According to Nicastro, Italian companies need even more money

Rome Italy is deeply in crisis: the country that is most severely affected by the corona virus in Europe with more than 23,000 deaths is experiencing a hard recession due to the lockdown and the fact that production has been stopped for more than a month.

The International Monetary Fund has just estimated a slump in growth of 9.1 percent, significantly more than the forecast for the euro zone of 7.5 percent. Italy also has large debts and therefore less financial scope. “The collapse is violent,” says top banker Roberto Nicastro. “The crisis can be overcome at the beginning of 2021 at the earliest.”

Nicastro is one of the most renowned bankers in Italy. He used to be director general of Unicredit, today he is Vice President of UBI Banca and also a European advisor to the financial investor Cerberus.

The top banker warns: Now Italy has the choice. “Either we can get the relief measures started quickly, then we can classify the crisis as temporary. Or we wait. ”But that is the worse alternative. Then there would be irreparable damage to the country.

The government’s first aid package for the real economy in early April has a volume of EUR 400 billion and is designed to bring liquidity to companies. Since then, there has been a flood of applications for emergency loans and credit deferrals at the banks. But the transmission has problems. So much so that the central bank Banca d’Italia had to specifically write to the financial sector to “intensify efforts” to facilitate access to credit in this phase of the national emergency.

Italian banks in a dilemma

The risk of default is too great for many banks. Credit losses are impending, even though the state takes over a large part of the guarantees. Because these are limited to 2020, as Nicastro explains. In addition, the state only guarantees 100 percent for smaller companies with loans of up to EUR 25,000. “With the larger ones, the bank is involved and will be careful not to give the money to those who cannot repay it.”

Nicastro sees the domestic banks in a dilemma: “If we give the money quickly so that the companies can start again quickly, we risk criminal problems. Or we take the strict regulations into account and accept a time delay. ”

The banks would at least need the opportunity to identify attempts at deception, the Milan financial expert says. After all, there are at least 1.5 million customers who have requested loans and around one million customers who have asked their bank for an advance payment for short-time benefits.

In March, the ECB’s banking regulator approved changes to the equity guidelines to help banks. This should help in particular the money houses in the southern European countries, many of which are still groaning under bad credit from the 2008 financial crisis.

“Of course, the banks know very well that this and the postponement of the stress tests are only temporary help,” Nicastro puts into perspective. “Everyone is aware that there is now a buffer until the crisis is over.” The rules themselves would not be changed, it was about provisional measures.

Nicastro, however, does not see the danger of a systemic banking crisis in Italy due to growing loan defaults and melting yields. The financial industry could survive the corona pandemic and its effects.

Recapitalization and reduction of contaminated sites

This also applies to problem houses like Monte dei Paschi or Banca Carige. The banks have been recapitalized. The domestic institutes have also made good progress in dismantling the contaminated sites. “The non-performing loans fell from the peak in 2015/16, when they were at twelve, thirteen percent, to four percent, which is a significant improvement.” In addition, there are around 50,000 employees downsizing in the industry to date, and without Redundancies.

Nicastro does not consider mergers or acquisitions to be urgent, not even in the face of the corona crisis. Because size is not the decisive factor. “What matters is technology and competence.”

In Italy, the most innovative bank is not one of the big ones, but Banca Sella, an old private bank, number 16 in Italy. And the greatest profitability is achieved by Credito Emiliano, the country’s 12th largest bank. “It’s about good management. But that also applies in Germany, I think of N26 and on the other side ING-Diba. These are not big banks, but they grew fastest. ”

Nicastro is skeptical about the EU summit on Thursday. “The logic should lead to success, we are constructive and optimistic, but I don’t know whether that will be enough.” The use of the European Security Mechanism EWS “without troika” and the introduction of corona bonds, which are now being disputed Elements for political rhetoric in Italy with a view to voters.

“What we need is a small Marshall Plan, so we share the cost,” says Nicastro. Like others in Italy, he calls for uniform aid programs and not just emergency loans. “I believe that there is an objective interest in the Europe system to ensure that the necessary investments are made to deal with the crisis.”

A country like Italy cannot get out of the emergency alone and quickly. “It is clear that the aid packages are not enough for Italian companies, that more money is needed.” Because Italy cannot raise five percent of the gross domestic product like Germany or like the USA eleven percent, but only 1.3 percent.

According to Nicastro, the more closed the European Union is to the corona crisis, the better the second virus can be combated: the growth of populist forces. “We cannot afford a delay.”

More: Italian Prime Minister Conte continues to insist on euro bonds.

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Little comfort from the interest


Ha, ha, ha: historic advertising poster by Commerzbank
Picture: dpa

Anyone hoping to pay less interest and get more in the wake of the Corona crisis should be disappointed. Financial service providers and companies have completely different problems.

I.In the wake of the Corona crisis, the world’s central banks once again massively relaxed their monetary policy. One should actually assume that interest rates will then continue to fall. In fact, this is not or only partially the case. The FMH interest rate index for ten-year mortgage loans, which had fallen from a good 1.5 percent to around 0.6 percent in the two years before March 2020, is currently back at 0.76 percent. That’s not a lot, but it’s still a 28 percent increase. The interest on loans with a term of 15 years is now well over 1 percent. Interest rates on consumer loans rose slightly less.

Martin Hock

In contrast, the Euribor interbank interest rate rose much more strongly. He actually only knew the way down since the financial crisis. The central 3-month interest rate was 5.39 percent in October 2008. Five years ago it fell below the zero percent mark and on March 12 reached an all-time low of minus 0.489 percent. At the moment, however, it is approaching from below again at minus 0.22 percent of the zero percent mark – it has doubled within just one month.

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Which banks cut board remuneration in the crisis

London More and more top bankers in Europe are foregoing salary or bonuses in the corona crisis. The British big banks also gave up their resistance this week. HSBC, BarclaysLloyds RBS and Standard Chartered announced millions in donations to various corona aid funds.

The largest single sum comes from RBS boss Alison Rose. She waives 25 percent of her salary for the rest of the year and receives no cash bonus. That’s a total of around £ 2.3 million. Barclays boss Jes Staley’s contribution, on the other hand, is significantly lower. This gives up just 33 percent of his salary for six months – a sum of £ 392,000. With the bonus, however, he makes no compromises.

The institutes act under pressure from bank supervisors. “PRA does not expect banks to pay cash bonuses to management,” PRA chief Sam Woods said last week. The European banking regulator Eba had also asked all institutes to set management board remuneration at a “conservative level”.

The model was head of the board of directors Ana Botin of the Spanish Santander bench preceded on March 23. Last week was the Spanish one BBVA and the Italian banks Intesa Sanpaolo and Unicredit followed. With the gesture of the British institutes, the pressure on banks in Switzerland and Germany is increasing. So far, these have been preventing a waiver.

Selected major banks have previously announced this:

Santander: Chairman of the Board of Directors Ana Botin and CEO Jose Antonio Alvarez waive 50 percent of their total compensation for 2020, i.e. fixed salary and bonus. The rest of the Board of Directors waived 20 percent.

Intesa Sanpaolo: CEO Carlo Messina donates one million euros to Corona relief funds. 21 other top managers who report to him donate a total of five million euros.

Unicredit: CEO Jean-Pierre Mustier and seven other board members waive their cash bonuses for 2020.

HSBC: Chairman Mark Tucker donates his entire annual salary of £ 1.5 million. CEO Noel Quinn and CFO Ewen Stevenson waive 25 percent of their fixed salary for six months and receive no cash bonus. Quinn has around £ 1.4 million and Stevenson £ 800,000.

Barclays: Chairman Nigel Higgins, CEO Jes Staley and Chief Financial Officer Tushar Morzaria waived 33 percent of their salary for six months. However, bonuses are paid. In total, all three managers donated a total of £ 800,000.

Standard Chartered: CEO Bill Winters donates 50 percent of his salary by the end of the year and his cash bonus for 2020 – a total of over two million pounds. CFO Andy Halford and board members also waive. However, the amount is unclear.

Lloyds: CEO Antonio Horta-Osorio and other managers waive the full bonus, both cash and stock options. However, they get their full salary.

RBS: Chairman Howard Davies and CEO Alison Rose waive 25 percent of their salary for the rest of the year and receive no cash bonus. RBS was saved by the state in the financial crisis and is still majority state-owned.

UBS: The Swiss bank announced on Thursday that it would pay its dividend in two tranches this year. Should the second tranche fail in autumn due to the corona crisis, the cash bonus for the board members will also be canceled, the bank said. Additional remuneration decisions will be made “as required” in the course of the year.

Credit Suisse: CEO Thomas Gottstein told Swiss radio last week that the board is considering a gesture of solidarity.

Deutsche Bank: So far, the board members have kept a low profile, it just says “one is aware of the overall situation in business and politics.”

Commerzbank: The board members have not yet waived their variable remuneration.

More: Because of the corona crisis: More and more board members are foregoing part of their salary

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Dividend waiver at banks – LBBW postpones decision

Frankfurt, Zurich, Stuttgart Numerous banks suspend their dividend payments according to instructions from the European Central Bank (ECB).

Landesbank Baden-Württemberg (LBBW) now also wants to postpone the decision on a dividend to its owners until autumn. The board decided to propose to the state of Baden-Württemberg, the Sparkassenverband and the city of Stuttgart, the largest German state bank announced on Thursday.

The board of directors had originally planned to propose a distribution of 259 million euros to the three owners at the general meeting in May after 250 million euros in the previous year.

Despite the ongoing low interest rate phase, LBBW had significantly increased its profit last year. At around 444 million euros, earnings after taxes were 7.5 percent higher than in 2018.

Many banks had previously declared that they would not distribute profits, most recently Aareal Bank.

Helaba and BayernLB have also suspended their dividends. According to financial circles, DZ Bank also wants to postpone the decision and payment of the dividend.

The second largest German cooperative bank after DZ Bank, the Deutsche Apotheker- und Ärztebank (Apobank), on the other hand, wants to maintain a dividend payment.

At the end of March, the Commerzbank announced in an ad hoc announcementthat she will not propose a dividend for 2019. “For the current fiscal year 2020, the Executive Board will not provide for a dividend payment until the uncertainties caused by Covid 19 have ended. After that, he will decide about it again, if necessary, ”it said.

The Dutch institutes had previously ABN Amro, ING, Rabobank and the Italian UniCredit, as well as numerous smaller financial houses in the euro area, have announced that they will not initially distribute any money to shareholders.

ECB had asked banks to waive dividends

In March, the ECB asked banks not to pay dividends for 2019 and 2020 due to the virus pandemic until at least October 1.

A similar request came from the Swiss authorities. They advised banks to “carefully consider” how high the dividends should be in the current environment. The ECB has no supervisory powers over Swiss banks.

“Although we are well capitalized and financed, we believe it is wise to follow the ECB’s recommendations,” said ING chief Ralph Hamers, who will become UBS’s chief executive officer later this year.

This gives the bank more flexibility to help customers and society fight the corona crisis. “These are exceptional times for all of us.” After October 1, ING will make further decisions about its dividend policy.

ABN Amro said that the consequences of the virus crisis for customers, the quality of the loan portfolio and the entire economy could not yet be estimated. The bank expects a record loss in the first quarter, also because a customer in the US had gambled on risky securities. ABN Amro will therefore follow the advice of the ECB and initially put the dividend plans on hold.

The major Spanish bank Santander had also announced that the planned interim dividend would be canceled. The funds should be used to help people and companies in need, the largest bank in the euro zone justified the move.

UniCredit also planned not to make a profit distribution and also to suspend share buybacks. The Munich HypoVereinsbank, which belongs to UniCredit, can, however, transfer a dividend of almost 3.3 billion euros to the Italian parent company, as Bundesbank board member Joachim Wuermeling told the “Handelsblatt”.

“With the recommendation, we want to prevent that in the current uncertain situation, distributions that may be urgently needed later flow out of the banking system. This is not the case with payments between parent companies and subsidiaries within banking groups. “

The Deutsche Bank does not meet the ECB’s dividend council, as it had already announced that it would not distribute profits for 2019 and 2020 due to its restructuring of the group.

More: The European banking supervisors are asking the credit institutions not to squander their equity but to use it primarily in Europe.

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“I have never experienced anything comparable”

Frankfurt Larry Fink began writing his letter to Blackrock shareholders in his New York office. The boss of the world’s largest asset manager ended him in his home office. Since January, the corona virus has also directed Blackrock. It represents an “unprecedented medical, economic and human challenge”, which will continue to shape the future, as Fink writes. After the crisis, the world would be different, he concludes in the eleven-page letter that is available to the Handelsblatt.

For the 67-year-old, the virus has “dramatically changed our lives and put financial security at risk”. Governments would have had to face unprecedented quarantines of the infectious disease while responding to the economic and financial failure. “In my 44 years in the financial sector, I have never experienced anything comparable,” writes Fink.

The outbreak of the disease had moved the markets at a pace and scale that was otherwise only seen in financial crises. As dramatic as it is: Fink believes that “the economy will recover, partly because some of the obstacles that characterize a typical financial crisis are missing”.

What Fink says has weight. Blackrock had $ 7.4 trillion in investment funds at the end of December, more than any other fund company. The volume is thus twice as high as Germany’s economic output. As in other regions of the world economy, Blackrock is also involved in the entire corporate elite in Germany and is often even the largest shareholder.

According to data from the financial regulator Bafin, the US fund holds 7.62 percent of the shares in the real estate group Vonovia, with the insurers alliance and Munich Re it is 6.44 and 6.68 percent. At the financial service provider Wirecard the asset manager holds 5.57 percent. The asset manager holds the largest share package at German bank with 5.15 percent and at Bayer with 7.44 percent.

Fink, an avowed supporter of the Democratic Party, was surprised by the speed with which stock indexes fell from record levels. For the first time since 1997, he writes, he took a break on trading on the New York Stock Exchange to offer brokers a break and to slow down price fluctuations. At the same time, record low liquidity in US government bonds has exacerbated the situation. These US Treasuries normally serve as the foundation for the capital market.

Long term view

Fink draws its confidence in a steady recovery of the economy from the quick reaction of the central banks to get the problems of the credit markets under control quickly. In addition, governments would “act aggressively to provide fiscal incentives”. Fink is once again campaigning for a long-term perspective. It is more important than ever. “Companies and investors with great determination and a long-term perspective have better chances of navigating through the crisis and the aftermath,” Fink hopes.

According to analysts from the Italian bank Unicredit The protective screens in industrialized countries have already triggered a bear market rally despite paralyzed economies. They refer to the $ 2 trillion rescue package in the United States and the Federal Government’s measures, which added up to more than a third of its gross domestic product.

In addition, the European Central Bank has announced a massive expansion of bond purchases through its pandemic emergency program. Defensive sectors already showed a drop in earnings estimates and price losses similar to those of the 2008/09 financial crisis. However, cyclical companies’ earnings estimates may still have a long way to go before they bottom out.

According to Esty Dwek, Head of Global Market Strategy at Natixis Investment managers, the stock markets have already largely priced in the damage from the corona pandemic. Nevertheless, the re-entry into the stock market seems premature at the current time. As long as the number of infections around the world continued to rise and the peak had not yet been reached, prices could continue to decline across the board.

According to the motto “First in – first out”, the courses in Asia are likely to recover most easily. America, on the other hand, could have been dealing with the consequences of the virus longest. At the moment there is hope that the restrictions imposed on society and the economy in most industrialized countries could be relaxed significantly by the end of June.

While the real economy will take longer to process the corona shock, the recovery in the financial and capital markets should start earlier.

Despite all the measures, Fink warns against too much optimism. The world is no longer without risks, and there is no clarity as to whether the ground has already been reached for the markets. “Knowing that is impossible,” says the financier. The world is facing major challenges in the face of heavily indebted companies and governments who have not carefully planned their aid programs.

The “economic pain of the outbreak will be disproportionately heavy”, especially on the shoulders of the economically most vulnerable.

More: Life insurance policies remain safe

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More and more banks are foregoing dividends

ECB in front of the Frankfurt skyline

The European Central Bank asked banks last week not to distribute profits.

(Photo: Jan Huebner)

Frankfurt, Zurich Numerous banks suspend their dividend payments according to instructions from the European Central Bank (ECB).

The Dutch institutes ABN Amro, ING, Rabobank and the Italian UniCredit, as well as numerous smaller financial houses in the euro area, are not distributing any money to shareholders for the time being. The Swiss banks UBS and Credit Suisse however, are sticking to their dividend plans, as announced on Monday.

The ECB asked banks last week not to pay dividends for 2019 and 2020 until at least October 1 because of the virus pandemic.

A similar request came from the Swiss authorities. They advised banks to “carefully consider” how high the dividends should be in the current environment. The ECB has no supervisory powers over Swiss banks.

“Although we are well capitalized and financed, we think it is wise to follow the ECB’s recommendations,” said ING chief Ralph Hamers, who is to become chief executive officer of UBS later this year.

This gives the bank more flexibility to help customers and society fight the corona crisis. “These are exceptional times for all of us.” After October 1, ING will make further decisions about its dividend policy.

ABN Amro said that the consequences of the virus crisis for customers, the quality of the loan portfolio and the entire economy could not yet be estimated. The bank expects a loss in the first quarter, also because a customer in the US had gambled on risky securities. ABN Amro will therefore follow the advice of the ECB and initially put the dividend plans on hold.

The major Spanish bank Santander had also announced that the planned interim dividend would be canceled. The funds should be used to help people and companies in need, the largest bank in the euro zone justified the move.

UBS maintains dividend

UBS, on the other hand, still wants to pay out $ 0.73 per share to shareholders. The institute has a strong capital base and is strategically well positioned, said a spokeswoman for the money house, which had to be supported by the state during the global financial crisis of 2008/09. “As the largest Swiss bank, UBS is able to support the economy and at the same time pursue an appropriate dividend policy.”

Credit Suisse also said it was pursuing a sustainable dividend policy and would continue to do so. “There are no plans to change existing policies.

UniCredit already announced at the weekend that it would not make a profit distribution and would also suspend share buybacks. The Munich HypoVereinsbank, which belongs to UniCredit, can, on the other hand, transfer a dividend of almost 3.3 billion euros to the Italian parent company as planned, as Bundesbank board member Joachim Wuermeling told the “Handelsblatt”.

“With the recommendation, we want to prevent that in the currently uncertain situation, distributions that may be urgently needed later flow out of the banking system. This is not the case with payments between parent companies and subsidiaries within banking groups. “

The Deutsche Bank does not meet the ECB’s dividend council, as it had already announced that it would not distribute profits for 2019 and 2020 due to its corporate restructuring. The Aareal Bank and the Commerzbank put question marks behind their dividend plans, but haven’t made a final decision yet.

More: The ECB demands that dividends be waived. DZ Bank and top public law institutions may still distribute profits.

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Financial regulators control the liquidity of large banks on a daily basis

Frankfurt When banks go bankrupt, it is often not because the capital buffers are too thin, but because of a lack of liquidity. In other words, the institutes simply run out of money. In the corona crisis, the central banks, financial regulators and financial institutions want to prevent this in any case. The issue of liquidity is therefore at the top of everyone’s agenda.

The largest, systemically important institutions in the euro zone currently have to give the European financial supervisory authorities their liquidity indicators and their internal plans for the management of liquid funds in conference calls, as several people familiar with the subject told Handelsblatt. A second group at somewhat smaller banks had to report to the controllers once or twice a week. The ECB’s banking regulator did not want to comment on this.

Compared to the 2008 financial crisis, banks now have thicker liquidity buffers. So far, according to information from the Handelsblatt, there have been no bottlenecks at any major European bank. But the tension is great among everyone involved. “In times like these, it cannot be ruled out that a lot will change from one day to the next,” says a person familiar with the discussions.

The so-called interbank market plays an important role in the liquidity management of financial institutions. Not only do financial institutions lend and lend liquidity there, but also money market funds, asset managers, companies and states.

During the financial crisis there were violent upheavals on the money market. Because after the bankruptcy of the US investment bank Lehman Brothers, there was a great fear that other institutions would collapse, everyone involved held their funds together instead of lending them to each other.

Everyone hoarded cash

There is no such mistrust of other financial institutions today, several bankers with whom the Handelsblatt has spoken in recent days emphasize. “In the corona crisis, there is no threat from other banks,” says one of them. “The challenge is the increasing liquidity demand from the real economy.”

Instead of investing excess funds in the money market, many companies are currently sucking themselves up with liquidity. They draw their credit lines from the banks and apply for additional loans. In doing so, they are reacting to the great uncertainty, after all nobody knows how long the corona crisis will continue and how the economy will cripple.

Asset managers and money market funds struggling with price losses and cash outflows are also currently failing to provide long-term liquidity. The same applies to many states and their funding institutions, which are in the process of supporting the economy with extensive aid programs. “At the moment, nobody is willing to spend money for three or six months,” reports one banker.

All of this means that banks can currently only absorb liquidity for a short time on the money market. There is a concentration of market participants on terms of up to one month, said Helaba capital market chief Hans-Dieter Kemler on Wednesday. “The market for long-term, unsecured transactions is currently rather difficult.”

Kemler does not want to know anything about a financial crisis 2.0. The situation is “not yet comparable to the situation we had in 2008 and 2009,” he said. At that time, many banks also had problems taking up liquidity in the short term. So you actually ran out of money.

The European banking sector is still a long way from this situation – and there are several reasons for this. For one thing, many institutions have significantly reduced their dependency on the interbank market since the financial crisis. On the other hand, the central banks provide the banks with liquidity on a large scale.

Toilet paper effect on the money market

“Compared to 2008, the central banks reacted promptly and very quickly,” says one banker. From the point of view of European financial institutions, it was particularly important that several central banks around the world decided in mid-March to make US dollars available to the money houses against the provision of collateral on a large scale.

Since then, banks have been able to borrow dollar liquidity daily from the ECB for seven days – and on more favorable terms than before. In addition, the ECB has launched a tender where institutions can borrow dollars for 84 days once a week. The institutes secured a whopping $ 76 billion on the first allocation and $ 28 billion on the second.

This instrument is important for European banks because they have a relatively large number of claims in dollars. Large parts of global trade, as well as business in sectors such as oil or aviation, are ultimately settled in the US currency. On the other hand, European banks have relatively little natural dollar financing – for example through stable dollar deposits from private customers or companies.

The institutes therefore normally borrow dollars on the international money market. But it is currently very difficult for them to get money there for more than a month. “Investors and banks have been hoarding dollar liquidity like many German toilet paper since the beginning of March,” complains one market participant. “The whole thing is an expression of fear.” He hopes that the state of shock will soon resolve again. “Everyone has to assume that there will still be toilet paper tomorrow and that I don’t have to store tons of it in the basement.”

graphic

You can see how big the concerns about the dollar money market are from the Libor-OIS spread. It shows how expensive it is to refinance in dollars for a certain period of time. The spread has widened from below 20 to almost 120 basis points since the beginning of February. However, it is still a long way off the highs from the financial crisis when the stress barometer climbed over 350 basis points.

Nonetheless, the situation is tense – and the central banks are in close contact with the banks. The Money Market Contact Group (MMCG), in which the ECB discusses the situation on the money market with bank representatives, exchanged views five times in March alone. For comparison: there were only four meetings throughout 2019.

In the MMCG, heavyweights are like Deutsche Bank, BNP Paribas, ING and represented UniCredit. And they are preparing for a persistently difficult situation in the long-term dollar money market, as can be seen from a summary of the March 20 debate. The tenor: It will be some time before trust returns and the situation improves.

More: Private investors are particularly affected by breakdown series on trading platforms.

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Suspension of dividends for savings banks and Volksbanks

Sparkassen logo

In addition to the savings banks, the ECB is also demanding that the Volksbanks waive dividends.


(Photo: dpa)

Frankfurt Financial supervision has loosened the rules for banks significantly in the wake of the corona crisis. This should enable the institutes to support companies in this difficult time. However, the authorities want to prevent banks from using the additional scope to keep their shareholders on line with dividends.

The European banking regulator has therefore tightened its pace on this subject. On Friday evening, it asked the largest institutes in the euro zone not to pay dividends until at least October 1, 2020. The same applies to the buyback of own shares.

“With the recommendation, we want to prevent that in the current uncertain situation due to distributions, much needed capital may later flow out of the banking system,” Bundesbank board member Joachim Wuermeling told Handelsblatt. “However, this is not the case for payments between parent companies and subsidiaries within banking groups. That is why the recommendation does not extend to such transactions. ”The Munich-based HypoVereinsbank can therefore pay its Milan-based parent company UniCredit a dividend of EUR 3.29 billion as planned.

“The situation within groups is comparable, even if it is not legally a group,” said Wuermeling, who is responsible for banking supervision on the Bundesbank board.

Here too, a dividend payment remains “within the financial group of the savings banks or cooperatives” and thus in the banking system. “That’s why I don’t assume that distributions will be waived within alliances,” emphasized Wuermeling.

DZ Bank, fund provider Deka and individual Landesbanken are therefore likely to be able to pay dividends to their owners after a case-by-case assessment. DZ Bank belongs to the Volks- und Raiffeisenbanken, some of which have factored in the distribution of their central institution in their plans.

The same applies to the savings banks, to which Deka belongs 100 percent. The ownership structure of the Landesbanken is very different. The savings banks hold only 25 percent of BayernLB, but more than 80 percent of Helaba.

As in the previous year, Helaba plans to distribute 90 million euros to its owners for the 2019 financial year. “This corresponds to a payout ratio of less than 20 percent,” said CEO Herbert Hans Grüntker on Wednesday. “We believe that we are careful with our capital resources.”

DZ Bank plans to pay dividends to its owners totaling EUR 322 million. This corresponds to a payout ratio of around 17 percent.

“Basel IV” rules are postponed

In contrast to DZ Bank and Deka, German private banks like that Commerzbank, the Aareal Bank or the Deutsche Pfandbriefbank will probably have to suspend or cancel their planned dividend payments for 2019.

On the other hand, the institutes can look forward to further relief. International banking regulators announced on Friday that they will postpone the introduction of tougher capital requirements because of the corona crisis by a year. The set of rules, which is called “Basel IV” in the industry, should only be gradually introduced in 2023.

More: So far, almost everything has been about relieving companies of labor costs. Now relief is also being discussed in the cost of capital.

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Savings banks and Volksbanks can continue to receive dividends

Sparkassen logo

In addition to the savings banks, the ECB is also demanding that the Volksbanks waive dividends.


(Photo: dpa)

Frankfurt Financial supervision has loosened the rules for banks significantly in the wake of the corona crisis. This should enable the institutes to support companies in this difficult time. However, the authorities want to prevent banks from using the additional scope to keep their shareholders on line with dividends.

The European banking regulator has therefore tightened its pace on this subject. On Friday evening, it asked the largest institutes in the euro zone not to pay dividends until at least October 1, 2020. The same applies to the buyback of own shares.

“With the recommendation, we want to prevent that in the current uncertain situation due to distributions, much needed capital may later flow out of the banking system,” Bundesbank board member Joachim Wuermeling told Handelsblatt. “However, this is not the case for payments between parent companies and subsidiaries within banking groups. That is why the recommendation does not extend to such transactions. ”The Munich-based HypoVereinsbank can therefore pay its Milan-based parent company UniCredit a dividend of EUR 3.29 billion as planned.

“The situation within groups is comparable, even if it is not legally a group,” said Wuermeling, who is responsible for banking supervision on the Bundesbank board.

Here too, a dividend payment remains “within the financial group of the savings banks or cooperatives” and thus in the banking system. “That’s why I don’t assume that distributions will be waived within alliances,” emphasized Wuermeling.

DZ Bank, fund provider Deka and individual Landesbanken are therefore likely to be able to pay dividends to their owners after a case-by-case assessment. DZ Bank belongs to the Volks- und Raiffeisenbanken, some of which have factored in the distribution of their central institution in their plans.

The same applies to the savings banks, to which Deka belongs 100 percent. The ownership structure of the Landesbanken is very different. The savings banks hold only 25 percent of BayernLB, but more than 80 percent of Helaba.

As in the previous year, Helaba plans to distribute 90 million euros to its owners for the 2019 financial year. “This corresponds to a payout ratio of less than 20 percent,” said CEO Herbert Hans Grüntker on Wednesday. “We believe that we are careful with our capital resources.”

DZ Bank plans to pay dividends to its owners totaling EUR 322 million. This corresponds to a payout ratio of around 17 percent.

“Basel IV” rules are postponed

In contrast to DZ Bank and Deka, German private banks like that Commerzbank, the Aareal Bank or the Deutsche Pfandbriefbank will probably have to suspend or cancel their planned dividend payments for 2019.

On the other hand, the institutes can look forward to further relief. International banking regulators announced on Friday that they will postpone the introduction of tougher capital requirements because of the corona crisis by a year. The set of rules, which is called “Basel IV” in the industry, should only be gradually introduced in 2023.

More: So far, almost everything has been about relieving companies of labor costs. Now relief is also being discussed in the cost of capital.

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Deutsche Bank is considering short-time working

“At the operational level, the bank is preparing for such scenarios.” As of today, however, there was no short-time working within the institute.

Individual Volksbanks and Raiffeisenbanks are also considering registering short-time benefits. “Wherever it can not be avoided, cooperative banks take this step to preserve jobs,” said a spokeswoman for the Federal Association of Volks- und Raiffeisenbanken (BVR).

The move would be a novelty for the banking industry. “Short-time work is something completely new and unknown to banks. In any case, I know of no cases in my 35 years of professional experience, ”said Stephan Szukalski, Federal Chairman of the DBV banking union.

Short-time work is generally used by companies such as car manufacturers or mechanical engineers to survive an economic downturn without having to fire employees. The federal government has recently expanded short-time working opportunities due to the corona crisis.

“We know of a number of Volksbanken and Raiffeisenbanken that have already applied for short-time work,” said Szukalski. “Many more – as well as most of the big banks – at least that is our assessment. We will follow suit at the latest in the course of the next week.”

The employers’ association of the private banking industry said that, to the best of its knowledge, there has been no short-time working at German banks. “Of course, companies have to prepare for the fact that short-time work may also be necessary in certain areas,” said a spokesman

Banking expert Jan Duschek from the Verdi union explained that the closure of branches as a result of the Corona crisis is not a prerequisite for applying for short-time work. There are already possibilities in the collective agreements as well as in internal regulations to manage fluctuations in the volume of work and to secure employment.

According to insiders, possible forced holidays at banks are not about tens of thousands of employees, for example Volkswagen, Fraport or Lufthansa. Only a few areas of the institutes in the private customer business are affected, such as processing, marketing or in the branches.

“So far, short-time working has been purely hypothetical, but if the pressure from the corona crisis persists, you need to be prepared,” said a person familiar with the matter. For example, internal company agreements would be changed or adapted in order to be able to react quickly in an emergency.

The Deutsche Bank and the Commerzbank Both are currently in the middle of the corporate restructuring and are cutting thousands of jobs. That costs them a lot of money; Deutsche Bank alone has budgeted more than seven billion euros for this.

If branches remain closed for a long time due to the Corona crisis or if the business is idle in some areas, this increases the pressure on costs even more. Short-time working regulations can save costs, since the Federal Employment Agency pays 60 percent of the lost net wages.

The situation for German commercial banks is currently divided. For one thing, the wires in the corporate customer departments are running hot because thousands of companies are applying for KfW aid loans through their house banks because of the corona crisis.

Many employees worked overtime because of this, the unions said. “We see a huge need for advice from our customers. Therefore, the question of short-time work is currently not being asked, ”said Commerzbank private customer boss Michael Mandel of the Reuters news agency. On the other hand, more and more branches are being closed because people no longer go out of the house or employees at the banks have contracted the virus.

UniCredit subsidiary HypovereinsBank (HVB) now only has around 30 percent of its 337 branches in Germany open. Nevertheless, all employees are fully committed to the customers. “Short-time work is not an issue for us,” said a spokeswoman.

Deutsche Bank closed more than 200 of its more than 500 locations last week and is currently not planning any further closures. Commerzbank also thinned its branch network by around 160 branches. The employees are increasingly advising on telephone or video calls. Self-service zones at the banks are still open.

More: The rating agency Moody’s fears damage to the European financial system due to the corona crisis. Despite aid programs, the environment will deteriorate significantly.

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