Eight years of successful work – the added value of EAA
EAA is an asset manager with a public mission. This mission is: To reduce risks and avoid burdens for its public owners as far as possible. Matthias Wargers, Board spokesman, explains what the benefits of the establishment of EAA have been up to now.
Questions for Matthias Wargers
Mr Wargers, it’s now roughly ten years since the beginning of the financial crisis and the introduction of the first support measures for the former WestLB. A good eight years ago, EAA was established because the first rescue measures didn’t have the desired success. Has the establishment of EAA been worth it for its stakeholders?
We assumed billion-heavy risk positions in 2009/2010 and so contributed towards the stabilisation of the former WestLB, without its owners, the Federal State of North Rhine Westphalia and the NRW savings banks associations, quickly having to mobilise billions of euros. The liability shield, which was placed instead over EAA, has not been required to date. In 2012, in a second step, EAA was crucial in ensuring that the EU resolutions to wind down WestLB were implemented smoothly. Removing a large and intricately connected major bank from the market without disruption was an experiment for which there was no existing precedent.
What effect did the stabilisation have for the further environment of the bank? Can you name some effects by way of example?
Firstly and above all, EAA ensured that sufficient liquid funds were available at all times in order to properly meet all liabilities of the former WestLB. If this weren’t the case, problems could have fed through to other banks and business partners. EAA assumed the management of WestLB corporate loans without hitch and, where necessary, extended or increased these. In this way, it ensured that the bank’s problems did not give rise to difficulties for companies. The former WestLB had, amongst others, two subsidiaries with Pfandbrief business, one in Germany and one in Ireland. EAA stabilised, restructured and sold both, respectively initiated the sale process. This was not only for the protection of the Pfandbrief as investment product, but also for the protection of the Pfandbrief investors.
„EAA operates in the interests of public budgets and thereby benefits all citizens.”
As a result of the liability commitments from the Federal State of NRW in particular, risks were ultimately assumed by the taxpayer. This gives rise to the question of the benefit that EAA provides for the large majority of citizens.
Let me quickly point out that the liability risks did not arise as EAA was established. As owners of the former regional bank, the Federal State of NRW and the loan savings banks association in that region already faced liability risks. The establishment of EAA ensured that losses to the bank which arose with the financial crisis were minimised and that assets were protected. Insofar, the resolution via EAA had a positive effect on the Federal State’s finances. It ultimately also has a positive effect on the municipalities in the state, the latter being stakeholders in the savings banks. EAA therefore operates in the interests of public budgets and thereby benefits all citizens. With the acquisition of WestImmo, we have also ensured that various private home loans could remain in place without problems for the customers.
Why did establishing EAA push up national debt? And what does it mean for the country’s standing on the financial market?
National debt is recorded on the basis of harmonised European rules. Here, the lion’s share of liabilities are taken into account which a national asset management company (AMC) such as EAA assumes. The fact that AMCs also hold assets alongside liabilities is not reflected in the national debt statistics. For this reason, German debt shot up when a German AMC was established. As the Bundesbank recently reported, thanks to successful management, debt has now decreased significantly. Insofar, EAA is positive as regards the creditworthiness of its stakeholders. This is not only evident from the European statistics. The ratings agency Standard & Poor’s recently upgraded the state’s AA1 rating as well as the outlook for NRW from stable to positive. It stipulated progress by EAA in portfolio reduction as the key reason for its decision.
The resolution of the former WestLB meant many jobs were lost. As portfolio reduction continues, an increasing number of jobs are lost at EAA as well. Can stabilisation measures also have positive effects for employees?
Stabilisation measures cannot avoid the loss of many jobs. In the case of the former WestLB, they contributed to ensuring that job losses occurred in a planned way and that the negative impact for employees was at least limited. EAA itself employs, where possible, former employees of WestLB. Since we know that EAA’s purpose is finite, we support employees in developing their future professional perspectives. The privatisation of our service subsidiary EPA, the outsourcing at the subsidiary EFS and the divestment of participations could also be implemented in such a way that they also opened up perspectives for employees. Wherever possible, we will continue along this path with regard to future measures too.