Financial market stabilization fund

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Logo of the financial market stabilization fund

The Financial Market Stabilization Fund ( FMS , also Sonderfonds Finanzmarktstabilisierung , SoFFin ) was an extra German budget from 2008 to 2015 to support illiquid banks as a result of the financial market crisis . It was created in 2008 by the Federal Agency for Financial Market Stabilization (FMSA) based in Frankfurt am Main and administered by it until the end of 2017. It has not been possible to apply for aid measures from him since the end of 2015. Rather, the FMS manages the holdings that have existed since then and endeavors to reduce them. In its stabilizing function, the FMS was replaced by the new, uniform European resolution fund of the European bank resolution mechanism . At the beginning of 2018, the financial market stabilization fund was integrated into the Federal Republic of Germany - Finanzagentur GmbH .

Facility

The financial market stabilization fund was set up in the form of a federal fund and is therefore not subject to the usual budget planning rules. 65 percent of the costs (or losses) are borne by the federal government and 35 percent, but a maximum of 7.7 billion euros, by the federal states . Law for the Establishment of a Financial Market Stabilization Fund (FMStFG) §13 The fund was set up on October 17, 2008 as part of the German Financial Market Stabilization Act, which was passed in an urgent procedure on the same day by the Bundestag and Bundesrat and signed by the Federal President. The ordinance on this law was passed by the Federal Cabinet on October 20 . The fund was originally limited to December 31, 2009.

The fund was designed for a volume of up to 480 billion euros. Initially, the FMSA was allowed to take out loans of up to 70 billion euros through the fund for the acquisition of problem assets and for recapitalization ( participation ) in financial institutions. With the approval of the budget committee of the German Bundestag, another credit line of ten billion euros was available for the same purpose. In addition, the Federal Ministry of Finance was authorized to raise a further 20 billion euros in order to satisfy claims from guarantees. The FMSA was authorized to issue guarantees up to a total of EUR 400 billion for the debt instruments and liabilities of the beneficiary companies issued up to December 31, 2009. The guarantees were limited to 36 months.

Beneficiary companies were:

  • Institutes within the meaning of Section 1 (1b) of the KWG (credit institutions and financial services institutions),
  • Insurance companies and pension funds within the meaning of Section 1 (1) No. 1 and 2 of the VAG ,
  • Investment companies within the meaning of the InvG ,
  • Operator of securities and futures exchanges

as well as their parent company. The aid only applied to companies based in Germany. Law for the establishment of a financial market stabilization fund (FMStFG § 2)

The special fund has not initially granted any new loans to financial institutions since January 1, 2011. It was reactivated in January 2012 for a limited period until the end of 2012. In October 2012, the federal government decided to extend new applications further until the end of 2014, and in July 2014 again until the end of 2015 as part of the newly established European banking union . It was then replaced by the new, uniform European resolution fund of the European bank resolution mechanism .

organs

The determining body of SoFFin and at that time one of the most powerful bodies in the Federal Republic was the so-called steering committee. The inter-ministerial steering committee is made up of one representative each from the Federal Chancellery, the Federal Ministry of Finance, the Federal Ministry of Justice and Consumer Protection, the Federal Ministry for Economic Affairs and Energy as well as a member based on the proposal of the federal states and an advisory representative from the Deutsche Bundesbank. The Federal Ministry of Finance ultimately decides on the stabilization measures of the FMS. Law for the establishment of a financial market stabilization fund (FMStFG) §4

Expected function and criticism

The fund was able to provide guarantees to the banks of up to EUR 400 billion. These guarantees did not actually have to result in government payments if they were not called. As a precautionary measure, the federal government set five percent, or 20 billion euros, as the ultimate budget burden. In addition, there were services for the recapitalization of the banks and the assumption of risks for problematic loans of up to 80 billion euros. In total, the fund had a volume of EUR 100 billion that would have had to be raised by the state. The institutes had to pay a “market fee” (salable consideration, e.g. shares) or “reasonable interest” to the fund as consideration. Commerzbank, for example, should pay interest of 9% p.p. on the silent participation of the financial market stabilization fund. a. perform, Hypo Real Estate should pay an annual commission of 1.5% (until January 2009; thereafter 0.5%) for guarantees issued by the fund for its bonds and a commission of 0 on the part of the guarantee that has not yet been used, Pay 1% per year.

According to the announcement of a constitutional complaint against the Financial Market Stabilization Act, this initially did not contain any provision regulating the repayment of financial aid to the state. A constitutional complaint actually submitted by a Commerzbank shareholder was not accepted for decision by the Federal Constitutional Court with reference to the passage through lower instances. He opposed the bypassing of the general meeting and the exclusion of shareholders from the capital increase for SoFFin.

"For the success of the rescue package, it is necessary that the new Special Fund for Financial Market Stabilization (SoFFin) has in the next few weeks and months about a compelling and comprehensible concept for a sustainable financial system," according to the opinion of Economic Advisers in 2008. It'll be here on out on the one hand, not to save all banks, but only those with a successful business model; on the other hand, the state should not interfere in the day-to-day business of the banks. After successful stabilization and restructuring of the banking system, the state should withdraw to its core tasks.

The Financial Market Stabilization Fund spent almost 100 million euros on external consultants between autumn 2008 and the end of 2012. That emerges from the answer of the Federal Ministry of Finance to a request from Klaus Ernst (Die Linke).

The consulting firms were:

SoFFin instruments

The SoFFin instruments were intended to help financial institutions for a limited time to strengthen their equity capital and to bridge liquidity bottlenecks. In addition, banks were able to set up their own resolution agencies under the umbrella of the FMSA. Credit institutions were able to outsource risk positions and strategically no longer necessary business areas to these so-called “bad banks”, with the aim of reorganizing their business in a future-proof manner.

Guarantees

The instrument of granting guarantees provided for SoFFin to issue guarantees for newly issued debt instruments and justified other liabilities by financial companies. SoFFin guaranteed the buyer of the debt security service, i.e. repayment of the agreed sum when due. If the bank were not able to do this, SoFFin would have had to step in. For the investor, the risk of loss is reduced. This made it easier for the bank to obtain liquidity on the market.

For the granting of guarantees, the fund charged an individual percentage of the maximum guaranteed amount, which reflected the default risk. This was between 0.5% and 2% p. a.

In the course of 2013, the last outstanding guarantees from SoFFin in the amount of EUR 3.73 billion were returned. As a result, none of the guarantees granted by SoFFin (peaked at EUR 168 billion) were canceled. The commissions paid by the beneficiaries for the guarantees totaled EUR 2.16 billion.

Recapitalization

The aim of the recapitalization was to provide banks with the necessary equity capital. The fund received market-based remuneration for capital contributions. When granting silent contributions, this was usually between 9% and 10% p. a. The recapitalization could take place, for example, through the purchase of newly issued shares in the bank or the acquisition of silent partnerships by SoFFin.

As a result of the complete repayment of the remaining silent participation of Commerzbank in 2013, the financial investments were further reduced. The stock (peaked EUR 29.4 billion) of granted recapitalization measures before value adjustments decreased to EUR 17.1 billion in 2013.

Risk assumption

As part of the risk assumption, SoFFin was able to take over risk positions (e.g. receivables and securities) from banks or hedge them in other ways. In return, SoFFin transferred B. secure federal debt securities that could be used by them as collateral for interbank transactions or for loans from the European Central Bank.

There was only one assumption of risk from September 30 to November 30, 2009 for Portigon (formerly WestLB) in the amount of EUR 5.88 billion, which, however, was not utilized.

Resolution agencies

In addition to structured securities, a bank can transfer other risk positions - such as loans at risk of default - and entire business areas that are no longer needed for the future strategy of the bank to a resolution agency, the so-called bad bank . This gives the banks the opportunity to process these portfolios in an orderly manner and to realign themselves for the future with a promising business model. By transferring the risk positions, the bank is immediately relieved of capital requirements and depreciation pressure due to fluctuations in value. The resolution banks model implies that the owners of the bank remain economically responsible for the resolution agency. The losses incurred by the liquidation agency must therefore continue to be compensated by the owners.

FMSA has set up two resolution agencies: Erste Abwicklungsanstalt (EAA), to which WestLB has transferred business areas and risk positions that are not strategically necessary, and FMS Wertmanagement (FMS-WM), to which the strategically no longer necessary assets and risk positions of HRE- Group were split off. The FMSA's duty to compensate for losses is regulated in the respective statutes of the resolution agencies. After completion of the transaction, i. H. after the sale of all transferred risk positions and business areas, the FMSA will dissolve the liquidation agencies.

Services and utilization

The nominal volume of the EAA was reduced from 143.3 billion euros in 2012 to 32.8 billion euros by the end of 2018. The nominal volume of the FMS-WM was reduced from 174.3 billion euros in 2010 to 69.0 billion euros at the end of 2018. In 2013, SoFFin paid FMS Wertmanagement (FMS-WM), due to the loss compensation obligation, 7.3 billion euros. After offsetting losses of EUR 2 billion in 2012, SoFFin's liabilities increased to the level of EUR 9.3 billion that is still valid today (end of 2018).

Benefits from SoFFin
applicant Max.
SoFFin guarantees		 Return last guarantees Max
recapitalization used 		Max.
Risk assumption used 		Liquidation
agency nominal volume
December 31, 2018 		Cumulative payments from
loss compensation obligation
up to December 31, 2018
Hypo Real Estate 124 billion euros 2010 EUR 9.8 billion No FMS-WM
69 billion euros 		EUR 9.3 billion
BayernLB EUR 5.0 billion 2011 No No No -
HSH Nordbank EUR 24.0 billion 2012 No No No -
Commerzbank AG EUR 5.0 billion 2011 EUR 18.2 billion No No -
IKB Deutsche Industriebank EUR 10 billion 2012 No No No -
Aareal Bank EUR 4.0 billion 2011 EUR 0.5 billion No No -
WestLB / Portigon - - EUR 3.0 billion EUR 5.9 billion
(September 30 to November 30, 2009) 		EAA
EUR 32.8 billion 		0 EUR
Corealcredit Bank AG EUR 0.5 billion 2010 No No No -
Düsseldorfer Hypothekenbank EUR 2.5 billion 2013 No No No -
Sicherheiteinrichtungsgesellschaft
deutscher Banken mbH 		6.7 billion euros 2012 No No No -

Economic result

When evaluating the annual balance sheets, it must be taken into account that SoFFin has been 100% owner of Hypo Real Estate since 2009 and at the end of 2018 still held a share of 15.6% in Commerzbank. Commerzbank shares were valued at around 2.2 billion euros in August 2017; in the 2018 annual financial statements, the value fell by 1.3 billion euros compared to the previous year's financial statements to around 1.1 billion euros.

Balance sheet figures
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Commission income € 55 million € 690 million € 933 million € 380 million € 132 million € 96 million € 50 million € 13 million € 13 million € 13 million € 13 million
Interest income € 12 million € 214 million € 49 million € 40 million € 29 million € 181 million € 33 million € 31 million € 39 million € 0 million € 0 million
Other company income € 0 million € 0 million € 142 million € 2,430 million € 1,429 million € 698 million € 63 million € 69 million € 1,022 million € 1,662 million € 0 million
Interest expenses € 12 million € 407 million € 809 million € 420 million € 267 million € 502 million € 296 million € 290 million € 386 million € 218 million € 214 million
Impairments € 0 million € 4,750 million € 1,250 million € 4,130 million € 740 million € 450 million € 143 million € 275 million € 454 million € 0 million € 1,313 million
Provision expenses € 0 million € 0 million € 3,870 million € 11,400 million € 0 million € 0 million € 127 million € 231 million € 0 million € 0 million € 0 million
Annual surplus € 55 million € −4,260 million € −4,810 million −13,100 million € € 584 million € 23 million € −419 million € −685 million € 99 million € 1,457 million - € 1,514 million
Total assets € 32,400 million € 30,150 million € 27,842 million € 26,439 million € 26,448 million € 25,925 million € 24,052 million € 23,662 million € 23,823 million

At the end of the 2018 financial year, income of around EUR 13 million was offset by expenses of around EUR 1,527 million, so that an annual deficit of almost EUR 1,514 million was reported. As in previous years, income of EUR 13.2 million came from the loan granted to the EAA. After the write-up of around 1,027 million euros to the Commerzbank share in the previous year 2018, the expense side is determined by a write-down of around 1,313 million euros. Interest expenses are reduced to around EUR 214 million compared to the previous year. The uncovered deficit that has accrued since the FMS was founded was around EUR 22.6 billion as of December 31, 2018.

See also

Web links

Individual evidence

  1. ↑ Financial Market Stabilization Act 2008. Federal Government, October 17, 2008, accessed on May 4, 2018 (Bundestag printed matter 16/10600).
  2. ↑ Further development of the Federal Agency for Financial Market Stabilization. Federal Ministry of Finance, August 19, 2016, accessed on May 11, 2018 (monthly report).
  3. ↑ Top of the coalition agrees: “Financial market stabilization fund” is ready Federal government initiates package of measures for European banking union. Handelsblatt, October 13, 2008, accessed on May 11, 2018 .
  4. ↑ Financial market stabilization of the FMS website of the FMS, accessed on May 11, 2018.
  5. ↑ A parliament disempowered itself. ZEIT ONLINE, March 28, 2009, accessed on May 22, 2018 .
  6. ^ Hypo Real Estate - Government approves bank nationalization. FAZ, February 18, 2009, accessed on May 22, 2018 .
  7. ↑ Federal government for the extension of protection against systemic banking crises - greater cost sharing by the financial sector. Federal Ministry of Finance, October 17, 2012, accessed on October 17, 2012 .
  8. ↑ Federal government launches package of measures for the European banking union. Federal Ministry of Finance, July 9, 2014, archived from the original on February 15, 2015 ; Retrieved February 15, 2015 (press release).
  9. ↑ Financial Market Stabilization Fund (SoFFin). Konrad Adenauer Foundation, accessed on May 4, 2018 (glossary entry).
  10. ↑ Package of measures to stabilize the financial markets. Federal Ministry of Finance, archived from the original on May 25, 2018 ; accessed on May 4, 2018 (infographic).
  11. ↑ SoFFin extends the guarantee granted to the Hypo Real Estate Group until April 15, 2009. DEPFA Deutsche Pfandbriefbank AG, January 12, 2009, accessed on May 7, 2018 (DGAP press release).
  12. ↑ Lawyers take a stand. ( Memento from October 25, 2008 in the Internet Archive )
  13. ^ Constitutional Court: Karlsruhe does not accept lawsuit against Soffin. FAZ, April 3, 2009, accessed on May 18, 2018 .
  14. ↑ Mastering the financial crisis, strengthening growth forces. Expert Council, November 12, 2008, accessed on May 7, 2018 (annual report 2008/09).
  15. ↑ Soffin consultant: those who caused the crisis got millions. Spiegel online, March 6, 2013, accessed May 7, 2018 .
  16. ↑ Bank rescue fund pays 100 million for consultants. Neues Deutschland, March 7, 2013, accessed on July 21, 2015 .
  17. ↑ Five years of financial market stabilization fund under the umbrella of the Federal Agency for Financial Market Stabilization. Federal Ministry of Finance, December 20, 2013, accessed on May 7, 2018 (monthly report).
  18. ↑ The state relieves the banks' capital. FAZ, January 20, 2009, accessed May 7, 2018 .
  19. ↑ Fund for the stabilization of the financial markets in Germany starts work. FMSA, October 27, 2008, accessed May 7, 2018 (press release).
  20. ↑ SoFFin: Last outstanding liquidity guarantee repaid. FMSA, December 13, 2013, accessed May 7, 2018 (press release).
  21. ↑ Complete repayment of the SoFFin's silent participation at Commerzbank AG. FMSA, May 31, 2013, accessed May 7, 2018 (press release).
  22. ↑ small inquiry: Hybrid capital in the financial market crisis. Federal Government, January 19, 2011, accessed on May 7, 2015 (Bundestag printed matter 17/4496).
  23. ↑ Liquidation agencies. FMSA, accessed on May 7, 2018 (overview and description of the resolution agencies).
  24. ↑ a b Historical overview of the FMS / SoFFin measures. (PDF) Retrieved on August 13, 2019 (tabular overview).
  25. ↑ The taxpayer jumps into the breach. tagesschau.de, September 29, 2008, archived from the original on September 26, 2017 ; accessed on May 7, 2018 .
  26. ↑ Bayerische Landesbank becomes a billionaire grave. Welt online, November 29, 2008, accessed May 7, 2018 .
  27. ↑ HSH Nordbank accepts state aid. NDR online, archived from the original on November 6, 2008 ; accessed on May 7, 2018 (Internet archive).
  28. ↑ Commerzbank relies on state aid. Spiegel online, November 3, 2008, accessed May 7, 2018 .
  29. ↑ Ad hoc announcement in accordance with Section 15 WpHG: IKB receives guarantees from SoFFin. IKB, December 22, 2008, accessed on May 7, 2018 (press release).
  30. ↑ Aareal-Bank flees under a rescue package. FAZ, February 16, 2009, accessed on May 7, 2018 .
  31. ↑ Fabian Strebin: Commerzbank: Is the federal government getting out? In: The shareholder. August 4, 2017. Retrieved February 4, 2019 .
  32. ↑ a b FMS annual financial statements, FMS website, accessed on August 13, 2019.
  33. ↑ Report on the 2018 financial year of the Financial Market Stabilization Fund - FMS. (PDF) FMS, July 1, 2019, accessed on August 13, 2019 (Annual Report).