"The global reform of regulation and supervision is of central importance for the competitive ability of the Frankfurt financial centre," stated Lutz Raettig, speaker of the presidency of Frankfurt Main Finance, the starting point of the panel discussion. Today, politics and market participants already make reference to the fact that the location of Frankfurt has a higher value for the stability of markets than any other centre. The proposals of the EU Commission that are now being presented on the reform of the supervision of financial markets is opening up the opportunity to develop the Frankfurt financial centre into an outstanding centre of supervision over the European financial markets," Raettig further said. "The conditions for this are - if only because of the presence of important institutions such as the ECB and CEIOPS - excellent."
In its greeting, the treasurer of the city of Frankfurt, Uwe Becker, stressed that, despite the financial crisis, the city is undertaking "all efforts to remain an attractive location for the financial sector." This does not solely concern transport infrastructure (although the development of the airport is naturally playing a central role), but also concerns so-called "soft factors," such as the offerings of cultural and sport events. A special emphasis is being placed on the development of Frankfurt as a family city. Through flexible childcare and various educational facilities, Frankfurt wants to remain attractive for a young workforce.
Within the framework of his introduction speech, the Hesse Minister-President Roland Koch set up a number of specific demands. Thus, upon the reform of supervision and regulation, a stronger focusing on system stability would have to be ensured and the substantial risk potential would have to be engaged. The appropriate supervision and regulation of all market participants that are relevant to the system are to be ensured.
The European Systemic Risk Board (ESRB) is to be set up at the European Central Bank to concentrate national financial supervision in Frankfurt. In implementing the proposal of the European commission, the European supervisory authority for insurance (CEIOPS) must in the future maintain supervision architecture as an independent institution. In addition, the Minister-President requested that the credit services sector engage in a decided enhancement of lending and that the Frankfurt financial centre engage in collective positioning for a sustainable, commercially stable business in the financial industry.
"The outstanding innovation in future financial market regulation can be macro-economic supervision," stated Dr. Jan Pieter Krahnen, director of the Center for Financial Studies (CFS) at the Goethe University Frankfurt. So that this occurs, the decision must be made to transfer national authority to a collectively operating supranational institution. This also includes the forwarding of data that has so far been monitored solely on a national basis, as for instance the individual financial relationships between large financial institutions. However, Krahnen expressed skepticism as to whether the present international consensus was large enough to jump over just this hurdle. A clear commitment on the part of the most important participants in Germany - banks, supervisory authorities, government and also state government - to this opening of data would be an important indication.
Wolfgang Hartmann, member of the presidency of Frankfurt Main Finance, chairman of the management board of the support association of the Institute for Risk Management and Adjustment and Regulation and, until May 2009, responsible for risk management in the management board of Commerzbank, made specific proposals for improved risk management for banks. Despite the changed regulations on capital adequacy in recent years, the current development has identified weaknesses. For certain market risks, capital adequacy is still too low; this has benefited the erroneous trend. The largest losses for the banks arose at the interface between market risk and credit risk. In the future, this will be important in preventing losses through a better understanding of the credit markets in an interlocked model of counterparty risk and market risk. In the future, credit risks would have to be seen as still stronger both from the market risk perspective and as a counterparty risk upon holding until maturity. Through the difficult situation in the real economy, banks are approaching increasing challenges as an outgrowth of restructuring.
Hans-Dieter Brenner, chairman of the management board of Helaba, had the group consider that Europe was nearly the sole area of applicability for Basel II, and the European economy is therefore particularly suffering from the pro-cyclical effects of this regime. The pro-cyclical effects of accounting would result from the close linkage between the particular supervision law and the strong teeth of the credit services sector. The discussion on the reduction of crisis-strengthening, pro-cyclical effects, which has also been conducted on a political basis, should be continued. Together with regulators, the standard setters in accounting should develop proposals in order to avoid the pro-cyclical effects of accounting standards and net equity requirements. With view to the IFRS, he added that the strong market value orientation of the IFRS in conjunction with quarterly reporting is increasing the volatility of income statements. For external parties, the extent to which any shown result is sustainable or results from temporary valuation effects it is thereby not clearly recognisable. This is complicating market transparency and financial market communication and, on its part, is justifying additional losses of confidence in the market and additional market distortions that accompany them.
In order to word towards the reclaiming of the confidence of the public in the accounts of the financial sector, Albrecht Merz, member of the management board of DZ BANK, suggested a reduction of the complexity in accounting and a harmonisation of the regulations under supervision law. The information to be disclosed by banks would reach a scope and a level of detail that would be difficult to review for specialised experts themselves and could be hardly comprehensibly imparted on the various addressees. In the sense of transparency, in the future, the regulations should be oriented to economic control and place commercial presentation in the foreground.
Roger Müller, chief counsel of Deutsche Börse AG, once again stressed the necessity of sustainably strengthening the stability and integrity of the global derivatives markets. The use of a central counterparty (CCP) for the off-board (over-the-counter, OTC) derivative business can make a substantial contribution to this and effectively reduce systemic risks. As Europe's largest central counterparty, Eurex Clearing supports the efforts of the industry for improved risk management through the introduction of "Eurex Credit Clear" as a central clearinghouse for credit derivatives (credit default swaps). Thus, the risk of contractor loss and the subsequent negative effects on further market participants are particularly reduced.
Professor Dr. Udo Steffens, president and chairman of the management, Frankfurt School of Finance & Management, pleaded for a reorientation of manager training. At least as important as an orientation to improved figures, instruments and processes is an orientation to values. At the same time, he stressed the importance of the training of future risk managers and called for the strengthening of the existing initiatives. With the Institute for Risk Management and Regulation, now in the conception phase, Frankfurt has the opportunity to position itself in the top international league.
In his conclusion, Europe Minister Jörg-Uwe Hahn confidently expressed that the location of Frankfurt will profit from the international reorganisation of the government supervision of banks. He pleaded for prudence and a sense of proportion upon the reorganisation of regulation and supervision; at the European level, for a coordination in terms of content and timing of the implementation of the recent resolutions of the EU committees welcomed by the L'Aquila summit. New financial architecture must become a global matter, and not only a European matter, said Hahn. A clear commitment of the Frankfurt financial centre to a stable financial market that is regulated and supervised adequate for risk is also an important signal for national and international market participants.
