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 Milestones

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

From landlocked to land-linked: how the UN is helping some of the world’s poorest countries

Child victims of DRC Ebola outbreak need ‘special attention and care’: UNICEF

New EU rules ensure better protection for 120 million holidaymakers this summer

Island nations on climate crisis frontline ‘not sitting idly by’

Jellyfish are taking over the world – and climate change could be to blame

Joint statement following the 22nd EU-Ukraine Summit, 6 October 2020

Thailand gave healthcare to its entire population and the results were dramatic

FROM THE FIELD: Conversations about Conservation

Drinking coffee could help you live longer, research finds

Education and Training: where do we stand in 2014?

Mosquitoes kill more people every day than sharks do in a century

JADE Handover Ceremony at the European Parliement

EU-Japan trade agreement enters into force

European Commission: Does Apple, Starbucks and Fiat really pay their taxes?

‘Global sisterhood’ tells perpetrators ‘time is up’ for pandemic of violence

Here are 4 tips for governing by design in the Fourth Industrial Revolution

Inequality triggered protests across Latin America. Here’s how the youth can help

Libya: UN Mission condemns deadly attack against police in country’s south-east

THE COMMITTEES: ‘All roads lead to the Fifth’

Thursday’s Daily Brief: dire living conditions in Idlib, migrants at US southern border, end in sight for trachoma, Human Rights Council

What happiness can teach us about how we measure human development

State aid: Commission adopts Temporary Framework to enable Member States to further support the economy in the COVID-19 outbreak

Questions and answers: Commission proposes SURE, a new temporary instrument worth up to €100 billion to help protect jobs and people in work

A new crop of EU ‘Boards’ override the democratic accountability and undermine the EU project

Giving humanitarian help to migrants should not be a crime, say MEPs

World Health Organization calls crisis meeting over deadly Ebola outbreak in DR Congo

Knowledge management and entrepreneurship: short term vs. long term perspective

UN chief urges Somalis not to be ‘deterred’ by latest deadly terror attack

UN chief welcomes announcement by Emir of Qatar to allocate $50 million to support Syrian refugees, displaced persons

De-escalation of fighting in Hodeida is key to ‘long-overdue’ restart of Yemen peace talks: UN envoy

Antitrust: Commission fines Google €1.49 billion for abusive practices in online advertising

EU, Canada and China co-host international meeting on climate cooperation and a sustainable economic recovery

Why COVID-19 poses a particular threat in the world’s slums

Why Sweden’s cashless society is no longer a utopia

How to make primary healthcare a favourable career choice for medical students: Strategies and reflections

Eurozone’s sovereign debt not a problem anymore?

BRICS’ New Development Bank turns four: what has it achieved?

10 things Europe does better than the rest of the world

Women and sustainable finance: fuel for the engine of COVID recovery

Education should be like everything else. An on-demand service

5G is here: PT Expo China 2019 will be held October 31 – November 3, in association with The European Sting

EU-China Leaders’ meeting: Delivering results by standing firm on EU interests and values

‘Critical moment’ for sustainable development, UN chief tells major financing forum

Capital Markets Union: Making it easier for insurers to invest in the real economy

At UN, France’s Macron says more ‘political courage’ is needed to face global challenges

World response to AIDS epidemic at a ‘critical juncture’

Chatterbox Rome Declaration cannot save the EU; Germany has to pay more to do that

ECB indicates south Europeans can endure more austerity

Could the fourth wave of globalization help to end epidemics?

EU defence gets a boost as the European Defence Fund becomes a reality

Illegal fishing: EU lifts Taiwan’s yellow card following reforms

7 lessons leaders should take from the COVID-19 crisis

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

Using the quarantine to your advantage

Why exporters need to mind the trade finance gap

Joint UN, OSCE engagement can address crisis in Ukraine, other ‘dark spots of conflict’ in Europe

More urgency needed to help increasing numbers ‘locked out’, before 2030, says UN’s Bachelet

State aid: Commission approves Belgian scheme deferring payment by Walloon airports of concession fees to mitigate economic impact of coronavirus outbreak

The EU Parliament sidesteps the real issues about banks, while the US target the Eurozone lenders

What do refugees really need from those who want to help? A refugee explains

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