by Agnes a Paris
Thu Feb 9th, 2006 at 11:23:31 AM EST
I am trying to respond here to a question raised by ckurie on the savingsbanks and the way they operate.
The markets I know best are Germany and France, but similarities exist to some extent with Spain and the Cajas.
The German Landesbanken benefited during a long time from the privilege of State guarantees through their owners, the savingsbanks. More precisely, the savingsbanks extend a statutory guarantee (Gewährträgerhaftung) for their Landesbank's grandfathered obligations (jointly and severally with the respective public sector guarantors)
This enabled Landesbanken, until July 2005, to have the same credit rating as the sovereign rating of Germany. A credit rating being a criteria reflecting the quality of the Borrower, the higher the credit rating, the lower the cost of funding and the better the conditions of the loans they can extend to their corporate clients.
In July 2005, the state guarantees were abolished. From then onwards, Landesbanks compete increasingly on par with their private sector counterparts as the benefits from the grandfathering of guaranteed obligations are progressively fading away.
Practically speaking, the outstanding obligations of the Landesbanken still benefit from the state guarantee whereas the loans extended after July 2005 no longer take into account a sovereign rating and are therefore higher priced.
As far as wholdesale lending is concerned, the main role of the savings banks is to guarantee, as their owner, the debt of the Landesbanken. For example, Landesbank Hessen-Thüringen Girozentrale (Helaba) is the mother company of Landesbak Hessen-Thüringen.
Landesbanks have been the regional central institutions of their owner savings banks for many years but both have never really acted as a group or developed joint management systems and business strategies to exploit revenue and cost synergies in an organized fashion.
As far as France is concerned, a merger trend has been witnessed over the past 10 years with municipal banking groups such as Caisse d'épargne, Banques populaires, or Crédit agricole incorporating wholesale/corporate banking entities in order to broaden their offer range and bolster their profitability as margins on municipal lending are thin. In turn, the corporate banking arms benefit from the low funding costs and the large capital base of the municipal banking activity. Banques populaires bought back Natexis and Crédit Agricole the investment banking boutique Indosuez.
This diary is not a big deal, but I hope this helps. Information on the Spanish Cajas are most welcome and I will be happy to update this thread.