyst for economic growth by financing it. Sewing is thus alluding to the dominance of banks in industrial finance in Europe. Sewing demands a new mentality in the financial business, but does not say in which direction the current mentality should change.

Commerzbank CEO Martin Zielke's permanent statement is digitalization. He considers that the banking sector is over-regulated on the one hand, but under-digitalised on the other hand. Today, bankers would have to become technologists. For example, cloud technology in Europe is lagging far behind availability in the USA. In a hazy remark Zielke mentioned people at Commerzbank having a number of good ideas internally. That sounds exciting at first. However, as long as one don't get ideas out there and try to do business with them, such ideas won't remain profitable. Lack of profitability is known to be one of the main problems of the self-proclaimed Mittelstandsbank. According to Zielke, it is not to be expected that the ECB (European Central Bank) will return to a monetary policy like before the financial crisis. This can only mean, that there should again be interest margins with which banks can earn money comfortably without having to be truly innovative.

Mario Draghi's last appearance as President of the European Central Bank at this annual event was insubstantial. He could have saved himself that. The European Central Bank's-metronome had nothing new to say. The economic statements on the overall situation of the economy are well known. The ECB's position and conditions are unlikely to change.

Core competence of the banks

On the other hand, the remarks of Jean Lemierre, the chairman of the supervisory board of the French Banque Nationale de Paris (BNP), who looks only outwardly old-fashioned, seem surprisingly refreshing. He advises for example, to stop dreaming about Anglo-Saxon pension funds in Europe. Europe has a life insurance system. Nevertheless, the banking and capital market union must move closer together. Contrary to Zielke's views, banks are not technology companies. He, like Sewing, sees risk management as the core competence of banks and for that is no need for any special technology. Rather banks should listen to their customers' wishes and meet their needs.

Much has already been achieved since the financial crisis, but Lemierre believes that only half the way has been covered so far. It is clear that new structures have to be created.

Of course, it is still unclear how the markets will realign themselves because of Brexit. An important problem that has not yet been solved, is the ongoing fragmentation of liquidity. The monetary policy of the central bank is made for the productive industry and not for the banks. It is already clear that banks will lose a sense of risk because of the large amount of liquidity.

Mario Draghi President  of the European Central Bank
(Source: Thomas Seidel)

Technology for the future

A second panel discussion focused on technology in the financial sector. The audience was asked for example, what concrete benefits crypto-currencies would have to them. As it turns out, none benefit is expected to be available for the time being. This is precisely the reason why crypto-currencies are not developing on a broad scale. There is no added value for consumers and companies when using them. It becomes clear what the financial sector really needs are standardized processes, that make business processing effective and affordable. What just few people know, is that standards for bank procesing have existed since the 1970s, but in almost 50 years the financial industry has not managed to take advantage of these opportunities. To dream today that in the future processes, such as the very cost-intensive processing of securities- transactions, could be simplified very soon with blockchain technology is not helpful for the industry.

The five-day Euro Finance Week is a mammoth event for the financial sector, which of course has to consider a new content concept. Its declining importance can be seen in the decreasing number of sponsors. At least the most prominent representatives of the industry, who traditionally speak on the last day, have not really had anything new to say in recent years. This reflects the general political paralysis in Europe. Germany has had a torturous year of government, the end of which is not yet in sight. The Brexit is imminent and one has no idea how it will end. 2019 will be a year for many changes in leadership in Europe. In the meantime one cannot see anymore one or the other faces of the official decision-makers. Either there will be a storm blowing a fresh wind through Europe, or the old continent will choke on its muff from rotting compromises.

Too much money is desperately looking for investments -Report from Handelsblatt-Summit on Private Equity- by Thomas Seidel

A panel discussion at the summit
(Source: Thomas Seidel)

Professionally organised by the Handelsblatt, a good 130 participants from the industry gathered at Frankfurt's Jumeirah Hotel, directly behind the Palais Thurn & Taxis for their annual conference. People like to see themselves as a driving force to help companies on their feet and drive innovations forward. But private equity is also always a tough selection process. What is no good is discarded. But it is precisely this demand for quality that the industry sees as endangered by too much money on the market.

Holger Schmieding, Chief Economist at Berenberg Bank, gave all participants an economic overview. He sees no recession for the coming year. In some sectors there would be a need for correction, but this would not turn into a general crisis. The global trade disputes instigated by the USA would be directed primarily against China. Important circles in the USA do not wish to have a dispute with Europe. Nevertheless, side effects of the US-China dispute would of course also affect Europe.

Holger Schmieding, chief economist Berenberg Bank
(Source: Thomas Seidel)

The United Kingdom should have four times more interest in a regulated outcome of the Brexit dispute than the European Union. Otherwise, a hard Brexit would harm Britain in particular. Italy simply has the wrong government at the moment. If at all, only the markets could discipline this government. Schmieding sees a problem rather in the oil prices. For the dollar, new interest rate hikes are expected from the FED in 2019. Overall, however, economic growth should improve again in the second half of 2019.

Dr. Levin Holle, German Ministry of Finance
(Source: Thomas Seidel)

Dr. Levin Holle from the German Ministry of Finance found words of softness. Yes, the financing of the real economy is important. Yes, better framework conditions for an EU capital market must be created. Yes, digitaisation is right at the top of the agenda because China is already seen as the world leader in this area. Yes, the Eurozone must be strengthened. Yes, structural reforms are important in some EU countries. Yes, the location Germany and especially Frankfurt must be supported more strongly. Yes, Germany needs to develop an equity culture.

Only Mr Levin, it was all like that a year ago. All this is well known. But nothing happened in Berlin!

A first panel discussion about the industry drew the following picture: Private equity would be regarded as a reliable long-term investor. This consideration is increasing more and more in Germany. During the last financial crisis, companies financed by private equity would have performed better and created more jobs than those classically financed.

But there are still many stumbling blocks for venture capital in Germany. The main reasons are the German mentality, supervisory rules would make it difficult, for example, for the pension fund to invest in venture capital and there is a lack of infrastructure such as in 5G. In Germany, one could even take the reforming France as an example. The government sees the lack of data security ("from a German perspective" editor's note) as a major obstacle to digitaisation.

Surprisingly, the Chinese savings rate would be 40 percent, so economists are not very concerned about the Chinese debt. It is expected that the French economy will overtake the Germans in the next decade. 

There are enormous savings rates and capital, but there is no demand for investment. The recovery of public budgets depends first and foremost on a healthy labour market that produces enough taxpayers to meet public debt. (Editor's note: Such formulations show the coldness of economic thinking). 

Johannes P. Huth, KKR
(Source: Thomas Seidel)

The overall picture is rounded off by individual voices. Johannes R. Huth of KKR (Kohlberg Kravis Roberts & Co, a large New York investment company) sees London-based private equity firms looking for opportunities to work legally in the EU. This does not have to go hand in hand with a move to Europe. As far as investments in the UK were concerned, the profit expectations had already had to be revised downwards. London has become less attractive as a location for future talent in the financial sector. Huth does not see a talent and brain drain, but the universities in England have to adapt more to the needs of students than they have done so far.

Hermann Dambach of Oaktree Capital has something positive to say about the new technologies. Their application leads to a decrease in manual tasks and a simultaneous increase in reporting, which in turn creates more time for the actual activities.

The industry sees itself in a positive development. However, there is concern about the large amount of money in circulation. The industry considers this to be dangerous and harmful. Ultimately, therefore, investments would be made in companies and areas that could hardly be profitable. This would destroy capital that could have been used more successfully elsewhere.

Mario Draghi clearly tells Target 2 critics his opinion -Report from the EZB-press-conference before summerbreak 2018- by Thomas Seidel

EZB-president Mario Draghi (center) announces decisions of the EZB-council
(Source: Thomas Seidel)

Before the summer break, there are no sensations in terms of Euro. The excitement of the hour take place especially on the other side of the Atlantic. However, a careless question about to the critics of the Target 2 balances, leads to cut someone short.

In its last session before this year's summer break, the ECB actually decided not to decide. In any case, the central bank interest rates and the terms of the extraordinary purchase program have remained unchanged. One did not expect anything else. The economic basis for this non-decision has not changed either. The key figures for overall economic development in the euro area have largely remained the same. Sustained economic growth, declining unemployment and at least non-increasing government costs in the social sector, as well as a moderate but not exactly definable inflation represent by and large the current situation. Ireland, Portugal, Spain and Greece are on a positive path, only the unclear development in Italy gives reason for thought.

The shimmering heat fills the air at Frankfurt am Main
View at the new Henninger Tower from the EZB building
(Source: Thomas Seidel)

With so much summery sunshine in Europe, the discussion is therefore more focused on secondary locations. One of them is the current trade dispute that the US has not only instigated with Europe. After all, according to Mario Draghi, the negotiations are a good sign for multilateral talks. The Governing Council do see a certain weakening in the extraordinary export growth of recent years. However, other indicators such as investment and private consumption would continue to show positive development.

Given a certain tiredness at 37 degrees Celsius summer heat outside the ECB press center, a request due to the German permanent critics of Target 2 balances acts, first seems to be a gap filler for a lame press conference. But Mario Draghi takes up this topic about constantly nagging critics on the German Target 2 balances to put someone in his place. First, Draghi explains the situation. Target is a payment system and every central bank system needs a system to handle transactions. Such a system, however, poses no risk in itself. The remaining high balances in some of the central banks of the euro system are mainly caused by the purchase program of the ECB itself. Then Draghi concludes with the remark, that those criticising the target balances, are people who do not like the Euro itself.

Conclusion

Certainly in Germany the criticism of the euro will not be silenced. The longing for the "good old German Mark" is just as unreal as the desire many British Brexit advocates for the "good old imperial times". Both will not come again. Other Europeans, of course, should refrain from any criticism of the Euro. Remember, no one at the end of the 1990s was ready at last to make faster swaps of their old useless national currencies, than the Belgians, French and above all the Italians.

The ongoing emergency in political decision-making puts Europe at risk -Report from 1st Forum Europe- by Thomas Seidel

Conference in a new format: Some venues are switched via video. An enormes
increase in outreach.
(Source: Corporate Group Maleki)

In this times when political Europe is becoming more and more divisive, the financial industry is trying to save from common European projects what can be saved. To support this process, a new format is being created, the conference Future Europe. The Maleki Corporate Group has organized a simultaneous conference. Participants at several European places were also able to make their contributions in Frankfurt, Amsterdam, Paris and London. The forum, with top class participants at all locations, successfully completed its entry. The event is supposed to be continued every six months.

The welcome speach was held by Dr. Andreas Dombret, until recently board member of the Deutsche Bundesbank, to all participants. This format would come at the right time. What started on European initiatives for a common financial market must be brought to an end. Thus, after the launch of the banking union, now capital market union must be addressed. It should be decided whether this should happen with or without Great Britain. Dombret cautiously points out the need to share liabilities in Europe as well.

Dr. Andreas Dombret adresses to the audiance
(Source: Thomas Seidel)

Via a recorded speech Peter Praet, chief economist of the European Central Bank (ECB), warned that the banks' traditionally national ties were another risk factor. This would hamper the creation of a true common financial market in Europe. It is urgent to find a European solution for a guarantee of customer deposits. In the event of a bank collapse, it would be unavoidable in the future to involve the taxpayer as an indirect guarantor.

Financing Europe's economy

After these speeches, the first panel will start, titled "Financing the EU Economy". Philippe Oddo, head of the French ODDO Bank, which not long ago bought up the traditional German BHF Bank from Deutsche Bank's portfolio, justified his commitment to gaining expertise in the German market. Oddo believes that the joint potential of France and Germany can be increased if the employees from both countries can be motivated to work together.

Oddo considers the German banking system as very strong and effective. This is mainly because of the savings banks and cooperative banks. The reason for the traditional capital market abstinence of the Germans sees Oddo in the timidity against debt financing and poses at the same time the question, whether the middle sized companies are really in need of a capital market. In France, this topic is being considered much more open. Oddo points out that between 2007 and today, the volume of the capital market in Europe has shrunk by 40 percent, while in the same period in the US an increase of 130 percent has taken place.

The Frankfurt panel, left to right: Gerhard Schröck, Philippe Oddo,
Stefan Collignon, Michael Rüdiger, Joachim Würmeling
(Quelle: Thomas Seidel)

Like Peter Praet, Oddo sees the lack of a deposit insurance solution as the main obstacle to European bank mergers. One can not use German deposits for financing losts in other countries.

The acting Bundesbank executive committee member Prof. Dr. Joachim Würmeling explains that Europe's outward view has always been made by the capital market in London, which is now being swept away by the Brexit for Europe. Würmeling hopes that new technologies will help to create a platform that will enable the dismantling of very fragmented financial markets in Europe. Würmeling still sees the euro as the common European currency in twenty years' time. At the moment there is more than ample liquidity. But the supply of capital to some countries in Europe could become more expensive as a result of Brexit. In this case, Europe must take precautions.

Dr. Gerhard Schröck of Deloitte stresses the importance of a recovery of the European banking industry. After all, corporate finance depended for more than half of bank loans. The establishment of the European Banking Supervision SSM (Single Supervisory Mechanism) as a recognized institution within just four years is a remarkable achievement. Of course, the supervisor must now move more to a qualitative approach based on the US model and not just pursue the quantitative approach as before. This means that financial supervisors need to better understand business models and the complexity of doing business.

The second panel on the same topic also included contributions from the video-linked venues Paris London and Amsterdam.

Lorenzo Bini Smaghi, the prevented ECB president and now chairman of the board of the major French bank Société Generale, emphasizes the need for a European capital market. At the same time he describes the obstacles. There will be no capital market unless there were pan-European banks. But that will not be possible without a European deposit insurance. While in the US banks get bigger and bigger, there are too many small-scale banks in Europe. For all this, Germany and France should look ahead together and be oriented towards the USA. Then it needs a schedule that one work through step by step.

Crossing borders: Roland Boeckhout Amsterdam above left.,
Lorenzo Bini Smaghi Paris below leftl., Minouche Shafik London above right,
Andreas Dombret below right
(Source: Thomas Seidel)

The Dutchman Roland Boeckhout, board member of the Dutch ING Bank, is very skeptical about the capital market. Europe simply lacks the knowledge and skills. The skills are still in London. He laments the lack of solidarity in Europe. There is a lack of objectification. At the moment there are a lot of emotions in Europe but no European solutions.

The president of the German banking supervisory authority, Felix Hufeld, is surprised that only a short time ago one had warned about too big banks "to big to fail", but now speaking again of the necessity for globally competitive banks. The problem in Europe is that there is a lot of capital that is looking for profitable investments, but such investments are hardly to find in Europe. Hufeld distinguishes between supervision, which makes a daily work about supervision in detail and the regulation, which he considers more as a political task.

Simultaneously in Frankfurt, from left to right: Felxis Hufeld, Andreas Dombret,
Harald Kayser
(Source: Thomas Seidel)

Again and again, the participants discuss the missing European capital market. Harald Keyser, who will shortly head PwC Europe SE in Berlin, also recommends reducing dependence on the London capital market. For this, Europe needs more standardization and harmonization and less competition between locations such as Paris, Amsterdam, Luxembourg and Frankfurt. As a major obstacle, however, Keyser sees the political decision-making emergency.

Strengthening the EURO-Zone

The next panel focuses on strengthening the Eurozone. An introduction will be given by the former Dutch Minister of Finance and Chairman of EURO Group Jeroen Dijsselborn. For him, the most important homework is the completion of banking and capital market union, but also to begin with an improvement in labor markets and pension systems.

From the work in the European Parliament Jakob von Weizsäcker reports. New European projects should prove that they can make a difference step by step. He gives an example of Frontex. Before any financing, it must be clear what effect getting 10,000 more officials at the external borders. But von Weizsäcker fears an end to the European project. In more and more countries, the political orientation is to be only pros or cons of the European Union. The awareness of the commonality is fading.

In the typical Prussian-Wilhelminian style ("the world should adopt the German character") presented by the only governmental member of the German Federal Government Thomas Steffen, State Secretary in the Federal Ministry of Finance. For him, the mayor constraint is currently the unsolved problem of a European deposit insurance. Many other approaches, such as asylum policy, corporate taxation, etc. may also be important, but the unsolved deposit insurance is currently preventing everything in Europs financial markets. But of course, he expects the only solution can be a German model and the repeatedly demanded catharsis of bad loans.

from left to right: Jörg Zeuner, Lüder Gerken, Stefan Collignon, 
Thomas Steffen, Jakob von Weizsäcker
(Source: Thomas Seidel)

The former governor and current professor at the London School of Economics, Lord Mervyn King, first lectures on the lost competitiveness of Southern countries in Europe. They could not compensate by devaluing within the euro. Therefore, there must be an internal devaluation, but this would trigger high unemployment. Alternatively, one could also promote inflation in Germany and the Netherlands, for example. The third possibility would be to carry out transfers in Europe (the German irritant theme par excellence). Anyway, it would inevitably come to that. If one goes along this path without adequately informing the electorate, it would only strengthen the right-wing radical forces. Another problem is the lack of democratic legitimacy. Under no circumstances should politics keep silent about the truth. (Note: Is this a British insight from the Brexit vote?) Lord Mervyn King then alleged with the statement: It is not Great Britain who is leaving the European Union, but the EU is leaving Britain. Finally, King explains the failure of the Brexit advocates. What they did not do, was give a positive justification for remaining in the EU. They only argued with the cost of leaving. But with such a statement you could win no vote. Similarly, the EU should be able to communicate a positive reasoning for Europe.

from left to right: Christian Sewing, Stefan Collignon, Norbert Röttgen
(Source: Thomas Seidel)

Then the concentrated pessimism about Europe spreads in the upcoming debate. It comes to statements such as by the former Italian Prime Minister Enrico Latta, in Europe there is currently either only "no" or „nightmares“. Christina Sewing, the youngest head of Deutsche Bank, sees a lack of negotiable visions for Europe. The German parliamentarian Norbert Röttgen philosophizes that at the end of the post-war period a new epoch has not yet begun. It is not clear which order is now resulting. For a deep disagreement prevail. It would be discussed different value, but one do not know which values will prevail. That's why the role of the EU in the world needs to be redefined, including the issue of migration. The President of the Banque de France Francoise Villeroy de Galhau finally gives a sense of a achieved banking and capital market union. It is about transforming the 400 billion euros of private savings into investment.

Conclusion

Once again, this event has made it clear that the current inability of the European Union to work together in a constructive and collaborative manner is putting the project Europe at an ever faster and more fundamental risk. More than ever, everything seems to be teeters on the brink. Even though the banks seem to be pleading for the completion of the Banking and Capital Markets Union, they are all unable to separate internally from their national action cultures. This is even more true for politics. Already the pro-European fire, which briefly caused the French President Macron to blaze, again only a faint glow. The hope for leadership and assumption of responsibility for Europe by Germany shatters like a striking crystal glass because of an absurd power dispute of a small regional people's party. The forces of perseverance on national priorities are on the rise everywhere, if not already on the march. This is how Europe crumbles itself or is wiped out by global reality.

Nader Maleki established a new conference format
(Source: Thomas Seidel)

The anchor of Europe for 20 years -The European Central Bank is celebrating its 20th anniversary- from Thomas Seidel

The headquarter of the European Central Bank at Frankfurt am Main
(Source: ECB)

It all started on 1st June 1998. The rules agreed in the Maastricht Treaties for the establishment of a European central bank and the introduction of a common currency, the EURO, came into force. For the past twenty years, the common central bank of many European Union countries has at the same time been a rescuer in times of need and a goal, of ongoing sharp criticism. We went out in search for what constitutes this globally unique supranational institution at its core.

Robert Heyes a travel experienced British works in the
payment department. A core function
(Source: Thomas Seidel)

The 1990s brought the world the hitherto most comprehensive reorganization of the post-war world. With the reunification of Germany disappeared the old line of confrontation of the Cold War. Above all, the communication technology made unimaginable rapid progress. Everyone is virtually connected to everyone thanks to the Internet. Today, worldwide logistics quickly deliver any demanded goods to all desired locations. A liberalized finance industry provided almost infinite funding for investment and consumption.

Akuvie Edzave the family is from Togo. Organizing travels
for her colleagues in a polyglot way
(Source: Thomas Seidel)

An economically fragmented nationalist Europe would not have been competitive in the rush of global trade. Reason enough for Europe to unite ever deeper and closer. It started with a monetary and banking union. It should be followed by a tax and social union. At least in economic terms, a kind of United States of Europe. So far only the EURO and the European Central Bank (ECB) have been realized.

Patricia Kern-Endres from Ireland is the
49th employee. Today she is working at
the president office
(Source: Thomas Seidel)

More than just a central bank

This largely unfinished European Union project has imposed a responsibility on the ECB that was not intended for the purpose of a central bank. But of all the European institutions, the ECB is the only one that has the impression to the European people that it really works. You may or may not agree with the decisions of the ECB committees. But if a decision has been made, it will be implemented immediately and effectively. The ECB is not just moving billions of euros. It promotes or slows down the economy, it creates a global competitive framework for the European economy and sometimes also saves its own currency or the dilapidated national budgets of entire member countries. But all this only in the context of their original mission (original Mario Draghi: "within our mandate").

Beverley Standon left Great-Britain 20 years ago
to work at the ECB. Today she is a compliance- officer
(Source: Thomas Seidel)

The ECB was usually taken by surprise by politics a few years ago with the additional task of being the supreme banking regulator in Europe alongside monetary policy. Nobody in the ECB wanted that at the time. Many outside the ECB had and still have doubts as to whether the ECB is thus permanently in a depleting conflict of interest. But the policy had no choice. Very quickly, a competent and effective European banking supervisory authority had to be established from the scratch. To do that at all could only be trusted by the ECB. It is therefore fair to say that the choice of this decision is the largest vote of confidence in the ability of the central bank to date. But ultimately, the project of a European central bank and years later of European banking supervision was successful only because all the staff of the ECB had the competence, the skills and the will to successfully implement both powerful projects.

Conception Alonso is of Portoguese origin, but
grew up in France. She takes care of investments
of the ECB in foreign currencies
(Source: Thomas Seidel)

Only Europe is true

It must have been at the time of the first President of the ECB, Wim Duisenberg, that the employees developed that awareness of being part of this supranational institution, and that, at least for their work, their national origin occasionally takes a back seat. What is the current central bank policy, decide the overall interests of all member countries of the EURO-Community, but indirectly also all countries of the EU. This overall interest must be kept in mind by the ECB, never only by the interests of individual states or smaller groups of states. This is a balancing act, which is not always easy to understand for some large but also small member countries. 

Eva Finkernagel-Eid is one of the longest serving
employees within the ECB. She studied banking
business and multilingual secretary and keeps
contact to the media

Despite severe elemental crises, the ECB has still succeeded in maintaining its share of the European project. Meanwhile, some go so far as to say that should the EURO and the ECB collapse, Europe will fall apart too. That may sound a bit drastic. For the future, however, one should wish the European Central Bank to concentrate only on its very own tasks. Sooner or later, a central bank would be overwhelmed to be the sole anchor for a drifting community of states.

The ECB announces the end of its purchase program -Report from today's ECB pressconference- by Thomas Seidel

Today's press conference took place in the Latvian capital of Riga
(Source: ECB-Webcast Thomas Seidel)

After more than 12 months of a de facto deadlock on monetary policy decisions, the European Central Bank announced today the long-awaited move to phase out the extraordinary buying program by the end of December 2018. Although this step was long expected by the professional public, this decision will lead to some significant changes in the medium term.

To anticipate, the decision to end the extraordinary purchase program comes with a handbrake therefore. As ECB President Mario Draghi told journalists at the press conference, a purchase program has become a standard monetary policy instrument of a central bank and can be re-used at any time. Specifically, after September 2018, the volume of purchases is to be reduced to € 15bn per month and then suspended for the time being from January 2019. All key interest rates remain unchanged until further notice.

ECB-President announces the stop of the purchase program
(Source: ECB-Webcast Thomas Seidel)

However, stopping the purchase program does not mean that the promissory note issuers now have to repay their debts when due. Most issuers would not be able to do that either. Therefore, the ECB in its current resolution formulates, that it will reinvest in the maturing bonds! That's important, because that means issuers pay for a bond that matures by placing a new one. Thus, the stock of purchased bonds at the ECB and thus its balance sheet total from these transactions remains initially unchanged. This applies without further time limit. In any case, one wants to prevent a narrowing of liquidity. In other words, the ECB has just decided not to continue to grow the mountain of purchased bonds!

The reason given by the ECB for its decision is, its essential goal of an inflation rate just under two percent has been achieved. It is currently estimated at 1.9 percent inflation and expects this level to more or less continue until 2020. The economy is recovering, general wage levels are rising and lending to companies and households is showing growth of around three percent.

The new ECB-Vicepresident Luis de Guindos talks about details
(Source: ECB-Webcast Thomas Seidel)

Mario Draghi encounters all sceptic. One would not see a denomination risk with government bonds. The parliamentary election in only one out of 19 countries should not be dramatized. The economic progress made in recent years must not be talked down. The EURO is an irrevocable institution, very strong and is demanded. On discussions that are led against the EURO by some and the view of the German economist Clemens Fuest, there should also be an exit option from the EURO, Mario Draghi is charmingly not replying to even one.

The criticism that the ECB's persistently low interest rates would help to reduce the assets of savers is not being accepted by Draghi. For an investment there would be good profitable alternatives and pension funds would show that even in times of very low interest rates still good alternative returns can be achieved.

The press-conference is being enriched by the questions from journalists
(Source: ECB-Webcast Thomas Seidel)

Effects of changing conditions to the global economy, for example due to customs duties, can not yet be determined at the moment, because some of these measures are not yet in force. Criticism from Italy, in the month of May, the ECB had bought less Italian bond as usual, is being refused by Draghi. In addition to Italy, the purchasing volume of France, Belgium and Austria was also lower than in other months before. Draghi makes it clear, that a conspiracy against Italy would not take place.

The ECB has taken a lot of time with its decision to end the extraordinary purchase program, at least in terms of the timetable compared to the US Federal Reserve System, the local central bank for the US dollar. Ten years after Lehman and in its twentieth year, the ECB's signal is important that in the meantime a certain normality has re-emerged in Europe and the EURO area. How long this normality will last, nobody can foresee. Despite all economic recovery, European politics has not used time or done any of their homework. Instead, the national protectionist forces are increasing. In less than nine months, Brexit is just around the corner. No one knows until today how the English bet will turn out. Likewise, we do not know what the consequences are for the European economy and thus for the decision-making basis of the ECB.

Competition for the future of European capital markets -British simulation games about Brexit- by Thomas Seidel

Discussion at the Frankfurt Finance Summit
(Source: Thomas Seidel)

At the edge of this week Frankfurt Finance Summit, which gathers senior financial industry representatives each year, we took the opportunity to meet British government representative Katherine Braddick for an exclusive and very brief background information on the state of ubiquitous Brexit.

The director of the British Ministry of Finance describes the extent of the work because of Brexit in the British government. For example, her area is over 50 percent burdened with Brexit tasks. Of course one is in the face of such a unique situation in a governmental state of exception. This also applies to the working level at the regulators and central banks between Great Britain and the EU. For example, it is already apparent that there could be problems with contracts with very long cycles (terms of 5 years and longer). At present it is impossible to see how regulators will handle such transactions in the future.

But Brexit has by far not only effects on the financial industry. For many companies affected by the withdrawal decision, this is an essential issue. Above all, British banks are relocating to Europe, where they want to ensure a qualitative continuation of their customer service. Above all, the historical advantage of the British financial industry was the availability of real talents in this industry.

Katherine Braddick (very left)
(Source: Thomas Seidel)

Competition in capital market business

So far, London is the only major capital marketplace in Europe. With Brexit, this market will in future be outside the European Union. We spoke to Mrs. Braddick about the efforts to establish a new European capital market exchange in Luxembourg (we had already reported on it in detail). Obviously such aspirations in the British government are very sporty. One is prepared to compete in the capital market in the future. However, problems arise when business in Luxembourg begins to industrialize, in other words, to approach the UK capital market in terms of volume and transaction numbers.

Getting business contacts at the Frankfurt Finance Summit
(Source: Thomas Seidel)

Shift of focus

With the withdrawal from the European Union, the focus of the whole British economy will certainly shift. During Britain's over forty-year membership of the EU, relations with the formerly colonial Commonwealth of Nations may have been neglected. That will definitely change. In particular, trade with Canada and Australia, and not least the United States, will become increasingly important for Great Britain in the future. It seems that the British Government is willing to turn away from Europe in the future.