The United Kingdom’s withdrawal from the European Union is an incredible opportunity for continental Europe, including Ireland, to set up a technologically first-class financial hub and to become a highly relevant global player, says Joachim Wuermeling. In a SAFE policy lecture on 15 February 2018, the Member of the Executive Board of Deutsche Bundesbank and newly appointed Member of the SAFE Policy Council presented some preliminary thoughts on the idea of a European digital financial center.
Wuermeling forecasted that London will not be able to maintain its role as Europe’s leading financial center after Brexit. Since no other financial center was in a position to fully replace the City of London, he considers the situation as a good opportunity to look at the suitability of business models from a strategic perspective, and encourages to strive jointly for a globally significant financial market in continental Europe.
While clarifying that the establishment of such a financial center would require an appropriate business environment, a suitable infrastructure, the right financial center development and a good reputation, he noted that the European Union already provides most of these qualities. However, Europe’s potential is spread over various locations across the continent. Furthermore, the financial crisis exacerbated the fragmentation along national borders. Pan-European financial centers would not pool their expertise and resources to face global competition but rather compete with each other.
Wuermeling sees a clear chance in new digital technologies, such as real-time communication, distributed ledger technology, platforms, and co-working to overcome these inefficiencies and to set up a technologically first-class financial hub from the scratch. He acknowledged that the establishment of “a digital finance hub of Europe” is a very ambitious project which requires the impact of many stakeholders, all working together in the same direction. In this context, policymakers could serve as catalysts by bringing the key players together. In his view, the collaboration may be kicked off at the European level where other successful projects as the European single market or the banking union started.