German banks suffer of nausea amidst rough seas

Dr Andreas Dombret

Dr Andreas Dombret, Bundesbank photographic library.

Earlier this week, Dr Andreas Dombret, Member of the Executive Board of the Deutsche Bundesbank, responsible for financial stability and risk controlling, delivered an open lecture in Hamburg, entitled “In the year 2013 – Challenges from a financial stability perspective” . Apart from the burning questions he posed for a number of Eurozone countries’ sovereign debt, he went as far as to question the stability of the commercial banking system of Germany.

According to Dombret the black spots over his own country’s financial system are caused from long exposure to the maritime sector. The German mercantile marine is Eurozone’s second largest shipping industry, only after the mighty Greek fleet. The German banking system has being traditionally offering strong support to the country’s shipping sector and as a result it has now accumulated a huge pile of such loans. Unfortunately the crisis that is now spreading over the world’s mercantile marine has transformed a large part of those debts into high risk assets.

The total exposure of Germany’s banking system to the shipping industry is estimated now by Dombret at €100 billion. Of course this exposure is not restricted only to German operators and ship-owners. As a result if the crisis continues engulfing the ocean-going fleet, the German financial system will be confronted with mounting problems.

As everybody knows, the merchant marine crisis is now fast spreading not only to all freight prices but touches by contagion the values of the ships itself. At this point it must be noted that during the last two decades the Greek ship-owners, by wholesale buying and selling entire fleets according to what they predict about the future developments of freight prices, have transformed the shipping industry into a bourse of ship values.

Consequently a down turn of freight prices is nowadays instantly transmitted to ships’ values. Given however that ships are being used as collateral for bank loans, the freight crisis is quickly transformed into a financial crisis for ship-owners, operators and of course the lenders. Today the German banks hold probably the largest portfolio of shipping loans in the world, with the country’s HSH Nordbank to be first in this. In the second place, as far as the exposure to the shipping industry is concerned, comes a Norwegian bank with the German Commerzbank being third in this list. More German banks hold smaller shipping loan portfolios.

In any case the exposure of the German financial system to the shipping sector is diminishing over time but still the issue remains a burning one. The German mercantile marine is the third largest of the world, behind the Japanese fleet which is second with 3,990 ships and the Greek fleet always in the first position.

The German banker who spoke in the Hamburg held responsible the same factors for both, the Eurozone sovereign debt crisis and the merchant marine loan problems. Those factors are the excessive indebtedness and the over optimistic expectations for the future. After the outbreak of the 2008 credit crunch with the bankruptcy of Lehman Brothers and the subsequent spreading of the financial crisis to the real economy, naval freights took a steep downward path and they are still losing grounds.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

European Solidarity Corps: three years on

Fisheries: Commission proposes measures to conserve stocks of deep-sea species in the North-East Atlantic

The vehicles of our future

DPRK reports ‘little progress’ since historic June 2018 summit with US

Can we put a price on clean air? Yes, we can

4 ways the way we make things can change for a sustainable world

To achieve the Great Reset, we will need more than just the actions of the powerful

UN human rights chief denounces grave ‘assaults’ on fundamental rights of Palestinian people

Vegetarianism is good for the economy too

China’s Ambassador to the EU Zhang Ming wishes to Brussels a Happy 2019 Year of the Pig

Draghi: A bridge from Brussels to Berlin

Fostering intergenerational solidarity and cooperation through age-friendly environments: the right answer to Europe’s demographic challenge

Trump’s Russophiles under investigation, Europe remains ‘en garde’

Healthcare’s a human right, not ‘a privilege for the rich’ UNAIDS argues at Davos

Celebrating the Customs Union: the world’s largest trading bloc turns 50

A woman would have to be born in the year 2255 to get equal pay at work

UN rights chief ‘alarmed’ by upsurge in attacks against civilians in Syria’s Idlib

No way out for Eurozone’s stagnating economy

Refugees in Greece: MEPs demand solidarity, warn about impact of health crisis

Is Britain to sail alone in the high seas of trade wars?

“Move fast, build to last: Europe’s new generation” – op-ed by Ursula von der Leyen, President of the European Commission

Guterres underscores UN role in achieving a free, secure Internet

Technological innovation can bolster trust and security at international borders. Here’s how

Why Eurozone urgently needs the ECB to print and distribute at least €500 billion

EU opens a third antitrust file against Google

EU Copyright Directive: Google News threatens to leave Europe while media startups increasingly worry

Why strive for Industry 4.0

The EU can afford to invest trillions in support of employment

FROM THE FIELD: What do you want to be when you grow up? One day I will…

Importance of Mental Health and keeping it together in a Pandemic 

The scary EU elections result and the delayed Council’s repentance

Who is responsible for public health? The tendencies and its benefits –or not– on Health Education around the world

Social Committee teaches Van Rompuy a lesson

Can the US-Iran rapprochement change the world?

Women still struggle to find a job, let alone reach the top: new UN report calls for ‘quantum leap’

Tuesday’s Daily Brief: sexual violence in conflict, a malaria vaccine trial, updates on Libya, Ebola in DR Congo, Sri Lanka and Mali

Japan to invest in euro values

Central Mali: Top UN genocide prevention official sounds alarm over recent ethnically-targeted killings

EU finally agreed to cut roaming charges in 2017 but criticism is always there

New EU rules to thwart money laundering and terrorist financing

Merkel: Nationalism and egoism must never have a chance again in Europe

Charles Michel advocates a strong Europe that acts where it can add real value

How technology can help us achieve universal healthcare

OECD sees global growth slowing, as Europe weakens and risks persist

This is what happened to CO2 emissions in the EU last year

EP supports local authorities fighting the effects of the pandemic

Bilbao’s city parks offer brain-training games for the elderly

Coronavirus: Pandemic alert should be trigger for countries to do more against COVID-19

A Sting Exclusive: “Delivering on the Environmental Dimension of the new Sustainable Development Agenda”, Ulf Björnholm underscores from UNEP Brussels

10 ways regulators need to change in 2020

Three of the world’s hardest-hit nations are preparing to end their lockdowns

UN condemns attack on Ebola treatment centre in DR Congo which left doctor dead, two others injured

How one change to shipping goods could change the way we live

European Commission adopts rules to ensure a smooth transition to its next President and the next College of Commissioners

These technologies are playing a major role at the Cricket World Cup

Trump’s Pandemic Failure: A Missed Opportunity

EU summit compromise: positive step for recovery, inadequate in the long-term

Fighting for minds of youth in Latvia

A healthy human future depends on healthy oceans. Here’s why

US-China trade war at point of no return: Washington’s demands go beyond tariffs

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s