interview: "Banks are facing huge funding Tasks - Editorial RISK MANAGER
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COLOGNE, 3.12.2010. Dr. Jochen Felsenheimer (photo), Co-Head of Credit at Assenagon Asset Management expects the coming year, a sharp increase in volatility in the credit markets. The financial markets have in the past two years, benefited enormously from the very expansionary monetary and fiscal policy. This, however, take the risk of a setback, especially as the vulnerability of the financial system s was still very high. The high funding needs of banks, governments and companies will eventually lead to an increase in funding costs. For the magazine RISK MANAGER credit risk manager Felsenheimer answered eight questions.
As seen from the credit markets in 2011?
The credit markets have benefited greatly from the extremely expansive monetary and fiscal policies of the last two years. The risk of kickback will inevitably be gradual. One must not always assume the worst case, ie a repetition of the events of 2008. However, investors should continue in the coming year to prepare for a sharp increase in volatility.
What are the opportunities and risks in the market?
The opportunity lies in the fact that corporate bonds are in the light of ailing state budgets still seen as a "safe haven", that demand remains high. After focusing the lending policy of banks currently in good qualities, they have no incentive to raise capital in the bond market. The primary market activity will therefore remain low, creating a strong demand hits a low supply. Technically, the markets remain so well supported, while the fundamental picture of decline.
Does it make sense that corporate bonds are considered less risky than the states where these companies are located?
It is a fallacy to believe that ailing state budgets will have no impact on business. Before a country gets into financial difficulties, he will pull out all the stops, also have costs of businesses. The banking systems in Europe and the U.S. is still extremely fragile, while the insurance industry to deal with the low interest rates added. And the discussions about the sustainability of European Monetary Union will dominate in 2011. All this speaks for rising risk premiums on corporate bonds also.
How big do you estimate the risk of "tail risk" a
The exact trigger of a crisis is difficult to predict - it is easier to analyze the vulnerability of the system This is still extremely high,. evidence suggesting that trigger an external shock such as a situation in 2008 could. Spain's financial difficulties, a meltdown in the U.S. commercial real estate market or a downturn in Asia would have such potential Shock events.
How important is the continued flow of liquidity by central banks?
The central banks are in a difficult situation. On the one hand, the additional liquidity in the real economy not passed but seeps into the banking market. On the other hand, the central banks know that the banking system is not facing a liquidity crunch, but from a capital shortage. The lack of capital means that the banks in the market and issue bonds to refinance. This increases but the cost of capital. It will therefore remain the central banks have no choice as the system continues to keep liquidity alive even though the risks of this policy and the apparent ineffectiveness of the same can not be overlooked.
be How are the spreads of corporates and sovereigns to Financials?
course, it makes little sense at first glance, if the spreads over a country where the banking sector, which in turn act through which the companies. However, this situation can persist even for technical reasons. Nevertheless, in 2011 with a high correlation between the three market segments expected.
Expect haircuts and restructuring in the euro zone?
I think the rescue in Next year, still holds. Ultimately, however, increased cost of the fate of the European Economic and Monetary Union for some countries, making an exit is more likely. A resignation would trigger a high probability of a restructuring event.
What challenges is the high-financing needs of countries and the banking sector in 2011 is for the credit markets?
banks, governments and companies compete with lower credit quality in the next few years by investors because they face major lending volumes. There are also U.S. municipalities and commercial real estate financing. That means a variety of Issuers with strong increasing funding needs is looking for investors who are naturally attract only with attractive yields, or spread premiums. Ultimately, the refinancing costs will therefore rise. Particularly for highly indebted countries, this situation is a burden, but also for banks that are in the light of new regulatory requirements such as Basel III face major funding responsibilities.
Questions by Manuel Priego Thimmel. NZZ will
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