Following are excerpts from a CNBC interview with Carsten Kengeter, CEO, Deutsche Börse, from the World Economic Forum 2017 with Steve Sedgwick and Geoff Cutmore.
SS: Blackrock has backed the proposed $28 billion tie-up between the LSE and Deutsche Börse. The second largest shareholder of both exchanges said, "Sceptics should consider the need for strong capital markets in Europe.' Carsten Kengeter is with us, the CEO of Deutsche Börse. Carsten, thank you very much indeed for joining us.
CK: Thanks for having me.
SS: Where is the biggest headache on this coming from at the moment? I look at what the German regulators are saying, I look at what Hesse is saying, as well, and I can't help getting the feeling that you're under so much pressure to HQ in Frankfurt and be done with it. Is that ever going to happen?
CK: Well, I think we are taking everything in its stride. It is a sequential process, we are right now in the middle of the Brussels deliberations, it's a strong, sort of, competition analysis that goes on, and that will take a number of weeks still, and following that, because everyone who is approving, or not, this transaction wants to look at the facts. They want to wait until the outcome of Brussels is secure.
SS: You're a banker by trade. I remember the first time I met you was in your office, at an investment bank you worked at in London, as well. Is London still the best place, though, to have as the finance hub of Europe, regardless of Brexit?
CK: I think London has a history as a financial center not only in Europe, but worldwide. It's a trade center, and there is a lot of infrastructure that has been built in London over time, not only banking, but all the ancillary services, as well, just like the ancillary services that you are providing, very importantly, to that industry. So what, in times of political uncertainty, where the future is, you know, unknowable, definitionally, we must ensure the institutional design to link London to Europe and vice versa.
SS: But Frankfurt, Paris, we just heard from Mr. De Guindos, Madrid, Dublin, they all want a slice of the pie, and I'm sure there's another financial center, maybe Milan, which I haven't mentioned, as well, but can any of them successfully, in your opinion, with your experience, replicate what London has?
CK: Well, isn't it natural that when businesses are beginning to deliberate what they might take in terms of sensible policy decisions to make for an unknowable future, and create robustness as well as flexibility, that other centers want to present themselves in the best light? I think it is. I think they would do well to collaborate with London, and that is exactly what we are trying to do.
GC: Carsten, we learnt yesterday that the UK will go for a hard Brexit option. We will be removed, ultimately, from the single market. Does that, in any way, change your thinking now at board level about where the business will be headquartered?
CK: Well, I would like to, if I may, make a slight, sort of, precision point here. We are talking about a legal seat of the holding company, which is indeed structured to be based in London, and then we are talking about dual-headquarter structure, where London and Frankfurt have operational headquarters and the regulated entities will reside without any change. So with, we don't know what Brexit, or what form of Brexit comes, and it is, sort of, unknowable, so I'm approaching this with a sensible degree of humility, and we will try to be flexible whatever comes, but I can tell you that this bridge between Britain and the EU is becoming more, not less, important.
GC: It's always unfortunate, I think, when a business deal becomes a political football, and that's always the risk with this deal in particular, given the timing surrounding Brexit, but does the business logic still stand, post-Brexit, that encouraged you to do the deal in the first place, with the LSE?
CK: The business logic stands in full force. We have done-, both the London Stock Exchange group, as well as Deutsche Börse Group, as well as many other exchange companies, are used to doing cross-border business. It is indeed in the nature of global capital markets to do so, and I believe political participants, political actors understand that very well, and I think they can benefit from having an institutional design that crosses borders in times of uncertainty.
SS: Carsten, very briefly, when will tie up, finally? When will it be Deutsche Börse/LSE as one company?
CK: The 30th of June is the final date in the offer, and if we are getting to that date then you will know the answer.
SS: You'll be a very happy man if we get there. Okay, look, great, thank you very much indeed for joining us. Carsten Kengeter, who's the CEO of Deutsche Börse, maybe one day Deutsche Börse/LSE, but it'll happen very soon, I'm sure.