Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
History of the Federal Reserve System wikipedia , lookup
Federal takeover of Fannie Mae and Freddie Mac wikipedia , lookup
Household debt wikipedia , lookup
Securitization wikipedia , lookup
Global saving glut wikipedia , lookup
Syndicated loan wikipedia , lookup
Financialization wikipedia , lookup
Shadow banking system wikipedia , lookup
THE ROLE OF BANKS IN THE ECONOMIC RECOVERY Tomaž Košak, Banka Slovenije UMAR "Why Slovenia should embark on structural reform" March 15, 2016 FINANČNA STABILNOST Outline • How the financial crisis reflects in banking sector? – Deleveraging – Credit activity (credit supply) – The quality of credit portfolio • How the financial crisis reflects in corporate sector? – Deleveraging through the debt repayment. – Corporate indebtedness and lack of equity – Cross-border financing. • How to revive the credit market? – Short-term activities – Long-term activities / process FINANČNA STABILNOST Financial crisis in Slovenia • Slovenian economy went through the typical boom-bust financial cycle: • – High credit growth until 2008 and credit contraction since 2010. – Double-dip recession in real economy. That reflects in the savings - investment gap development. Figure: GDP growth rate and credit growth rate to NFC and non-banking sector (L) Savings investment gap in Slovenian economy in % of GDP (R) 40 35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30 -35 8 34 6 32 4 30 32,9 Savings ratio 32,7 Investments/GDP 30,2 Savings/GDP 28,4 2 28 0 26 26,4 28,5 28,9 29,7 27,4 26,7 28,4 26,3 NBS credit grosth -2 24 NFC credit growth -4 22 -6 20 -8 18 -10 16 SI GDP growth rate 29,0 26,8 22,6 23,4 27,2 23,2 21,7 22,2 21,6 26,6 20,9 21,7 21,3 18,8 23,2 22,1 23,7 19,4 19,8 20,1 22,0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 15 Q2 FINANČNA STABILNOST Financial crisis in Slovenia • The banking intermediation prevailed in the structure of financial sector in 2008 and in 2015: – Banking based financial intermediation (Bank's BS 76% and 73% of fin. sect. respectively). – Financial sector achieved up to 170% GDP at the outbreak of financial crisis. • The real sector highly dependent on bank financing. – After outbreak of crisis the consequences for SLO corporate sector were more sever than in the economies with the developed capital markets. Table: Structure of Slovenian financial sector Balance sheet (mio EUR) Structure (in %) Proportion to GDP (%) Growth r. (%) 2008 2014 2008 2014 2008 2014 2009 2014 Monetary f in. Institutions 47.948 38.724 76,3 72,7 128,5 104,0 8,5 -4,0 Non-monetari f in. Institutions 14.925 14.531 23,7 27,3 40,0 39,0 6,2 -11,8 Insurance com. 5.151 7.385 8,2 13,9 13,8 19,8 9,9 6,4 Pention f unds / f unds 1.041 1.530 1,7 2,9 2,8 4,1 23,6 6,9 Inv estment f unds 1.912 2.156 3,0 4,0 5,1 5,8 16,8 15,9 Lizing com. 6.146 3.461 9,8 6,5 16,5 9,3 -0,9 -9,5 1,1 0,0 1,8 0,0 -13,7 -100,0 100,0 100,0 168,5 143,0 7,9 -6,3 Ohter non-monet. Fin. Inst. Total 675 62.873 53.255 FINANČNA STABILNOST Deleveraging of banks • At the outbreak of crisis the banking sector was affected on the liability side: – – – – High indebtedness of banks on wholesale market: >36% of total bank's liabilities. The crisis affected the interbank confidence (depleting cross-border interbank financing) From 2008 until 2015 the banks net repayment amounted to more than € 12 bn or 1/3 of GDP. Deleveraging in banking sector was necessary, but it remains open: • what form the deleveraging should take and • at what speed. Figure : Net repayments of liabilities to wholesale market and balance sheet shrinking in % GDP Figure: Strukture of banking liabilities in % 100% 90% 5,2 5,0 4,4 4,8 4,7 3,6 2,5 2,9 2,8 8,4 8,4 8,3 8,0 8,1 9,1 10,8 11,8 2,3 2,6 2,7 4,1 8,2 1,2 8,9 7,5 80% 70% 6,6 3,5 8,7 4,7 40% 2,9 4,3 4,1 11,7 34,0 33,6 25,0 23,1 19,5 16,5 13,3 5000 2,4 3,0 3000 9,4 2000 4,3 43,6 5,6 45,9 6,8 47,0 6,7 3,3 1000 1.911 1,0 -1000 6,7 -2000 49,9 Non-banking sector deposits Liabilities to foreign banks Liabilities to ECB Other 30% 12,6 4,3 5,9 3,6 46,1 5.349 4000 0 60% 50% 9,2 6000 51,7 55,9 63,1 67,2 -3000 Liabilities to domestic banks Debt securities Equity -4000 -5000 -6000 20% 2008 2007 2008 2009 2010 2011 2012 2013 2014 16 14 12 Banking system's total assets 4.061 10 8,5 Year-on-year growth in total assets, % 8 6 4 2 -241 -2.781 -799 0 -3,0 -2 -2,4 -908 -4,0 -1.301 -4 -1.249 -1.629 -1.517 -3,4 -6,3 -6 -1.548 -8 -2.911 -3.124 -10 -3.527 -12 -12,5 -14 -16 -5.776 2009 2010 2011 2012 2013 2014 2015 Liabilities for wholesale funding 2015 FINANČNA STABILNOST Deleveraging of banks • Three types of deleveraging in banking sector (Banoit Coeure): – Good deleveraging • involves banks raising capital and getting rid of impaired assets in a rapid manner (among Slovenian banks since 2013 large domestic banks). – Bad deleveraging • an indiscriminate reduction in balance sheet size, regardless of the quality of assets. Motivation is to reduce indebtedness. The upshot is a potentially prolonged, across-the-board reduction of credit to the real economy. – Ugly deleveraging • comprises banks specifically discarding good assets while keeping distressed assets in the banking book and recording them at close to nominal value (at certain Slovenian banks in the first phase of crisis). • • The "bad" and "ugly" deleveraging have real economy effects on liquidity, funding access… Financially weak banks tend to roll over unprofitable loans that do not support GDP growth. "Wrong" type of deleveraging harms the transmission of monetary policy. FINANČNA STABILNOST Deleveraging of banks • Financial leverage of banks grew since 2008 until 2013, afterwards is it has been declining : – At the beginning too slow recapitalization of banks pressure on further decrease in total assets (and capital request). • Regulatory capital: -18% & capital request: -31% – After 2013 "good" deleveraging. • Regulatory capital: +12% & capital request: -24% Figure: Net repayments of liabilities to wholesale market and balance sheet shrinking in % 18% 14% 10% Figure: Capital adequacy in % and the changes in CR and recapitalization of banks in p.p. 16 Total assets (y-o-y growth) 11,0 14 Financial leverage (right) 12 8,5% 11,1 11,3 11,5 7,5% 6% 14,2% Capital (y-o-y- growth) 12,6% 12,3% 11,4 10 10,0 5,5% 2% 8,2 -2,4% -2% -3,9% -6% 7,5 -1,6% -3,0% -5,5% -4,6% -6,3% 8 6 -3,4% -4,0% 4 2 -10% -12,5% 0 -14% 2008 2009 2010 2011 2012 2013 2014 7,0 6,5 6,0 5,5 5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 -0,5 -1,0 -1,5 -2,0 25 Contributon of own funds to the change of CA (in p.p.) 19,3 Contribution of RWA to the change in CA (in p.p.) CA- system (in %, right) 11,6 20,9 1,2 15 14,0 11,3 11,6 20 10 11,9 5 3,6 0,4 -0,5 0,0 -0,2 0,7 -0,4 4,0 0,7 -0,4 0,5 0 1,0 -5 -10 -1,5 -15 2009 2010 2011 2012 2013 2014 2015 2015 FINANČNA STABILNOST Deleveraging and CAR • After the rehabilitation of banks in 2013-2014 the CA ratio improved and cannot be treated as a restriction factor: – CAR in 2015 stood at 20,9% (on consolidated level at 18,6%, Tier 1 ratio grew to 17,9%) both exceeding EMU average. • Moderate decrease of RWA (€ -57 mio): a) contraction of lending activity, b) restructuring the assets (less risky) ↑securities/ total assets & ↓loans / total assets. • ↑ own funds (€ +103 mio): a) profit, b) recapitalizations. "good" deleveraging. – Internal generation of capital (credit growth) and optimization of existing capital (↓NPL ↓ RWA) efforts to keep sufficient capital adequacy and fulfilment of all regulatory requests (CRR). Figure: Net repayments of liabilities to wholesale market and balance sheet shrinking in % 20 19 18,1 17 CAR in SI- Banking system 16 15,5 14 12,8 13 11 16,2 15,6 15 12 18,6 17,9 CAR in EMU 18 14,3 13,1 13,7 13,1 11,7 11,5 11,7 11,3 11,8 11,4 10 9 8 2008 2009 2010 2011 2012 2013 2014 sep.15 2015 FINANČNA STABILNOST Deleveraging and more sustainable funding • Through the deleveraging the LTD ratio lowered to 81% what reflects in more sustainable funding than before the crisis. – Increase in the share of "core funding" in the banks, however • Increased share of demand deposits / total deposits of NBS, in 2015 +9,3 p.p. (55,4%). • Growing gap between maturity of investments (lengthening) and funding (shortening) increases the importance of secondary liquidity. – Stable growth of HH deposits and sufficient liquidity are supportive factors for potential credit supply. Figure: The term-structure of NBS' deposits in % Figure: Loan to deposit ratio in % 100 300 9,7 Banking system 12,2 90 22,8 Large domestic banks 250 31,8 80 Small domestic banks Banks under majority foreign ownership 70 53,4 50 161,5 142,9 150 145,3 134,8 40 129,8 30,3 30,1 88,2 81,0 20 27,7 16,9 45,5 33,1 30,9 28,9 28,4 24,2 Long-term deposits Short-term deposits Sight deposits 30 107,9 100 32,3 54,7 60 200 33,4 55,4 36,9 33,1 31,7 35,1 35,8 38,7 41,4 2008 2009 2010 2011 2012 2013 45,7 10 50 0 2008 2009 2010 2011 2012 2013 2014 2015 2007 2014 FINANČNA STABILNOST 2015 Deleveraging and credit standards • Adequate CAR and sustainable funding reflect in expected turn in the dynamics of lending to NFC: – The decline in corporate loans is slowing (-10% p.a. at the end of 2015). – Increase of newly approved long-term loans (+1,9% p.a.) and lengthening of the average maturity of loans. • However some factors slow down credit recovery: – – – – Tightened credit standards for corporate loans (but change in Q4-2015) & lack of bankable projects. Commitments to EC for banks that received the state aid during rehabilitation (divestment, restriction on min RoE). Regulatory uncertainty regarding capital (CRD & CRR,..) and debt requirements (MREL,..) Still high level of NPL (in arrears >90 days), that hampers new credit supply and profitability. Figure: Credit standards for corporate loans Figure: Y-o-y growth of loans to NFCs by bank group in % 55 50 45 40 35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30 -35 -40 -45 LOANS TO NFC (y-o-y grow in %) 100 1000 80 800 60 600 40 400 20 200 0 0 -20 -40 Large domestic banks -400 Raven kreditnih standardov v Sloveniji (desno) Small domestic banks -60 Neto sprememba kreditnih standardov - Slovenija (v %) -600 Banks under maj.foreign.own. -80 Neto sprememba kreditnih standardov - evro območje (v %) -800 Total 2008 -200 2009 -100 2010 2011 2012 2013 2014 2015 -1000 q1q2q3q4q1q2q3q4q1q2q3q4q1q2q3q4q1q2q3q4q1q2q3q4q1q2q3q4q1q2q3q4 2008 2009 2010 2011 2012 2013 2014 2015 FINANČNA STABILNOST Factor: Tightened credit standards & lack of bankable projects • Despite of low IR and adequate banks liquidity and funding condition, there is still slow recovery in creditworthiness credit demands of corporate sector: – In 2015 the IR for corporate loans up to € 1 mil converge to EA average value. – However, the structure of credit demand was still modestly underpinned by private investments in 2015 (according to BLS). Banks are competing for low volume of bankable projects, what can further affect banks' profitability. Figure: IR for loans to NFCs to 1 mil EUR in Slovenia and in EA 150 6 100 5 5 4 4 50 3 3 0 2 2 -50 1 1 0 0 -1 -1 FINANČNA STABILNOST 2015-Q4 2015-Q3 2015-Q2 2015-Q1 2014-Q3 2014-Q1 2015 2013-Q3 2014 2013-Q1 2013 2012-Q3 2012 2012-Q1 2011 2010-Q3 2010 2010-Q1 2009 2009-Q3 -150 2009-Q1 -100 2011-Q3 Euroarea 2008 Inventories and working capital Gross fixed capital formation The use of other sources of funding Other funding needs The general level of interest rates Demand 7 Slovenia 6 200 2008-Q3 7 8 Diference (right) IR FOR LOANS NFCs to 1 mio EUR 2011-Q1 8 Figure: Factors of corporates credit demands according to BLS, index 2008-Q1 • Factor: level of NPL • NPL levels (CC in arrears >90 days) remains elevated despite visible progress and accelerating NPL resolution since 2013: – The share of CC in arrears >90 days 9,9%; decreased by 1,9 p.p. or by € 966 mio in 2015. • Contraction in CC by -5,6%. • High volume of write-offs: € 880 mio. – Segments of portfolio with high arrears >90 days: NFC: 15,4% (60% of CC in arrears), SME 24,6%. • Manufacturing decreased most, by -3,6 p.p. to 8,8%. • Construction decreasing, still represent 25% of CC in arrears >90 days in NFC. Figure: CC in arrears more than 90 days in EIR million, proportion in CC (L) and proportion of CC in arrears over 90 days by client type (R) 10.000 9.000 8.000 7.000 Claims against SMEs more than 90 days in arrears, EUR million (left scale) Claims against large enterprises more than 90 days in arrears, EUR million (left scale) Other claims more than 90 days in arrears, EUR million (left scale) Proportion of claims more than 90 days in arrears (right scale) Year-on-year growth in classified claims (right scale) 25% 20% 15% 10% 6.000 5.000 5% 4.000 0% 3.000 35 NFCs OFIs 30 Non-residents Sole traders 25 Households Overall 20 15 -5% 10 -10% 5 -15% 0 2.000 1.000 0 20082009 2010 2011 2012 2013 2014 2015 20082009 2010 2011 2012 2013 2014 FINANČNA STABILNOST 2015 Factor: level of NPL (2) • Coverage of CC in arrears >90 days by impairments increase by 3,8 p.p. to 64,5%, although decrease in volume. Level of "NPL" and "sufficient coverage ratio" have two consequences – 1.) Robust balance sheet of banks but, – 2.) High share of NPLs affects the bank profitability and increase risk aversion of banks ( hampering new credit supply!). Figure: Coverage of non-perfomring claims by impairments and provisions over 90 days in arrears in % 9.000 8.000 80% Unimpaired claims more than 90 days in arrears Impairments and provisions for claims more than 90 days in arrears 70% Coverage of non-performing claims by impairments and provisions 7.000 65% 60% 61% 6.000 57% 50% 5.000 36% 4.000 38% 30% 3.000 2.000 40% 43% 29% 25% 20% 10% 1.000 0 0% 2008 2009 2010 2011 2012 2013 2014 2015 FINANČNA STABILNOST Factor: Tighten credit standards and corp. deleveraging • Risk aversion of banks originates from funding structure of corporates and cause their deleveraging: – Corporates have reduced their indebtedness in the last four years. Debt-to-equity ratio is at a pre-crisis level. – Debt-to-equity ratio in Q3 2015: 119% (-27 p.p. from 2008) – But decrease in leverage from 2008 mostly due to reduction of debt (-17%) and less to increase of equity (+2%). – Level of corporate indebtedness is not problematic, but the structure of funding is (growth of equity is too slow and not sufficient). Debt / GDP(Q3-2015) 76%. Figure: Corporate debt-to-equity ratio 60 55 50 146 200 Debt in EUR billion Equity in EUR billion Debt-to-equity ratio (right) Proportion of equity (right) 142 136 143 131 45 53 52 53 41 41 51 42 50 41 160 140 139 123 40 180 46 48 42 43 120 119 80 44 45 100 46 60 40 35 36 37 38 2008 2009 2010 36 36 37 2011 2012 2013 37 37 30 20 0 2014 2015Q3 FINANČNA STABILNOST Factor: corporate indebtedness and lack of equity • In deleveraging, corporates should put more emphasis on increasing equity and less to reduction of debt: – D/E of SI corporates in Q32015 stood at 119%. – SI corporates would "need" addition € 2 billion of equity to get to the median value of debt-to-equity - D/E 113% in EA18 countries. • Recapitalization, revaluation of capital, retained profits… to improve creditworthiness of firms. Figure: Comparison of corporate indebtedness in EA in 2014 250 Debt / GDP Debt-to-equity ratio in corporate financing 200 EA 18 EA 18 - median (D/E) 150 100 50 0 BE CZ DE EE IE GR ES FR IT CY NL AT PT SI SK FI SE FINANČNA STABILNOST Factor: corporate indebtedness and lack of equity • The structure of corporate financial liabilities in Slovenia changed from 2008 up to Q32015: the share of long-term loans increased (+3%), while the share of short-term loans decreased (-7%) from 2008 to 2015Q3 • In comparison to EA19, – a substantially lower share of equity in SI (SI:46%, 51% EA19 in 2015Q3) – a higher share of trade credits in SI (as in other). Figure: The structure of corporate financial liabilities in Slovenia (L) and EA (R) by years 100 100 90 21 20 19 18 19 18 19 19 70 43 41 41 42 41 45 46 15 15 16 15 Equity 14 14 51 52 Debt securities 25 26 28 26 20 27 30 26 26 10 15 13 0 1 1 11 1 12 1 12 1 10 1 9 1 8 1 2008 2009 2010 2011 2012 2013 2014 2015Q3 Corporate financial liabilities - Slovenia 48 49 46 49 12 Equity Loans: long-term Loans: short-term Debt securities 24 24 24 24 23 22 21 24 11 9 3 10 9 3 4 9 4 9 4 9 3 9 3 2008 2009 2010 2011 2012 2013 2014 2015Q3 20 10 0 51 Other 40 Loans: short-term 23 45 50 Loans: long-term 40 70 60 Other 42 50 30 17 80 80 60 90 Corporate financial liabilities - EA19 FINANČNA STABILNOST 4 Factor: corporate indebtedness and lack of equity • Compared with large enterprises, SMEs are more indebted, although their indebtedness has fallen faster and to a greater extent since 2008 than that of large enterprises: – Debt-to-equity of all firms stood at 123% in 2014, while debt-to-equity of SMEs stood at 168%. • SMEs’ leverage in 2014 fell below its level of 2004, while large enterprises’ leverage in 2014 was still a quarter higher than in 2004. How to find alternative financing for SME? • Figure: Debt-to-equty of all firms and SMEs (L) and debt-to-capital of firms by size (R) by years 250 225 Leverage 220 229 300 209 202 200 186 Leverage 2004 224 199 185 192 Leverage 2008 250 179 168 175 153 150 139 151 150 145 138 103 200 133 123 122 125 Leverage 2014 109 100 150 75 50 Leverage of all firms Leverage of SMEs 100 25 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 50 Micro Small Medium-sized Large All firms FINANČNA STABILNOST Factors: corporate indebtedness and lack of equity • Loans from the rest of the world account for a large proportion of corporate loan financing, with 26% of all corporate loans at the end of Q3 2015 – The growth in the corporate loans from ROW in the last years was in greater extent influenced by firms in ROW and less so by banks. – Loans at banks have decreased in H2-2015, as well as loans at international institutions. Corporate loans from ROW have increased in 2015. Figure: Stock of corporate loans from the rest of the world by foreign creditor’s sector in EUR million 3,500 3,000 27 Proportion of loans to NFCs accounted for by foreign loans (right scale) NFCs 25 Banks 2,500 23 International institutions 2,000 21 1,500 19 1,000 17 500 15 0 13 2008 2009 2010 2011 2012 2013 2014 2015 FINANČNA STABILNOST How to improve the conditions for credit reviving? • Current state of play: banks' pf' under pressure and coroprates deleveraging. • Relative high solvency of banks due to recapitalizations 2013 – 2014. • Still high level of NPL's • Continues pressure on banks margins and capability to generate income due to deleveraging and LIRE. • Deleveraging in corporate with a lack of bankable projects. • A) Measures on short-term to improve banks' capability to work-out NPLs: – A strategy how to work-out is necessary due-to different stakeholders' interest and complexities of process. – a) Developments in corporate restructuring: • "Slovenska nacela financnega prestrukturiranja dolgov v gospodarstvu" for large corporates restructuring principles from 2014 ZBS, BS, MF (based on ZM form 2011). – Result of MRA monitoring: • Number of MRAs signed: app. 72 (mainly financial restructuring). • Amount of restructured claims: > EUR 2 bn. (as of 31 Nov. 2015) • Average number banks involved: 7 FINANČNA STABILNOST How to improve the conditions for credit reviving? – b) Regulatory activities for improving banks' capacity to reduce NPLs: • Objectives: – Improve the efficiency of restructuring process. – Monitoring and supervision of banks' activity on the field of corporate restructuring – Supporting the financial restructuring of SME. • BS has implemented the objectives through the guidelines, requests… : • • • • Guidelines for impairments of restructured loans (Dec. 2014). Guidelines for NPE management (May 2015). Guidelines for SME restructuring (Nov. 2015). Requests for banks to prepare individual plans for NPE management for 3-years period (incl. implementation of operational plans and describe measures to achieve NPL target). – c) Other systemic activities for improvement of corporates restructuring: • Setting up infrastructure to support financing SMEs (ie. factoring). • Establishment of private SPV for NPLs restructuring…. FINANČNA STABILNOST How to improve the conditions for credit reviving? • B) Measures / process on long-term: – Banks business plans adjustment to new long-lasting LIRE and to the bank disintermediation. • That reflects in pressure for banking sector consolidation: • M&A. • Specialization. • Exit the market. – A strategy how to build up financial infrastructure for equity and alternative debt financing of corporates and particular SMEs: • Developing alternative source of financing to cater for specific needs of smaller firms (crowdfunding, minibonds…). • Developing Private Placement markets for medium-sized and unlisted companies. • Enhancing the availability of SME credit and accounting info. • Start-up companies VC-funded, should be able to become public through an IPO. • Taxation creates incentives (e.g. reducing the preferential treatment of debt financing). • …. FINANČNA STABILNOST Thank you for attention! FINANČNA STABILNOST