Relaunch of the Belgian finance place afterthe Brexit 24 04 2017.pdf · 2018. 1. 9. · BRU-3510-90017-11 (Belgian Finance Club)_Presentation_vf.pptx 2 • Presentation of the strategic

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Relaunch of the Belgian finance place after the Brexit

24-04-2017


• Presentation of the strategic study

by Grégoire Tondreau, managing partner of Roland Berger Belgium

• Presentation of the conclusions

by Prof. Dr. Bruno Colmant, chairman of the BFC

• Panel discussion lead by Marc Lambrechts, journalist at L'Echo with:

- Luc Bertrand, chairman of Ackermans & van Haaren

- Fabian Vandenreydt, Global Head of Securities Markets, Innotribe & the SWIFT Institute

- Prof. Dr. Bruno Colmant, Executive Board Member de la Banque Degroof Petercam.


AGENDA

Evaluation of competitiveness and recommendation

Brussels, April 24, 2017

The Belgian Finance Place




The Belgian Finance Place (BFP) is characterized by limited risk taking, resulting in lower economic developmentCharacteristics of the Belgian Finance Place (BFP) [2015]

Source: Statbel, Febelfin, Beama, ECB, NBB, ONS Business Register, Roland Berger

1) Size of MFIs in Belgium, represented by their balance sheets

What would be the benefits of shift of capital to riskier assets/investments?

Capitalallocation

Retail banking

dominanceLimited risk

taking

Lowereconomicdevelop-

ment

Fiscal Policy

Dynamicof the BFP

Flow to PE / VC (EUR bn) < 0.5

(80% of GDP)

(39% of GDP)

(0.1% of GDP)

Bank deposits (EUR bn)Asset Managers AuM (EUR bn)

330 160

Allocation of capital

Number of established MFIs

Total size1) of MFIs in Belgium (EUR bn)of which BE MFIs (EUR bn)

112

1,091People employed in MFIs (FTE) 55,000

591

Banking activity

Number of inhabitants (m)Gross Domestic Product (EUR bn)

11.2410

Demographics & Economy


Following Brexit, banks are leaving the UK - They are however looking outside Belgium

"Lloyd’s of London picks Brussels for European base"

Financial Times 30/03/2017

Selected articles

'HSBC could base more staff in Paris in case of ‘Brexit"

The Financial Times 26/06/2016

'Dozens of UK banks and financial firms 'looking at moving to Ireland''

The Guardian 25/12/2016

'Brexit: Banks consider ‘moving London staff to Luxembourg to get access to EU"

The independent 19/10/2016

"Goldman Sachs considers Frankfurt move over Brexit"

Bloomberg 09/11/2016

'UBS Said to Mull Moving London Investment Bankers to Madrid"

Bloomberg 19/01/2017

Observations


Wor

kfor

ceav

ailab

ility

Labo

urco

nditi

ons

Inst

itutio

nal

attra

ctive

ness Established

financial center SP DEFRLU ILNL

Established subsidiaries SPNL

Fiscalpolicies FR SPNL LUDE IL

Wage levels & structure SP DENL ILFR LU

Labour flexibility FR SPNL ILDE LU

Skilled/talented workforce SP DENLLU FRIL

International character SP DE NL LUFR IL

DEFRLU IL

Lacking institutional attractiveness, Brussels is not a EU destination of choice for major (UK) banks & insurers in a Brexit triggered moveKey selection criteria for (UK) banks

Source: Reuters, Bloomberg, Roland Berger

Lloyds of London

EU Ta

rget

Dublin

Banks & Underwriters considering to moveFrankfurt

Madrid

Brussels

Paris

Amsterdam

Luxembourg

Hiscox, Beazley, Fintechs

HSBC

Citigroup, Goldman Sachs, UBS

Multiple FinTechs

Credit Suisse, Columbia Threadneedle, M&G Investments

Goldman Sachs, UBS

FrankfurtA'dam

Madrid

BrusselsLondon

Dublin

Paris Luxembourg

Move confirmed

Ranking among EU peers

MunichParis

Dublin

Amsterdam

FrankfurtLondon

Luxembourg

Brussels

LiechtensteinCopenhagen

Madrid


We assessed the competitiveness of the Belgian Finance Place along four dimensions, and identified issues and recommendations

> Build strategic vision & ecosystem

> Rebalance fiscal treatment of financial assets

> Aim for LT stability of fiscal framework

> Infrastructure plan

Source: Roland Berger

Diag

nose

Key

Issue

sRe

com

men

-da

tions

Banking & Insurance

> Create competitive advantage in digitized banking models

> Make shift to fee-based business

Capitalmarkets

> Find common interest towards stock market financing

> Direct more money to PE and work on defragmentation

> Build-up local AM

FinTech & Infrastructure

> Create ecosystem for SME's & startups to share innovation & talent

> Partner with universities

Regulatory & Government

> Limited international footprint> Abundant capital> Low risk taking

> Stock market financing is not common

> Limited mobilization of domestic capital into PE

> Small share of wealth managed by domestic AM

> Historically strong in infrastructure

> Leading banks collaborate intensively with start-ups

> No real FinTech champions

> Government present in all dimensions, but has limited impact

> Unwanted distortion in choice of asset classes

> Gold plating of EU standards

> Limited experience in cross-border expansion

> Gold plating disadvantage> Limited ability to attract talent

> Lack of IPO-culture > Fiscal disincentive to mobilize

capital into equity> Less supportive regulatory

climate for asset managers

> Domestic market size> Regulator is conservative> Lack of Governmental

guidance & support> Infrastructure lead not

leveraged

> Regulatory/ fiscal insecurity> Unbalanced tax framework> No focused strategy

Structural issues: LMS (= Labour cost, Mobility, Stability of fiscal framework)

1 2 3 4


Although no immediate opportunities from Brexit, the BE retail market shows above average profitability and lower leverage ratios

Highprofitability

Source: ECB data, HLEG report 2015, Roland Berger

of assets controlled by foreign entities50%

EU 14

7.8%

4.1%

Average RoE ['10-'15]

Profitability driven by interest income

Strong international presence on BE market

Strong deleveraging

highest average net interest margin (1,7%)

4thEU 14

22%26%

Fee share in income '1523%

2010

21%

15%

201420132012

18%

2011 2015

16% 15%

Leverage ratio '10-'151),3)

Key characteristics of the Belgian banking & Insurance market

37% 7% 6% 4%50%

1


BE capital markets are characterized by low stock market financing, small domestic PE's and importance of foreign asset managers

A. Trading platforms B. Private Equity C. Asset management

400

300

200

100

0

50

350

150

250

450

148

Nether-lands

1,250

Germany

219

BelgiumFrance

452

UK

92

Average money raised after 1st day of tradingin Million Euro ’13-’15

Number of IPO’s 13’-15’ per country of listing

0.04%

Germany 0.21%

0.32%0.01%

Belgium 0.34%

France 0.38%0.21%

UK 0.66%0.22%

0.07%

Netherlands 0.49%0.21%

Austria

PE money invested in countryPE money raised by country

Netherlands 26%

France 30%

UK

Austria 8%

Belgium 14%

Germany 16%

69%

Characteristics of the Belgian capital markets

Source: Roland Berger, Invest Europe, EFAMA, ECB, Credit Suisse, NBB

6%

18%

Other

13%

Equity

Debt securities

31%Currency and deposits

Investment fundsInsurance

19%

13%

0.68% 0.57% 0.20% 1.42% 0.12%Money raised as % GDP

% of GDP, 2015

average money invested per PE

(m EUR)

67

43

20

44

19

9

AuM by country of fund / Total wealth owned by citizens in 2013

#

2


Belgium should leverage its historical leadership position in Financial Markets Infrastructure to foster local FinTech ecosystem

Source: Global FinTech Hubs Federation, De Tijd, company websites, Roland Berger Research

FinTechsegment CrowdfundingFMI

Data Management

Crypto-currencies & BlockchainInsurance

Growth Potential

Belgian players

Belgian presence

Investing& Asset

Management

Low

Payments

Medium LowLow Medium LowHigh

Belgian FinTech market per segment

> Few established FMI's vs growing pool of start-ups> Growth potential limited by lack of a dedicated ecosystem and adequate guidance

ISSUES

3


Despite initiatives, Belgian FinTechs are being outpaced by other EU hubs, with better access to capital & more supportive regulation

Key initiatives

> Attracting talent is difficult due to limited market size & Government support

> Regulator is prudent/conservative> Nascent FinTech Ecosystem

Key Issues

> A collaborative innovation platform

> Funded by a.o. the Belgian Government (FPIM) & private financial actors

> Connecting with leading global FinTech hub UK

B-Hive – international initiative

Accelerators & Networks

1) In 2016, Belgium ranked 118th as a global FinTech hub. Score calculated on Global Financial Center index, Global innovation index, Business Environment index.2) Based on a 2016 Roland Berger survey with 248 EU FinTechsSource: Global FinTech Hubs Federation, De Tijd, company websites, Roland Berger Research

FinTech initiatives & accelerators

Paris FrankfurtLondonLuxembourg

Belgium1)118th 87th 77th 43th

10th

Fintech HUB ranking[2016]

3

> Increased Governmental support:– dedicated strategy for the FinTech industry– better access to capital

> Regulatory framework aligned with the (small) size and complexity of the Belgian FinTech industry

Recommendations


In Belgium, strong variation in tax treatment across financial assets:– Tax-exemptions– Preferential tax treatments– Withholding taxes– Specific taxes

Tax treatment also varies substantially across sectors

The distortion favors debt over equity

Current Belgian fiscal framework for financial assets creates (potential) distortions in the financial markets

Rebalancing the fiscal framework

could create shift from ST savings

deposits to LT / riskier equity, and

demotivate overall leveraging


Current fiscal framework for financial assets

4


The way ahead


Despite its unique assets and competences …


1

2

Talent

Technology and infrastructure

3 Collaborative innovation

Location4

"Belgium Inc." USP


… Belgium has lost track on all fronts on how to develop and sustain a leading finance place and doesn’t see how to change


123

Retired and risk adverse

Regulatory and fiscal pressure

Gordian knot

Resignation4

> Foreign players lead

> Belgium an unattractive finance place

> Very few UK players in light of the Brexit

> Economic consequences underestimated

Implications

"The lost cause"


> 1 initiative: create fiscal incentives for risk taking (e.g. Monory De Clercq)

We identified three priority wake-up actions, both simple and effective to relaunch the Belgian finance place

A

C B

Risk culture

EUopportunity

Scalable platforms

How to wake up?

> 1 initiative: build the KYCmarketplace of Europe through collaboration of Belgian banks

> 2 initiatives:– Re-initiate the project of a

European Rating Agency– Get involved as a joint

finance place in all EU fintech initiatives


Wake-up actions


The Brexit banking matrix: the contenders lining up for London'scrown

Lisbon Amsterdam Milan Madrid Dublin Paris Luxembourg Frankfurt London

BankBranchOther2)

The highest level of presence in each city

Darker columns indicate strong presence in a city

Darker rows indicate broad presence of a bank

1)

1) Deutsche Bank has a London subsidiary but its main entity is a branch2) Broker dealer branches are included for Morgan Stanley and Goldman Sachs as they are a significant part of their European networkSource: FT research


> Promote entrepreneurial mindset:> Deploy the Brussels' finance place with two objectives in mind:

Foster financial entrepreneurialism and boost asset management activity, for both listed assets and Private Equity

Change mindsets through increased predictability, legal and fiscal simplification, a less invasive fiscal policy and an improved mobility framework

>For companies, simplify and reduce tax rates>For employees, improve SOP

Sell Brussels as an attractive and innovate hub for European finance in order to attract foreign talent! Stop the Belgian Bashing!

>By political parties>By private associations

Conclusions of the Belgian Finance Club

2

1

3

The Belgian paradox – Savings per capita among highest globally, while BE asset management activity is very low and decreasing


• Panel discussion lead by Marc Lambrechts, journalist at L'Echo with:

- Luc Bertrand, chairman of Ackermans & van Haaren

- Fabian Vandenreydt, Global Head of Securities Markets, Innotribe & the SWIFT Institute

- Prof. Dr. Bruno Colmant, Executive Board Member de la Banque Degroof Petercam.


Panel discussion

Documents

Relaunch of the Belgian finance place afterthe Brexit 24 04 2017.pdf · 2018. 1. 9. · BRU-3510-90017-11 (Belgian Finance Club)_Presentation_vf.pptx 2 • Presentation of the strategic