Frankfurt was ready to celebrate.
Only a year after the 2016 Brexit referendum, the vast majority of US banks had set up their EU hubs in the German city. International school places were being block-booked ahead of relocations from the UK and property prices were rocketing.
But the French government had other ideas.
Emmanuel Macron, victorious after defeating far‑right candidate Marine Le Pen in France’s presidential elections, started courting the world’s biggest investment banks.
“Their people were texting our people photos of magnificent, historic buildings we could open trading floors in, saying they had amazing food and great infrastructure,” said the CEO of one major Wall Street bank. “They said they would cut income taxes, corporation taxes and make it easier for us to fire people. Everything they said they would do, they did.”
Six years on and while Frankfurt remains the formal EU headquarters for many banks, Paris has won the battle for talent.
Bank of America was the first of the Wall Street banks to nail its colours to the Paris mast after Brexit. It now has 600 staff in the French capital, 180 of whom work in fixed income sales and trading roles — that’s up from 20 before Brexit.
Goldman Sachs had just 17 people in Paris before Brexit — it now has 500. JPMorgan has 900 staff in its Paris office, around 600 of whom work in markets; it plans to up that to 1,000. Citigroup and Morgan Stanley are also all building in Paris.
“There are huge opportunities coming out of Paris,” said Vanessa Holtz, CEO of BofA Securities Europe SA and France country executive. “Since Brexit, the landscape has become even more dynamic and competitive. Paris has established itself as a major European financial centre and now offers a very wide spectrum of financial services.”
A talent crunch
However, Paris’s success as an EU financial centre is facing growing pains. The surge in international banks has led to a talent crunch as firms switch from relocating staff from London to hiring on the ground. Meanwhile, highly paid traders are scrambling for limited places at top international schools after moving their families from the UK.
“We’ve been moving people from London to Paris, but there are plenty of employees who have family ties in the UK who don’t want to move and that makes it more complicated, because very often we have to recruit locally and that is challenging,” said Fabio Lisanti, head of European markets at Citigroup, who moved to the French capital last year.
“There’s a big ecosystem of talent in Paris, but it’s not as liquid as London,” said Marc d’Andlau, co-head of Goldman Sachs’s Paris office. “It will happen, but a lot of people who have relocated are happy in their jobs right now.”
That talent crunch is leading to friction with French banks, which have had to battle an exodus of staff. The likes of BNP Paribas, Crédit Agricole and Societe Generale have scores of markets staff in Paris, but the incoming US firms offer bigger pay packets and have more financial firepower. That enables the them to poach some of the native banks’ best staff, frequently offering them a 30% premium and more capital, which in turn feeds through to bigger bonuses.
One head of markets at a top US bank said he had arranged to have lunch with a peer at a French rival. But when details emerged about a big hiring spree at the Wall Street lender, they suddenly cancelled. They’ve never rescheduled their lunch.
“This clearly rubs them up the wrong way,” the head of markets said. “We’re taking their best people, but so are seven of our rivals and some hedge funds. It’s driving up their costs massively.”
Hedge funds including Millennium Management, Point72 and Exodus Point have also been expanding in the French capital and that’s having an effect, too
“The arrival of hedge funds in Paris has prompted people on the ground in banks to move,” said Goldman’s d’Andlau. “That may create more movement in the job market.”
“We had to work hard on talent retention because we were the first bank to set up in Paris, and as a result we have been one of the obvious places to hire from,” added Jan Smorczewski, co-head of Emea FICC trading at Bank of America. “However, as Paris has grown into a significant hub, it has also helped attract talent.”
One reason many traders are content to stay put is France’s Le régime des impatriés — commonly known as the ‘expatriate tax law’. This offers tax breaks that can see up to 30% of expats’ earnings remain tax-free and was key in luring highly paid traders to Paris.
But the benefit disappears when employees move jobs, meaning that any potential new employer has to shell out more to make up for traders’ lost earnings. Banks and lobby groups are pushing for change, Financial News reported, in a bid to allow talent to move more freely.
“We’ve hired some amazing people from domestic platforms that have really benefited from joining a platform like ours where there is more balance sheet,” said Citi’s Lisanti. “We’ve uncovered some exceptional talent, which were underperforming because of their current platform.”
While the infrastructure in Paris is well-developed, there has been some strain on the residential rental market as bankers have flocked to the French capital. Many have clustered around the well-to-do 15th and 16th arrondissements, which is pushing up prices, according to conversations with senior bankers.
Estate agent Savills said rental prices in Paris have increased just 3.6% since 2016, compared with 7.6% in London and 15.3% in New York. But demand for property is high, according to Kelcie Sellers, an associate in Savills’ world research team.
“The rental market in Paris has seen high levels of demand, particularly for prime furnished assets, with demand emanating from expats returning from Asia, London bankers, and French nationals looking for a pied-à-terre to use for a few days during the working week,” she said.
Meanwhile, senior traders and bankers relocating from the UK have also complained about the lack of places available for their children at international schools in the French capital. One school is particularly popular, senior bankers told FN — L’École Jeannine Manuel, which charges up to €28,000 a year for higher education.
“It’s becoming very hard and complicated to get in,” said one senior trader. “It’s something that needs to be looked at.”
Paris became the preferred location for most major investment banks because they were being led by staff demand, senior bankers said. Many bankers or traders, unable to deal with clients in the EU after Brexit, faced the stark choice of relocating to the bloc or losing their jobs. The French capital, which is just a two-hour Eurostar journey to London, became the popular choice.
“In the immediate aftermath of Brexit, we didn’t have a grand plan to focus on France, but we wanted to increase our presence in continental Europe,” said Goldman’s d’Andlau. “But step-by-step, Paris has become the preferred location for a lot of our staff over other cities, so that drove some of our thinking. The pro-business agenda under President Macron was also very helpful.”
“The biggest driver for us choosing Paris was access to talent, and the ability to more easily persuade people to move from London than to other European cities,” added Citigroup’s Lisanti. “People are now permanently relocating, but the Eurostar and ease of access to London definitely has a bearing on people’s willingness to move.”
Paris has already seen an influx of bankers bringing in big pay packets. The European Banking Authority said in its latest EBA Report on High Earners that there were 371 bankers earning more than €1m in France in 2021; this was up from 226 a year earlier.
“It was a move born out of necessity, but one that has turned into a real competitive advantage,” said Jim DeMare, president of global markets at Bank of America, about its EU hub. “We hear that from our clients. We see it in our flows.”
After the initial flood of Brexit relocations, banks are now focused on building out their operations on the ground as they get more established.
Jean-Charles Simon, chief executive of Paris Europlace, which develops and promotes the French financial sector internationally, said France is now looking beyond front office jobs. It is also hoping to attract banks from emerging markets as well as the US, Canada and other countries.
“The biggest international banks are continuing to expand their workforce, but I think we have the potential to continue to grow in financial services in different kinds of activities and jobs,” he said.
Citigroup is in the process of opening a new trading floor in its Paris office that will house 80-90 people in addition to its current space, which contains 130 staff. It plans to end the year with around 170 employees in its markets business and will expand to 250 over the next couple of years, Lisanti said.
It is now considering revamping its internship programme in Paris to mirror its London scheme. Students would then come in for nine weeks over the summer, rather than for an extended period as per the French system.
“We are growing from within in a tight labour market and this means recruiting from entry level,” said Lisanti. “The summer internship allows us to hire international students, rather than relying on French‑style internships that tend to attract only students from French universities.”
Bank of America is also likely to expand into other areas, Holtz said.
“We plan to build on our success in Paris and continue to offer our global connectivity to clients in France and the EU more and more products, services and counsel to help them meet their ever-evolving needs in France, the EU and around the world,” she said.
The French expat community
For all the growing pains around France as a financial centre since Brexit, senior bankers said that it has developed from a relative backwater for international banks into a place where employees are choosing to be based for the long-term.
“If you move to Paris, you are no longer moving to an office of 20 people — it’s a chance to have a career that simply wasn’t there before Brexit when it would have been seen as a hardship posting,” said Lisanti. “People can see it’s a growing office and a little bit more entrepreneurial. Our people are moving with their families, so it’s a community.”
Banks want to see their Paris offices less as French outposts and more as European hubs with a multitude of backgrounds and nationalities, bankers said.
“Before Brexit, it could be tough to convince people to move to Paris, because they felt removed from Goldman’s main business in Europe,” added Goldman’s d’Andlau. “That has changed and people are embracing the new careers they can have in France. We have 26 nationalities in Paris and people are now happy to be here.”
Culled from Financial News