New "Strategy" interview on Finascope. After Camille Leca from Euronext last week, Arnaud de Bresson answers our questions a month before the Paris Europlace International Meetings on June 29. The CEO of the association promoting the financial centre details the latest post-Brexit developments. He counts 4000 direct jobs and 120 relocations from London to Paris. According to him, the movement should accelerate thanks to a long-term strategy that is bearing fruit.
What is the situation of the Paris stock market five months after the Brexit?
I repeat this every time. We are not happy about the Brexit, which is not good news for Europe. Nevertheless, it is clear that it is an accelerating factor for the Paris financial centre. The momentum started four or five years ago, particularly since the election of Emmanuel Macron and the reforms that have been implemented, in terms of the regulatory and tax environment. Paris is turning a corner. The financial centre is becoming more open and international, and even the leader in the European Union in financial matters.
How has Paris become the leader?
Paris has taken the lead in terms of the number of new projects and jobs. In the financial sector, we have 120 projects already completed or underway in Paris and the Ile-de-France region. This represents 4,000 direct jobs moved from London to Paris and a potential of 15,000 additional indirect jobs. This concerns corporate banking and trading, in particular with Bank of America which is developing 400 new positions, JP Morgan which should recruit around 300 additional people in the next 2 or 3 years, or Morgan Stanley which is going to double its teams and Goldman Sachs, whose objective is to increase from 80 to 350 employees in two years.
The movement is a little later in the investment business despite the developments of BlackRock and Schroders. Management teams are moving to Paris, while Luxembourg is attracting legal entities. Citadel and Citadel Securities have just obtained their authorisation from the AMF and the ACPR. I met them in New York in early 2020, just before the borders closed. On 29 June, during the Paris Europlace Financial Meetings, we will welcome these international companies, whether they are banks or investors.
"Some establishments that had chosen to locate in other European cities are changing their minds."
Isn't the range of motion less than you expected?
Some estimates were indeed higher. But, this is just the beginning in our view. And the movement will accelerate with the effective implementation of the Brexit since January 1. It has furthermore been slowed down well by Covid. London is seeing a significant portion of its business move away, both in terms of employment and assets. I would add that some establishments that had chosen to locate in other European cities are changing their minds, as they realise their difficulties in recruiting and are disappointed with their living environment.
The recent London-based think tank New Financial showed that Paris is less attractive as a location for corporate headquarters. What do you think about this?
First of all, it should be noted that this study shows that Paris is the leader in the European Union with a 24 % market share for financial activities, compared with 20 % for Frankfurt, for example. Regarding headquarters, this is a subject that mobilises us and for which we will make proposals in the coming weeks.
Won't the equivalence negotiations between the European Union and the United Kingdom slow down relocation?
For the time being, the European authorities are waiting to see how regulations outside the European Union evolve before going any further. Equivalence is based on the principle of harmonising the rules of the activities concerned. In the case of equality of rules, equivalence can indeed be granted, thus providing players with a kind of passport. It is too early to know whether the London market will evolve towards a regulation that diverges from the one in force in Europe and in which areas. However, it seems very unlikely that equivalence will develop.
"This makes all the difference with Frankfurt, which is more of a traditional banking city, or Luxembourg, which is mainly home to legal entities of asset managers."
What is the financial centre's strategy for further acceleration?
Our long-term strategy was relaunched two years ago with the appointment of Augustin de Romanet, CEO of the ADP Group (Aéroports de Paris) as the new Chairman of Paris Europlace. Our first objective is to consolidate our two major strengths, namely the corporate and investor divisions. This is why it is so important to have the presence of large companies that are clients of international banks and investors and are very active on the capital markets in Paris. When we asked JP Morgan's boss, Jamie Dimon, why he chose Paris to develop the American bank's activities in Europe, he insisted on this point, in addition to the skills he found here and the quality of the infrastructure. This makes all the difference with Frankfurt, which is a city of traditional banks, or Luxembourg, which is mainly home to legal entities and asset managers. We are a business centre that brings together all the players and a true "universal" financial centre.
What about investors?
The investor division includes all categories, i.e. asset managers, institutional investors and insurance companies. Paris is by far the leading insurance centre in continental Europe. The weight of our asset management business as a whole is twice that of Germany. To develop these two areas, we have created two colleges on the Paris Europlace Board. The corporate college is chaired by Xavier Gire, who is Executive Director and Finance Director of EDF. The investor college is chaired by Valérie Baudson, CEO of Amundi.
What is Paris Europlace doing to address climate issues?
These issues are included in our second strategic focus, which consists of accelerating Paris' positioning in the sectors of the future: sustainable finance, innovation and Fintech, and infrastructure financing. In terms of sustainable finance, Paris is already a world leader in SRI, environmental finance and everything that has developed since the COP21 in 2015. In 2015, we organised Climate Finance Day which takes place every year in Paris. In 2017, we created an ad-hoc entity called Finance For Tomorrow, which brings together our most active members in this area. As regards Green Bonds, the Paris financial centre accounts for around 90 billion euros out of the 270 billion issued worldwide.
"Today France has more than 1,000 Fintechs in risk management, sustainable finance, payment systems."
What are the advances in financial innovations?
We have identified a strong dynamism of financial innovation in Paris, with the accelerating development of Fintech. As early as 2008, we created the Finance Innovation Competitiveness Cluster, another branch of Paris Europlace, to bring together these initiatives. Today, France has more than 1,000 fintechs in risk management, sustainable finance and payment systems. And we are gradually catching up with London. We are supporting very fast-growing companies, including unicorns that are starting to appear in these areas, such as Shift Technologies, an insurance fintech.
We are also involved in the financing of infrastructure projects, where France has one of the best ecosystems in the world, with major companies in the energy, environment and transport sectors. We have created Paris Infra Week, which takes place every year in October and focuses on this type of financing. We also attract relocations in this field.
Is the catch-up with London on fintech taking place through in-country developments or departures from London?
Both, but clearly relocations have accelerated from London.
How is Paris Europlace doing?
We are in full development with a total of thirty employees today. I would remind you that we also have a research institute, the Europlace Institute of Finance. Created in 2003, it merged with the Fondation du Risque to create the Institut Bachelier, which coordinates 50 research chairs in Paris. We also created the Emergence fund to finance young innovative companies. It has just reached one billion euros in assets. In the end, we have become a model for the organisation of a financial centre in the world. Our essence is to bring together all the players - issuers, investors, banks and financial intermediaries with the market authorities - to develop together a financial centre that serves the objectives of the sustainable economy and innovation.