Foreign banks' attraction to the financial centre Frankfurt--an inverted 'U'-shaped relationship

This article traces the location of foreign banks in Germanyfrom 1949 to 2006. As suggested by New Economic Geography models,we find an inverted ‘U’-shaped concentration offoreign banks in Germany. Only after a competition between severalcities, Frankfurt has emerged as the pre-eminent financial centre,triggered by the ‘historical event’ of setting upthe German central bank in Frankfurt. After a strong increase,Frankfurt's share in the location of foreign banks in Germanydecreases slowly but significantly since the mid-1980s. We concludethat there will be a lesser role in Europe for second-tier financialcentres in the future.