Lot size transformation

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As batches transformation ( English lot size transformation ) is in the financial market , the conversion of different levels of amount of money specified in the desired by consumers sums of money.

General

The word batch size transformation includes the batch size, a term from industrial management , which means a certain production quantity. The batch size transformation of financial intermediaries is also about certain “production quantities” . Here the lot size transformation (also called the agglomeration function) is one of three economic functions. In addition, credit institutions still fulfill the deadline and risk transformation . The task of the institutes in the batch size transformation is to convert many small amounts into a few large amounts depending on the demand.

species

Since capital seekers and capital providers usually do not trade the same amounts of capital, it is the task of financial intermediaries to ensure that the amounts are congruent. There are two options for a lot size transformation:

  • Large loans are refinanced and / or through a variety of smaller investments
  • A large number of smaller loans are refinanced by one or a few large investments.

The typical case in banking is the bundling of several small investments in large loans. In both cases, the batch size transformation ensures the harmonization of quantitative incongruences.

Banking impact

The batch size transformation - like the maturity transformation - is made possible by sediment theory . With prolongations, the depositors in fact leave their funds with the banks longer than legally agreed; with substitutions, withdrawn funds are replaced with new investments; however, this sediment theory is only valid in trouble-free markets. The capital accumulation function consists in particular in the accumulation of many very small amounts of savings deposits and unused deposits on current accounts .

The difference in size of different amounts of money expressed in the lot size transformation is empirically well documented. But the diversification of creditor risks can also be a motive for small investments. Lot size transformation can be seen as a reflex to decision problems of the creditors . With a large number of bank customers, the batch size transformation leads to economies of scale and experience curve effects .

The more refinancing volume that can be bundled, the greater the opportunities for an institution to increase in value. However, the credit risks also increase if a bank is able to extend a large loan to a single borrower by bundling many small financial investments . Large exposures represent a particular risk, which is why they are subject to qualified resolutions and reporting requirements in accordance with Section 13 ff. KWG .

The principle of lot size transformation assumes that loans granted will be refinanced by appropriately available capital investments. However, it must be taken into account that , according to modern credit theory , credit institutions are also able to grant loans with the help of money creation . Recourse to capital investments is not necessary as long as the lending institutions remain solvent (they can generate more liquidity inflows than outflows from net lending - typically larger banking institutions in export surplus countries). Likewise, in the ideal case of “lending in lockstep”, the lot size issue does not arise.

Outside the banking sector

Insurance companies collect many small insurance premiums in order to use them to settle a few larger insurance claims or to make larger investments. Similar transformations are part of the task of other capital collection agencies . Batch size transformation does not only occur with financial intermediaries, but also in many areas of direct financing ; for example at stock corporations , which collect the high issue amount of their shares from a large number of small shareholders .

Individual evidence

  1. ↑ a b Peter Betge, Bankbetriebslehre , 1996, p. 13 f.
  2. ↑ Matthias Hofmann, Management of Refinancing Risks in Credit Institutions , 2009, p. 9.
  3. ^ A b Friedrich Theißen, Opportunism and Financial Markets , 2010, p. 198 f.
  4. ^ Friedrich Theißen, Opportunism and Financial Markets , 2010, p. 203.
  5. ^ Nils H. Tröger, Mergers & Acquisitions in the German banking sector , 2003, p. 28.
  6. ↑ Christian Schäfer, Recording bank-specific risks in the assessment of credit institutions , 2008, p. 6.
  7. ↑ Nils Moch, Liquidity Risk Management in Credit Institutions , 2007, p. 8.
  8. ↑ Wolfgang Stützel: Economic balance mechanics. Reprint of the 2nd edition. Tübingen 2011. p. 27:
    “So z. For example, a small bank can expect that all of its borrowers' transfers from the loans granted to them will end up with other banks, so granting a loan will lead to an equally large loss of liquidity [...]. A larger bank with a widely dispersed branch network can already expect that some of the transfers of its borrowers will end up in the accounts of other own customers, increase their deposits or reduce their credit utilization. [...] As a result, almost every reduction in liquid funds at an individual bank leads to an increase in the liquid funds of other banks in this group ( size mechanics ). "
  9. ↑ See Hans Gestrich: New credit policy. Stuttgart and Berlin 1936. ( PDF; 652.3 KiB )