Maximum load theory
The maximum load theory is Bankbetriebslehre one of Wolfgang Stützel established in 1959 theory that the loss-absorbing function of own resources stresses while liquidity-oriented formulated disposition rules.
History of origin
In September 1959, Wolfgang Stützel gave a lecture to Sparkasse auditors in Kiel, which he and his students expanded and established a permanent place in scientific banking management under the heading of maximum workload theory. When banks accepted deposits through the Berlin Disconto-Gesellschaft founded in October 1851 , bank loans were for the first time not financed by equity , but by debt , so that maturity mismatches arose with the risk of maturity transformation . The theoretical starting point was the golden banking rule developed by Otto Huebner in 1854 , in which he demanded that “the credit that a bank can give without running the risk of not being able to meet its obligations must not only be in amount but also in quality correspond to the credit she enjoys ”. With this, he advocated absolute (quantitative and qualitative) maturity congruence between assets and liabilities . Adolph Wagner modified this term congruence in 1857 with his sediment theory , which he linked with the law of large numbers : "... but it is completely incorrect to draw the conclusion that 1000 deposits that are also due may not be used either". Karl Knies extended the sediment theory in 1897 to the rediscounting of bills of exchange , because the Reichsbank had provided the institutes with a source of central bank money that they could use to create liquidity by monetizing circulating assets such as bills of exchange .
Core of the maximum load theory
Stützel recognized that in the event of maximum liquidity exposure, the sediment theory is no longer in force, since one is no longer “faced with a very large number of individual risks that are independent of one another”. As a result, even the dregs disappear, which due to the resulting bank run leads to a domino effect with a massive deposit withdrawal , which the banks concerned try to counteract by monetizing their assets . In this connection, more and more liquidation losses occur , which lead to coverage problems for the payment claims for bank deposits. The amount of loss depends on the creditworthiness of the debtor ( counterparty default risk ) and the interest income from the receivables ( interest rate risk ). These specific risks are visually illustrated by Stützel in the “depositor protection balance sheet”. After all, the available equity must be sufficient to cover the liquidation losses. "The sum of the losses that have to be accepted in the event of such an early assignment of certain assets must never be greater than the equity".
consequences
The maximum load theory thus also provides an initial indication of the question of how much equity capital must be available to secure the liquidity risk . In addition, Stützel's theory has shown that the sediment theory is not applicable in times of crisis, especially when a bank run occurs. The more illiquid the markets are, the higher the discounts when selling assets and the higher the equity must be and vice versa. A functioning loan trade is overwhelmed when several banks are forced to sell entire loan portfolios at once , so that loan sales can tend to lead to increasing losses. Today's banking supervisory law requirement for a minimum level of the quotient of risk positions and own funds has a conceptual proximity to Stützel's maximum burden theory. The statutory deposit insurance is intended to eliminate the risk of bank run and thus neutralize one of the main effects of the maximum burden theory. As part of the stress tests , scenarios of the maximum load theory are also simulated today.
The maximum burden theory got its name from the maximum burden to which a bank is exposed in the extreme scenario of a complete withdrawal of deposits by its creditors without these being rolled over or substituted. In order to satisfy the payment requests of its creditors, it also has to sell illiquid assets at a loss. In this regard, the theory has been verified by numerous banking crises . The bankruptcy of the Herstatt Bank in June 1974 brought its creditors a bankruptcy rate of 65% on average, which proved that the realization of the bankruptcy estate led to losses that exceeded equity. When the Lehman Brothers in September 2008 filed for bankruptcy, gave the banks to each other in the interbank market no loans more so in Europe, the ECB had to step in as a substitute massively creditors.
In this way was increasingly in banking and insurance , the risk-bearing capacity in the focus of the banking and insurance regulators . She realizes the fundamentals of the maximum load theory in finance through regulatory provisions.
Individual evidence
- ↑ Jan Körnert, The maximum load theory of Stützels as a contribution to the microeconomic analysis of domino effects in the banking system , in: Eberhart Ketzel / Hartmut Schmidt / Stefan Prigge (eds.), Wolfgang Stützel - modern concepts for financial markets, employment and economic constitution , 2001, p. 81 ff .
- ↑ a b Jan Körnert, The maximum load theory of Stützels as a contribution to the microeconomic analysis of domino effects in the banking system , in: Eberhart Ketzel / Hartmut Schmidt / Stefan Prigge (eds.), Wolfgang Stützel - modern concepts for financial markets, employment and economic constitution , 2001, p. 88 f.
- ↑ Otto Hübner, Die Bank , Volume 1, 1854, p. 28 f.
- ^ Adolph Wagner, Contributions to Doctrine of Banks , 1857, p. 167
- ↑ Carl Knies, Das Geld - Presentation of the basic doctrines of money , 1873, p. 154 ff.
- ↑ Wolfgang Stützel, Is the “golden banking rule” a suitable guideline for the business policy of credit institutions? , in: Lectures for Sparkasse Auditors, 1959, p. 772 f.
- ↑ Wolfgang Stützel, Is the “golden banking rule” a suitable guideline for the business policy of credit institutions? , in: Lectures for Sparkasse Auditors, 1959, p. 775.
- ↑ Wolfgang Stützel, Is the “golden banking rule” a suitable guideline for the business policy of credit institutions? , in: Lectures for Sparkasse Auditors, 1959, p. 43.
- ↑ Stephan Germann, Strategic Implications of Credit Risk Management in Banks , 2004, p. 133 FN 343.
- ↑ Eduard Gaugler / Richard Köhler, Developments in Business Administration: 100 Years of Specialized Discipline - Simultaneously a Publishing History , 2002, p. 290