Frankfurt is catching up. It is overtaking Tokyo and now occupies 5th place in the financial centres ranking of the Goethe University Center for Financial Studies (CFS), in cooperation with Paris based Institut Louis Bachelier (ILB).

Last year, when the Open Financial Ecosystem Index (Ofex) was presented for the first time, Frankfurt was in 6th place. Meanwhile, in the global financial centre ranking of London-based think tank Z/Yen Group, the Main metropolis is in 10th place, and is the only continental European financial centre in the top ten.

As in the previous year, New York is the unrivalled leader of the CFS ranking, followed by Chicago and London. However, the number four, Paris, is within reach, CFS Managing Director Volker Brühl notes. He cites as the most striking aspect of the rankings the extent to which Tokyo, Seoul and Toronto have lost ground. Tokyo fell from 4th to 7th place, the South Koreans dropped from 8th to 12th and the Canadians slipped six places to 13th. Seoul and Toronto have also dropped out of the top ten.

Chinese financial centres Shanghai (6th place) and Shenzhen (8th) are new to the top ten group, moving up nine and ten places respectively compared to the previous year. This also shows that „there is quite a lot of pressure from the lower places,“ explains Brühl.

The financial centres Abu Dhabi, Athens, Bogota, Manama and Vilnius were newly included in the ranking, due to better data availability and quality.

The CFS and ILB ranking is based on 53 indicators from publicly accessible and reliable sources – in contrast to the London ranking, for example, which is survey-based. The assessments of financial and economic development as well as the working environment are included in equal weightings.

The first category includes 21 indicators, such as the size and volume of the stock and credit markets, or economic dynamism. The working environment, in turn, is divided into three sub-categories: Business Environment (14 indicators), Human Capital (14) and Infrastructure (4). In each case, these factors are assessed versus the top position.

A closer look at the details shows that Frankfurt has improved overall in the area of financial indicators. According to the CFS, this was due to further growth in bank assets, progress in sustainable bonds and trading and clearing OTC interest rate derivatives. In addition, the decision to locate the EU Anti-Money Laundering Authority (AMLA) in Frankfurt. In the equity markets, on the other hand, Frankfurt lost ground slightly in terms of market value and the number of listed companies, IPO activities and trading volumes.

When it comes to the working environment, Mainhattan has slipped significantly, from 12th to 15th place, with Singapore, Zurich, Stockholm and Hong Kong among the top 4.

Brühl considers the high cost of living and housing as well as the declining competitiveness of the German economy – keywords bureaucracy, energy costs, tax burden – to be negative factors. „The state, but above all the federal government, could take action here", he says.

The lack of progress in digitalisation and the below-average development of fintechs are also a burden – this could be countered with more innovation funding. On the other hand, the high level of political stability, legal certainty, good logistical infrastructure and a good pool of young talent all speak in favour of the financial centre.

Above all, however, Frankfurt suffers from size disadvantages. Frankfurt could make gains here through acquisitions or cooperation, particularly in the areas of data services or crypto assets – but also in all traditional asset classes. „Considerable efforts are required if Frankfurt wants to defend this currently very strong position,“ Brühl concludes.