JUVE Law Firm of the year

Banking and Finance

Investment pressure and technological innovations keep market moving

To begin with, it looked like it would be a successful year for the financial industry. In spite of all the problems, such as the increasingly dramatic woes in the Italian banking sector, or the ongoing, self-inflicted crisis at Deutsche Bank, the debt issues and credit markets developed well overall. A whole host of major issuers even ventured into secondary offerings and IPOs again: the number of IPOs was higher than it has been since 2007, the response of investors exceptionally strong. But after the surprise vote for Brexit, uncertainty set in and the markets noticeably cooled down.

The fact that there is no end in sight to the ECB low-interest policy intensified the pressure to invest further. As a result, even assets and securities that were considered hard to sell just a few years ago are finding buyers – quickly and at comparably high prices. This was particularly evident in what is one of the last major problem areas in the German banking sector left over from the financial downturn almost ten years ago: when NordLB sold a billion-euro portfolio of partly non-performing ship loans in summer 2016, PE house KKR and a sovereign wealth fund seized the opportunity – the first step by both major investors in plans to build up their own ship finance businesses.

Boundaries increasingly blurred

Even away from this specialist field, the boundaries between banks and other players in the financial sector are becoming increasingly blurred. More funds, for instance, are trying their hand in the market as creditors, thereby turning up the pressure on banks. The fintech sector is also growing in importance and offering a vast range of technology-based services that were traditionally the domain of the financial institutes themselves – from transfers to asset management.

Brexit plays into the hands of financial center Frankfurt

On top of all this, the banks have to battle with the ever stricter requirements of the regulatory authorities. Alongside the leading issue of recent years (equity ratios), the rules regarding risk monitoring, compliance and investor protection are constantly intensifying. Out of necessity, most of the institutes affected have warmed to the idea of responsibility transferring from the Federal Financial Supervisory Authority to the ECB; the European Banking Authority was even praised heavily by the regulatory experts at law firms.

And its importance, like that of Frankfurt as a banking city, is likely to rise in the future. It is almost unimaginable that London will continue to play exactly the same role as a financial metropolis once the UK leaves the EU. As well as Dublin, Paris and Luxembourg, Frankfurt is likely to profit from this, whether because of the relocation of key market players’ European headquarters – for instance after a possible merger of Deutsche Börse with the London Stock Exchange – or simply because of the foreseeable rise in demand for advice.

PfeilJUVE Law Firm of the year