Die US Wirtschaft ist durch das ewige outsourcing nach China und Indien mittlerweile so schwach, dass die
aus meiner Sicht bald zusperren können und mit einer noch riesigeren Arbeitslosigkeit kämpfen werden.
Mir geht das ewige Euro Bashing von denen schon wirklich auf den Wecker, die sollen zuerst mal
ihre Kriege beenden und ihre eigene Wirtschaft auf Vordermann bringen. Wenn das erledigt ist kann man
dann vielleicht darüber reden, dass sie sich auch dem Euro anschließen und den Dollar endlich
Dann könnten Sie endlich auch das Europäische Rechts- und Normensystem
übernehmen und müßten sich nicht weiter mit ihrem veraltetem, absolut ungerechtem weiter
Eine Stellungnahme von BNP Paribas - ich finde sie informativ: (vieles betrifft nicht nur BNP
Euro, sovereign debt, liquidity and other issues: questions and answers from BNP Paribas
After being asked a number of questions about the
bank and the Eurozone, we have decided to publish the answers to the most frequently asked questions in the three categories below:
- Questions to the bank - Questions about
the Eurozone - General market questions
Questions to the bank 1) Why does BNP
Paribas hold one of the largest sovereign debt portfolios among peers? How does BNP Paribas intend
to manage its sovereign debt portfolio in the short and medium term?
Government bonds banking book portfolio has been brought down to a total of €75bn (1) as at 30 June
2011. Its purpose is essentially two-fold: a) To provide a liquidity buffer which can be used in
situations of liquidity stress, given that government securities are still considered by regulators
as one of the most liquid and non-risky assets available for such purpose; b) As a structural
hedge for our deposit base in our four domestic markets, in particular against interest rate risk
for non-interest bearing accounts such as current accounts in France.
(1) The figure of
€140 billion mentioned in the press was based on an erroneous interpretation of tables published by the
EBA and did not reflect Group’s risks on sovereign bonds.
2) Why is your exposure
to Italy’s sovereign bonds so large? Our banking book sovereign bond exposure to Italy is €21bn,
1.7% of BNP Paribas’ total commitments. This amount represents only 1% of the total value of
Italian bonds outstanding. The Italian debt market has been liquid and widely used as an interest rate management tool by banks and investors, including BNP Paribas at a time when
government bonds were deemed risk free.
3) How likely is it that the current crisis could
lead to a freezing up of money markets and overnight interbank lending, similar to what we
experienced during the Lehman crisis? Are you well-equipped and sufficiently liquid to deal
with such an adverse scenario?
The situation today is very different. Among the large
European banks, the fall in activity in the interbank market is not mainly due to counterparty risk
issues, but to the banks pre-empting the impact of the future Basel liquidity regulation. The interbank market is therefore likely to focus on instruments of one-month duration or less, which
is in line with what BNP Paribas had expected.
Regarding BNP Paribas’ funding position:
• BNP Paribas has access to substantial short-term euro funding from a wide spread of
sources. Conditions and maturities have not significantly changed in recent weeks. There has been
no shortage of funds and no change in counterparties.
• In USD, we have an excess of
short-term liquidity which the bank is obliged to deposit at the Fed.
BNP Paribas has
been taking steps since the start of 2011 to secure its funding position by proactively increasing
the duration of its short term resources (one month to three months, three months to six months and
Despite the lower level of funding available to European banks from US money market funds in August, BNP Paribas has been able to tap a wide variety of funding sources.
For example, US dollar funds have been sourced from corporates, supras, institutionals, Central
Banks, wealth management clients, as well as money market funds across four geographic areas (USA,
Asia-Pacific, Gulf countries, Western Europe). The bank has also had recourse to foreign
exchange swaps to maintain access to US dollar funds.
The recourse to alternative US dollar
funding sources has had cost implications which have impacted pricing.
In addition, BNP
Paribas has a sizeable liquidity buffer: BNP Paribas has around €150bn of unencumbered assets
eligible as collateral with central banks, of which USD30bn eligible under US Federal Reserve
criteria. These eligible assets are made up of Government bonds, loans to United States or Eurozone
corporates; selffunded securitizations, and CDs (Certificates of Deposit).
The bank has
already secured its long-term position: BNP Paribas 2011 medium and long term funding programme of
€35bn was completed in June. As of today a total of €38bn has been raised with an average maturity
of 6 years. The USD part represents about 40%.
CDS spreads current levels for European
Governments as well as for European Banks do not reflect the bank’s true cost of funding, even
senior unsecured funding, which is considerably lower. Furthermore, even in troubled times,
BNP Paribas has benefited from “the flight to quality” and has been able to raise funds through
covered bonds or private placements at reasonable cost.
4) Is BNP Paribas actively reducing
the size of its balance sheet and/or changing its composition?
BNP Paribas is
monitoring the size of its balance sheet pro-actively. The size of BNP Paribas' balance sheet (€1.9
trillion as at 30 June 2011) is inflated by International Financial Reporting Standards (IFRS)
which do not allow for netting of derivatives and other trading items, which is authorized under US
GAAP. The netting according to the US GAAP rules would reduce the balance sheet by ~25%.
5) BNP Paribas is clearly a Global SIFI (Systemically Important Financial Institutions), but its
Common Equity Tier One Ratio is below 10%, which regulators are increasingly viewing as a minimum
requirement for Global SIFIs. Is your Common Tier One Ratio sufficient in the current uncertain
market environment, or will you seek to bolster it?
BNP Paribas already has a Common
Equity Tier One ratio of 9.6% as at 30 June 2011. The EBA stress tests showed the resilience of our
capital base even in a severe downturn scenario with a 7.9% result. BNP Paribas has constantly been
profitable through the 2007-2010 crisis and consistently reinforced its capital base by
retaining two-thirds of its profits. We have already doubled our capital base over the past three
years. Thanks to our high level of profitability (our H1 2011 annualized 13.8% ROE is the highest
in our peer group) we should gradually reach the required level for a Global SIFI without any need
of capital injection.
6) How do you explain the discount of your bank share price?
While BNP Paribas’ shares have suffered severe falls along with the sector, it has outperformed
its peer group. The share price is down by 35% since the beginning of the year, compared with 36.8%
for the Eurozone banks index, 33.7% for the European banks index, and 33.9 % for the main US banks
in average (as of 05.09.2011).
We consider this impact of the crisis on the present
valuation of BNP Paribas by the market, as discounting unrealistically pessimistic scenarios. If we
look at the Net Book Value per Share of € 56.7 as of 30.06.2011, and at the current share
price which is around €33 as at 02.09.2011, the total market discount is over €27bn. This seems
unjustified by any measurement.
Questions on the Eurozone
1) How do you see the
current situation and future perspectives for the Eurozone? How would you be affected by a scenario
of default of a major Eurozone country, or by a worst-case scenario of a break-up of the Eurozone?
The Eurozone has a core of wealthy and stable countries, with a low level of private debt, and governments who are taking the necessary measures to restore the soundness of public
finance. Those who write about the Euro break-up underestimate both the political and economic
reasons why the Euro is there to stay.
A- Proactive Policies show a commitment of the
Eurozone countries have fixed clear targets in order to first stabilize
and then reduce public deficits as share of GDP:
2012: 4.6% in France, 2.8% in Belgium,
1.5% in Germany, 6% in Spain, 3% in Italy 2013: 3% in France, 1.8% in Belgium, 1% in Germany, 3% in
Spain, 0.2% in Italy.
More importantly governments have demonstrated their clear political
will in Europe to reduce public deficits by taking further supplementary measures to avoid
undershooting as a result of deteriorating economic circumstances.
-France (€12 bn deficit
reduction plan end-2011 and 2012). -Italy (balanced budget in 2013, instead of 2014, the Chamber of
Deputies passed deficit reduction measures of €48 bn (even if some details are still under
discussion)). -Spain: additional €5bn savings before end-2011 to ensure targets are met. -Portugal: new measures on 31 August targeting 0% deficit in 5 years: 7% of GDP cut in spending,
extension of public sector wage freeze, acceleration in payroll reductions and welfare payments,
increase in household and corporate taxes (all tax increases = 3.5% GDP) - Ireland: growth is
reviving faster than expected.
B- European authorities and the ECB have shown their strong
will to take the necessary measures to support the governance and cohesion of the Eurozone.
The ECB and the European institutions have committed to support the financial strength of
the Eurozone through an increase of resources (European Financial Stability Facility, European
Financial Stabilisation Mechanism) and to improve the governance of the Eurozone. These commitments
are based on a common interest to protect and uphold growth in Europe.
C- Key economic
indicators in the Eurozone are resilient
Growth figures: H1 2011: 1%. The outlook for
2011 and 2012 is between 1 and 1.5%
Public finance data : The fiscal deficit in
2010 (including local government) represented 6% of GDP in the Eurozone. In 2011, the outlook is
4.3% in the Eurozone.
Private debt ratio to GDP is at 135% in the Eurozone despite Spain +
Ireland’s high level of private debt.
Since the private domestic savings pool is large
enough in the Eurozone to finance the fiscal deficit, the current account is close to balance
(-0.6% of the GDP in 2010.
The figures for the US economy are roughly on par with those in
Growth H1 2011: +0.35% – Outlook for 2011 and 2012 is between 1 and 1.5%.
The fiscal deficit in 2010 was 10.6% of GDP. The outlook for 2011 is at 9.5%. The private
debt ratio to GDP is at 162% in the US. And the US has a current account deficit around 3% because
of its relatively low savings ratio.
3) After the recent downgrade of the United States by
S&P, are you worried that France could be next on the list, and how would this affect BNP Paribas?
Rating agencies have all reaffirmed the AAA with a stable outlook for France. The government’s commitment is clear, there is a well-defined path to be followed, and the policies
in place are adjusted to offset the possible negative consequences. There is a strong commitment to
reduce the public deficit over time: 5.7% of GDP in 2011, 4.6% in 2012, 3% in 2013. In our opinion,
two measures are essential to create an improved base effect for the coming years:
reforming pensions, - being at an all-time low, in volume, in terms of increase of expenditure
(resulting to some extent to the “one out of two” replacement policy for civil servants and a freeze in their basic wages)
According to our estimates, the effect of these measures will
cut expenditure by 0.5% of the GDP each year. An additional element of comfort is that there is a
growing consensus among political parties that public deficits should be reduced, despite the
divergence on the ways to achieve this.
Finally, France is one of the Eurozone countries
which benefits from healthy demographics, with a birth rate of two children per woman. This
“demographic dividend” has positive consequences:
As estimated by the
OECD, the increase in health and pension expenditure as a proportion of the GDP between 2010 and
2015 puts France in a relatively favourable position with a forecasted increase of 1.9% versus 2.1%
for the UK and 2.6% for Germany for example.
Potential growth is
necessary for governments to generate revenues in the future. The OECD estimates put France in a
relatively good position thanks to the dynamics of its working age population with OECD potential
growth forecasted at 1.5% over the 2010-2015 period and at 1.7% over the 2016- 2026 period.
For all these reasons, we do not consider France at specific risk of a sovereign debt downgrade.
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