Too Small To Fail? – oder: Sind die kleineren Banken sicherer?

Die neuen Regelungen für die beiden „Too Big to Fail“-Banken UBS und CS haben im Juni den Ständerat passiert und werden wohl bald auch vom Nationalrat genehmigt werden. Die öffentliche Wahrnehmung ist (zu?) stark auf die Grossbanken gerichtet, deren Kollaps man nun mit harten Regeln für alle Ewigkeit verhindern will (aber wohl nicht kann).

Leider fragt momentan aber keiner, wie „fit“ die anderen Schweizer Banken sind. Dabei haben Kantonal- und Raiffeisenbanken zusammen einiges Gewicht, so dass man sich diese ebenfalls Gedanken machen sollte. Und siehe da, einige dieser Kantonal- und Raiffeisenbanken sind kaum diversifiziert und einseitig stark exponiert in einzelnen Märkten (fast 50% der Bilanzsumme der ZKB besteht aus Hypothekarfordeurngen; bei der Raiffeisen sind es sogar 80%). Es ist fraglich, ob kleinere Banken über das notwenige Know-how verfügen im Risiko-Management, um die Gefahren der mangelnden Diversifikation oder der hohen Abhängigkeit von Zinsgeschäften zu meistern. Bekanntlich hat das Platzen der Immobilienblase Anfang der 1990er mehreren Kantonalbanken und anderen regionalen Instituten und danach auch der realen Wirtschaft heftig zugesetzt.

Eine mögliche Lösung wäre es, die Kantonalbanken zu privatisieren und aus dem Staatsbesitz vollständig zu verkaufen. Diese könnten dann mit einigen Regionalbanken fusionieren und die nötige Masse und Fähigkeiten erreichen, die es braucht, um genügend konkurrenzfähig und robust zu sein. Der Verkauf der Kantonalbanken wäre auch das Ende des ordnungspolitischen Sündenfalls, da diese durch die Staatsgarantie bisher nicht nur einen unfairen Wettbewerbsvorteil genossen, sondern bei einem allfälligen Kollaps den Steuerzahler direkt belastet hätten. Zudem würde die Privatisierung der Kantonalbanken auch dem politische Postenschacher mit Bankratssitzen ein Ende machen und damit die Corporate Governance der Institute verbessern. Es ist also höchste Zeit, bei den Regional- und Kantonalbanken ebenfalls einen sauberen Tisch zu machen.



Adrian Ineichen

Präsident Jungfreisinnige Stadt Zürich (JFZ)





Siehe für die Bilanz der Raiffeisenbanken den Geschäftsbericht 2010$FILE/GBG10_de_web.pdf


Siehe für die Bilanz der ZKB den Geschäftsbericht 2010

The World in 2010: The Top Ten Economic and Financial Issues

By Adrian Ineichen

The Top Ten

A new year provides the opportunity to look back, learn, and look forward what may (need to) change. Instead of adopting New Year resolutions, I look forward to upcoming hot top ten issues and what we may expect from 2010 relating to economics and finance: 

1.       The World Economy is Recovering, But Some Countries More Slowly Than Others

Asia has rebounded and even Western countries will recover, but slowly, but many structural problems remain: Financial markets remain weak and current labor laws in some Western countries are too rigid such that high unemployment levels are likely to persist for some years. Policymakers will have to strike a balance between supporting the economy and winding down stimulus measures. Further, plans to fix public finance (growing deficits and debts) will be developed but may fall short of expectations and so many countries will continue to live beyond their intergenerationally equitable and sustainable means.

Also the growth champions will face challenges: Qatar will see again double-digit GDP growth and continue to boost both its oil and gas sector and the shift towards education- and technology-intensive sectors, thus outperforming its Arabic competitors such as the UAE whose Masdar Institute in the fledgling Masdar City will host the World Future Energy Summit in January. But the region must first regain confidence after the Dubai World debt appeared unsafe. China will probably start to tighten its monetary policy and reduce lending to prevent asset price bubbles, NPL growth and CPI inflation, but sees its growth rate increase to 9-10%.

Some things will not change: commodity prices will be volatile and see a lift when economies recover. Meanwhile, China became the world’s largest automobile market already in 2009 with approximately 13.8m units (passenger cars and light trucks) while US sales have been just around 10m for 2009. Both figures will rise in 2010.

2.       Emerging Markets’ Growth Fuels Confidence to Claim Bigger Say in Global Policy Making

Following the IMF/World Bank meetings in Istanbul in October 2009, it appears settled that Emerging Market Economies (EME) will see their voting power at both International Financial Institutions (IFI) increasing by 3-7%, for which new formulas will be fixed in 2010. Likewise, given their dynamism, EME will claim also more influence in various UN bodies and other global or regional policy making bodies, such as the G-20 and APEC. It will be interesting to see whether this translates into taking over more responsibilities, e.g. in the upcoming IDA 16 replenishment negotiation round which probably starts in 2010.

The EME world is diverse and evolves. While China, and even more so Russia will need to rebalance their economies. Watch for developments in India, South Africa, Brazil, which will have parliamentary elections in 2010, and especially Indonesia.

3.       Regional Free Trade Is Booming – the US is the Looser

While the US becomes increasingly protectionist (the most recent example: Chinese steel pipes) and thus loses even more trade market share, Europe appears willing to reform its Common Agricultural Policy to reduce subsidies which could help moving closer finish the stalled WTO Doha round successfully. This, however, is unlikely to happen in 2010. The action is, again, in Asia: By January 1, China and the ten ASEAN countries established a free trade zone combining 1.9bn people and eliminating tariffs on 90% of their traded goods. This is likely to reinforce the redirection of trade flows involving China from which more goods will flow to the rest of the world.

Meanwhile, bilateral and regional free trade agreements will continue to proliferate as second-best surrogate to a global (WTO) agreement. This multiplicity of agreements is costly, and reinforces impediments to the conclusion of the Doha (and the start of future) round(s). Since the US appears reluctant to proceed with bilateral trade deals (and may not even put the one with South Korea into force in 2010 … after almost three years), it will be among the losers: Americans will pay relatively higher prices and have relatively worse access to other markets to sell goods and services.

4.       The Future of Banking and Finance

Good crises could lead to healthy lessons learned. 2010 will see at least some policy moves in the right direction, but midterm elections in the US and calamities elsewhere will prevent the restructuring of financial markets from being completed in 2010. While the UK will probably suffer from its extraordinary tax on boni of executives, room for reasonable realignment of incentives will open up: claw-backs on executive pay, more independence and teeth for regulators. To reduce forbearance and capture, regulators may get better remuneration and clearer targets which they have to meet (and sanctions in case of failures). Some global policy coordination will take place and could help for reshaping markets effectively.

As capital adequacy ratios have been proven to be an insufficient indicator on their own, new ideas are needed. Will there be a Basel III standard? Or some tradable capital insurance contracts? With regards to the US, one will see how the new credit card law (going into force in February) will affect the consumer credit market, which is torn by increasing default rates and punitively high interest rates. A unified financial regulator is unlikely to emerge (and may not even work better, as the UK’s FSA showed). Finally, new measures to boost SME lending will emerge.

5.       China’s Rebalancing, Age and the Renminbi (RMB)

China’s rebalancing to more domestic consumption will be supported by policy moves and the trade deficit is likely to shrink by half down to 5% of the GDP, but the real economy will shift only slowly. China will overtake Japan in 2010 as the second largest economy in the world by GDP in US$, just behind the USA (which it may overtake in the next 20 years or so), and its exports will reach 10% of world trade.

Challenges exist many: China is in 2010 at the peak of its “generational dividend”: The dependency ratio will bottom out in 2010 at 0.4 and start to increase due to the (recently somewhat more lenient) one-child policy. Is China getting too old to get rich fast enough? China’s population will nevertheless grow to an expected 1.46 billion in 2030, and then decrease slowly. Further, with the China-ASEAN free trade, jobs e.g. in the textile industry will increasingly get off-shored to Cambodia, Vietnam or Indonesia.

One can expect the internationalization of the Renminbi (RMB) and capital liberalization to continue gradually. The central bank may shift foreign assets to China’s SWF and into higher yielding currencies and may even relink the RMB to a currency basket (in which the US dollar probably will have less weight).

6.       USA: The Fed, the Deficit and Other Hot Issues

Despite some skirmishes, Bernanke will probably be confirmed as Fed chairman, and will face the challenge to support the US economy while reducing the extraordinary policy measures to prevent inflation. Even if Congress will follow Ron Paul’s idea to curtail or audit the Fed, it will make sure to keep the real effects small.

Since only about 30% of the stimulus money was spent in 2009, it will continue to have some effects in 2010. But the big question will be how to reduce the federal deficit (and debt). The budget proposal in early February will provide some hints and open the battle. Likewise, the administration will need to address how to wind down TARP and other policy measures, how to meet educational and infrastructure needs and the public finances of the states.

As the healthcare bill will soon be settled, numerous other issues such as defense spending (and obligations, given the growing war efforts in Afghanistan) and social security would deserve to be tackled, but midterm elections will probably prevent effective solutions.

7.       Energy and Climate Change: A Real Treaty after Copenhagen?

Why does the US emit 19 tons of carbon dioxide per person and year while other rich countries such as Switzerland (5.8t) and Germany (9.8t) can do better? After the shaky confirmation of emissions cut by some countries in Copenhagen last December, 2010 could see (with luck) the conclusion of a more elaborate treaty succeeding the Kyoto protocol. We may even see the launch of Chevy’s Volt electric car – meanwhile, Beijing’s emission standards are likely to remain tougher than America’s.

While the hunt for global commodities continues, pipeline construction will result in some spats in Eastern Europe and Asia. The US Congress may pass a cap-and-trade bill, however diluted and pork-filled it may be in the end. It remains open whether carbon capture and storage can make a real difference already in 2010 whether new nuclear power plants and sizeable new renewable energy sources will come anytime soon to America. Equally of interest will be whether behavior and mentality of some societies will significantly alter to reduce waste and increase environmental awareness, probably the key ingredient for change.

8.       Emerging Innovations

More investments will be made in green and bio technologies. Although America is the first innovator, Asia will draw closer. Up to 80% of South Korea’s stimulus funds go into green technology.

Boeing’s first 787 Dreamliner, an aircraft that features better less fuel consumption due to the vast use of composite material, better engines and wings, will finally be delivered (to the Japanese ANA). Hints for the future of the automotive future could be seen at the shows in Detroit (January) and Geneva (March).

2010 will see the rapid expansion of ebook readers with more devices, more competition and lower prices. Likewise, going online with mobile phones will spread further, as WiMax and other technologies will be developed. URLs will no longer be restricted to Roman letters, as ICANN opens bidding procedures for new domain names that may contain Cyrillic, Chinese, Arabic or Korean characters.

9.       Big Events and Big Business

The World Economic Forum in Davos (Switzerland) in late January under the slogan “Improve the State of the World: Rethink, Redesign, Rebuild” will provide a great opportunity for discussing the future of markets and economic policy making. Watch for trends and gossip.

The third biggest sports event, the Winter Olympic Games, will take place in Vancouver starting February 12, whereas the second largest, the FIFA soccer world cup, is hosted by South Africa and begins in June. (Since the US faces a relatively easy group with Algeria, Slovenia and England, we could hope for another exploit like in 2002.) The last FIFA world cup 2006 in Germany resulted in US$ 2.6bn marketing and sponsorship revenues which are likely to be surpassed in 2010.

And, of course, there is the world expo in Shanghai from May to October, where the mascot “Haibao” (symbolized by the character “ren” 人, meaning person) expects to greet 70m visitors and 200 participating countries.

10.    You: Imaginative, Competitive and Entrepreneurial

Since this column has already exceeded its regular size, it is up to you to think and act. America needs more entrepreneurs who do not fear global markets, but discover new opportunities, explore and adopt new technologies and help less advanced economies. You are the key.

Selected References for Further Reading

The Economist (2009, November 13): The World in 2010.

Masdar City
Masdar Institute

Automobile Industry Information
All China Data Center (ACMR), and

Vancouver Games

ASEAN-China Free Trade Agreement

Annual Meeting of the World Economic Forum 2010 in Davos

World Expo 2010 in Shanghai

Chinese Banks and the Minsheng Case

By Adrian Ineichen

Economic Growth
While many major countries have suffered economic contraction or stagnation in 2009, China is expected to grow by about 8.2% in 2009. On the one hand, a massive stimulus package of approximately 4 trillion renminbi (RMB; about US$ 585bn) seems to have supported growth. Fiscal expansion has boosted infrastructure spending on airports, railways, bridges, environmental infrastructure and low-cost housing. This spending will contribute to a record budget deficit of 3.8% in 2009 (comparably, the US federal budget deficit for 2009 up to date is at about US$ 1.4tr, which is more than 66% of projected revenues, according to CBO estimates as of November).

On the other hand, Chinese bank lending has contributed to support economic activity. For the period January to October, total bank lending has accumulated to RMB 8.92tr in 2009 while the same period in 2008 saw lending at RMB 3.66tr – an increase by the factor 2.43. Overall lending for the whole year 2009 may well hit the 9.5tr level which would approximately equal the US federal deficit in dollar terms.

Chinese Banking
Such gigantic figures raise the questions about how sustainable and well-targeted such lending is. Recent steps point towards a tightening of the lending boom. The China Banking Regulatory Commission (CBRC) has warned about the build-up of risks in the banking sector. Concerns have arisen that some of the new money is flowing into equity markets and real estate speculation.

So far, the ratio of non-performing loans (NPL) across the banking sector is low at 1.7%. The state-owned banks, particularly the top-five which have been used in the past by the government to direct credit, have relatively higher figures than some privately owned banks. Chinese banks may need to raise more capital in order to strengthen their balance sheets. Further, the People’s Bank of China is expected to tighten monetary policy and, among others, raise reserve requirements.

It will be interesting to watch how policies will balance between growth targets (and thus new lending and investments) and financial stability (and thus maintaining capital adequacy and prudent risk management). In any case, historical experience suggests that if NPLs are rising again, this may be hidden for some time and in the end the government may step in to clean up (as in the early 2000s). Such a wait-and-see approach is not only very costly, but also lengthy and it takes years to be effective (for example as late as August 2008, the Economist Intelligence Unit estimated the NPL ratio of one of the top-five state-owned Chinese banks to be at more than 23%). Damage to the banking sector could be long-lasting.

A Brighter Spot?
One of the brighter dots on the Chinese banking scene is the China Minsheng Banking Corporation (CMBC). Minsheng’s NPL with less than 1% is about half of the average. Last week, it raised US$ 3.86bn by listing on the HK stock exchange. With this step, CMBC’s tier 1 capital ratio increases to 8.65% (from 5.90%). While the Basel standard for tier 1 is 4%, many Western banks have strengthened their sometimes heavily damaged balance sheets since the current crisis broke out; the Swiss bank Credit Suisse has currently a tier 1 capital ratio of 16.4%, while Citi’s it at 12.7% and the British HSBC has 10.3%.

Even though the share offer appears to have been modestly priced and the retail part was 154 times oversubscribed, the shares took a hit on their first trading day in Hong Kong. This could hint at some market uncertainty about the soundness of Chinese banks, although CMBC looks comparably well-off. How will the market react when other Chinese banks raise their capital? Some others say Minsheng’s profitability is relatively weak which could explain the less-than-enthusiastic response to the listing.

Minsheng’s bid to take over a Californian bank, the United Commercial Bank (UCB) was deplorably thwarted in November 2009 by FDIC’s intervention to save the bankrupt UCB. The Federal Reserve could not grant approval to the Minsheng take-over of UCB as its home regulator, the CBRC, does not yet meet American standards for “consolidated supervision.” While such requirements may seem plausible (if they are too weak, a worst case scenario would be that many badly regulated and managed foreign banks could own American banks and engage in excessive risk-taking and undermine US financial stability), the Minsheng case is unfortunate as it involved one of the better Chinese banks willing to avoid the bankruptcy of a US bank. The FDIC intervention comes at an aggregated cost of US$ 1.4tr plus 300m lost TARP funds. Minsheng loses its 10% stake it had already in UCB.

It appears that the FDIC and the Fed should improve their coordination among themselves and with foreign regulators to avoid such cases which cause anger abroad and at home and lead to higher taxpayer’s costs. While prudential regulations are important, they should not spur domestic protectionism. Entry of foreign financial institutions in the US, but also in China and elsewhere can spur competition and market discipline and thus should be welcomed. I hope that regulators can work together to reduce barriers for foreign entry, streamline regulations and make them more transparent. A bi- (or: multi-?) lateral investment treaty would be a step in the right direction.

Suggested Links

About Minsheng Bank’s Hong Kong Listing:

The Economist about Minsheng:

UCB Failure and the Non-take-over:

Recent figure on the US budget deficit:

About Chinese lending:

EIU Country Report China December 2009