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Genossenschaftsverband Bayern e.V. (GVB)

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Yes. Loans of Bavarian cooperative banks to corporate customers have increased from 37.396 Mio. € as of Dec 31, 2013 up to 40.293 Mio. € as of June 30, 2015. These clear numbers show that the introduction of the supporting factor for SMEs has turned out to be an important factor. In order to strengthen the regional economy, it is essential that the supporting factor for SMEs is maintained to prevent adverse effects. Moreover, an intern inquiry commissioned by GVB for loans allocable to the SME-segment shows that the quality of such loans – measured by the percentage of distribution of the IFD categories – has substantially improved over a period from June 30, 2004 to Dec 31, 2013. For instance, the percentage in IFD*-category I (highest degree of creditworhiness) of 21,97% as of 2004 has increased up to 43,23% in 2013, whereas in the same time the percentage in IFD-category VI (lowest degree of creditworthiness)shows no material negative change based on 3,27% in 2014 with only minor increases up to 4,04% in 2013.
* This Rating Scale is used by “Initiative Finanzstandort Deutschland (IFD)”.
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As a general rule, cooperative banks are mainly involved in SME-lending. Lending to larger corporates may rather occur in exceptional cases. It follows from the size that cooperative banks will mostly not be able to grant loans to large corporates in the required amount, as large exposure regulation serves as a limiting factor.
Upon reversion, portfolios of cooperative banks may turn out to be more granular, containing less risks insofar. It is due to this fact that the offset of the SME risk weight is justified, as high granularity effectuates low risk, and in the end justifying lower capital backing.
In conclusion, there exists no cyclical link between SME-lending and lending to larger corporates.
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Q10.1: No; Q10.2: Yes.
An intern inquiry based on nationwide data of cooperative banks confirms a massive surplus coverage of 60,01% in relation to regulatory capital requirements even during the peak of the financial crisis (also see attachment). Taken as a whole, such result of a massive surplus of coverage in regulatory capital requirements supports GVBs claims to maintain the SME supporting factor.
In particular, GVB claims to incorporate national circumstances in regulatory considerations. This concerns conservative generally accepted national acconting standards (N-GAAPs), the fact of early bad debt provisions as well as provisions for lending values in the course of lending. All of those risk-reducing measures are completely disregarded in the ongoing survey.
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Equity study_GVB.pdf
Dr. Jürgen Gros
0049 / 89 2868 3102