Time is running out: in Europe many banks will disappear
European banks remain under considerable pressure. The ECB provides them with an emergency plaster, but they have harmed them in substance because of the monetary policy. Financial investors are pushing for an adjustment of the market.
ECB President Mario Draghi. (Photo: dpa)
Financial institutions in the euro area can continue to deposit unconsolidated senior bank bonds as collateral in the future for money supply via the ECB. The European Central Bank (ECB) maintained the so-called central banks' ability to issue such debt securities as they reported in Frankfurt on Wednesday. The decision is expected to be positive in the industry. For example, restrictions on refinancing with central bank money would result in a phase in which many institutions are under pressure on the stock market and in some countries financial institutions suffer from bad loans.
Monetary policy makers want to review their decision in the coming year. In order to reduce risks, they also halved the limit on the use of such bank bonds as collateral from 2017 to 2.5 percent. The limit is not to be applied if the pledges are below € 50 million.
The European Central Bank (ECB) does not see any danger of a general economic crisis in the euro area, despite the fact that it is a problem-solving institution. "There are individual cases of financial problems, but the system is solid", said ECB bank inspector Ignazio Angeloni on Wednesday at an event in Milan. However, the conditions for a systemic crisis are not met. Since autumn 2014, the European Central Bank (ECB) has been responsible for overseeing the largest euro area currency reserves. It now supervises 129 institutes.
However, the authority of the ECB is crumbling just the area of supervision: Recently had Bundesbank President Jens Weidmann demanded that the ECB should deliver the supervision, as the existing conflicts of interest were not to solve.
According to Angeloni, perception is wrong that there are problem institutes only in one country. In Germany, in particular, Deutsche Bank is currently in the headlines, which is working with scarce reserves to settle many costly legal disputes. In Italy, on the other hand, money-launderers are struggling with a mountain of bad loans, which in the course of the years of economic downturn have risen to some 360 billion euros. On Wednesday, the International Monetary Fund (IMF) called on the Italian government to do more to reduce it.
In the euro area as a whole, banks had loans worth some € 900 billion in their balance sheets at the end of last year. Too many distressed loans make institutes reluctant to grant new loans, which can slow down growth in an economy in the long term. According to Angeloni, a solution to this problem takes time. Even for moneyhouses where this is acute, this could not happen quickly, "the bank supervisor said. "But that is precisely because it is a long process, so it should begin immediately." The ECB's banking supervisors will soon give the institutions concrete guidelines for reducing bad loans.
In the opinion of the rating agency Moody's, the German banks mainly have a cost problem. "We see the high cost base compared to the European competitors as the biggest weakness and challenge for German banks," wrote Moody's analysts in a study published on Wednesday on the prospects for the German money bins by the end of next year. This puts pressure on the banks' profits and impairs their ability to provide more capital. The board of directors is increasingly seeing the need to address the issue. This is demonstrated by Commerzbank's savings program, as well as the announcement of many savings banks and cooperative banks to thin their branch network.
More than saving, the banks are not left, says the study. "Because the capital markets are still fragile and difficult to implement large banking fusions, we expect the slow process of cost reductions to continue," writes chief analyst Andrea Wehmeier. Low interest rates, overcapacities and moderate credit growth led to persistently keen competition, especially in business with private customers and SMEs. The rating agency evaluates 37 German banks, which comprise 76 percent of the sector.
Most German institutions complain about the margins, which shrank due to the low key interest rates. According to Moody's calculations, however, their margins are not far from the EU average - the cost quotas with about 70 percent of the revenues are much higher. Demands and branch closures are therefore likely to continue later this year. Commerzbank has announced that it will withdraw up to 9600 positions, but wants to retain its network of some 1,000 branches. However, fewer people will work in the future than before. The number two wants to reach a cost ratio of 60 percent by 2020, when the markets are playing.
The rating agency is dominated by the ship market. In general, credit default rates in Germany were very low at 3.1 percent. However, banks that have issued ship loans would have to expect a growing number of wobbling loans - and therefore with higher reserves, especially if they are pushing the reduction of their holdings. Most recently, they had hardly succeeded in reducing their volume of ship loans: from 2012 to 2015, the stock of the five largest German ship financiers - including NordLB and HSH Nordbank - fell only to 63 by 65 billion euros. Depending on the bank, seven to 46 percent of them are risky.
Nevertheless, according to Moody's, German credit institutions have "adequate" capital. The hard equity ratio according to the sharp Basel III standard had an average of 14.7 percent at the end of 2015. A year earlier, it was only 13.5 percent.
This ratio is used by financial researchers as Anat Admati and Martin Hellwig considered insufficient: They call at least 20 percent. Above all, they consider the risk assessment to be inadequate because it reduces the real risks too low.
The International Monetary Fund (IMF) has continued to hit Deutsche Bank. "Deutsche Bank is one of the banks that needs to make further adjustments to convince investors that their business model is viable for the future," said IMF money and capital market expert Peter Dattels on Wednesday in Washington. In addition, investors should be convinced that Germany's largest money house has its risks from various legal disputes under control.
At least: All-clear seems to come for the Deutsche Bank in the money laundering allegations in Russia. According to the SZ, it is clear that financial supervision will restrict itself to making the German industry pri- ority a requirement for better risk management. An exact source did not call the newspaper for their information. Spokesmen of the Bafin and the Deutsche Bank rejected a comment on demand. However, investigations by the US and British supervisory authorities continue in Russia.
In the spring, Bafin had already made a mild decision with Deutsche Bank when the financial supervision ended several special audits without further consequences for the Frankfurt money house. The Libor scandal was about manipulated reference rates, derivative transactions with the Italian crises bank Monte dei Paschi di Siena and precious metal businesses.
For Deutsche Bank CEO John Cryan, the warning words are coming at a critical moment: the renditschwache institute is right in the middle of the negotiating pokers with the US authorities, to a 14 billion dollar penalty in the dispute about lazy mortgage papers. The issue should also be the focus of the IMF's autumn session in Washington. There, at the end of the week, numerous high-profile bankers, banknotes and politicians gather to discuss, among other things, the situation on the financial markets.
Deutsche Bank itself argues that it has enough liquidity, a thick capital ceiling and has never been as secure as it is today in terms of balance sheet risks. But as long as the mortgage is not solved, the uncertainty remains as to how resistant the institute really is. There are many other legal disputes that can cost a lot of money. In addition, low-interest rates are on the cards for all European banks. The IMF said in its report on global financial stability: the general weakness of earnings of local banks in an environment of low interest rates and low economic growth could wipe out the capital buffers with time, they said. In addition, lazy loans in the total volume of an estimated 900 billion euros.
The largest investor of Deutsche Bank is the US fund giant Blackrock in addition to the Emirate of Qatar. His vice-president, Philipp Hildebrand, spoke up in the FAZ, and was also unusually open for mergers between major European banks. "If we are talking about a need for consolidation, we should not do that in the national context," he emphasized. But politics must finally send clear signals.
Hildebrand also criticized the fact that many European banks still do not know how to make sustainable money. He did not go explicitly to Deutsche Bank. The Blackrock manager, however, has expressed fundamental criticism of the state of the industry: "It is frustrating that despite the rhetoric of a number of major European banks, it has not yet been clear enough that a radical reorientation of the business model is necessary."
According to financial circles, Deutsche Bank has been under pressure for some time in its discussions with important investors to look around for a potential merger partner in the face of their never-ending clean-up efforts. "This was stimulated as early as the spring and was of little interest to the bank at that time," reported an insider from a top 10 shareholder. Another investor said: "The merger subject is now openly discussed among the shareholders." Deutsche Bank did not want to comment on the issue. From the supervisory circles it was the last time, especially the French big banks were scrambling their hooves and wanted to push forward cross-border deals.
Whoever would be the buyer of a Deutsche Bank - he would need a green light from Berlin. And in German politics there is currently a preference for a national solution: a merger between Deutsche Bank and Commerzbank. Discussions between the two institutions had also been briefly given in August as insiders reported. They were, however, very quickly quit again.
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