FDSeminar Financiering na Basel III - Peter Vermeiren en Nico De Muijnck

FINANCIERINGSMARKT INGEVOLGE

BASEL III ONDER SPANNING,

FABEL OF WERKELIJKHEID?

27 november 2014

Oorzaken, gevolgen en oplossingen

P. Vermeiren – Nico De Muijnck

Hoe zijn we tot hier geraakt?

Welke zijn de gevolgen?

Focus op de nieuwe regels voor de financiële sector en

de gevolgen

Financiering: opportuniteiten & alternatieven

Agenda

3

Sterke stijging rentevoeten

Immo markt stort in


4

Header TitleSubprime Effectisering

Ontstaan van toxische assets

Liquiditeitscrisis

Bank crisis

Economische & schuldcrisis

Zoektocht naar rendement

Lage rentevoeten

Verwachte verdere stijging van Immo markt

Impact op de balans beperken

Leverage effect gebruiken




de gevolgen


Agenda

5

6

Moeilijke economische situatie

Rentevoeten historisch laag

Nieuwe regels voor de financiële sector



7

Faillissementen Ondernemersvertrouwen

Import / Export Schuld België

Bron : NBB

Moeilijke economische situatie

7680 8476

9420 9570 10224 10493

11897

9097

0

2000

4000

6000

8000

10000

12000

14000

2007 2008 2009 2010 2011 2012 2013 2014(10m)

80

85

90

95

100

105

110

115

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

-35.00-30.00-25.00-20.00-15.00-10.00

-5.000.005.00

10.0015.00

jan 0

7

jul 07

jan 0

8

jul 08

jan 0

9

jul 09

jan 1

0

jul 10

jan 1

1

jul 11

jan 1

2

jul 12

jan 1

3

jul 13

jan 1

4

jul 14

In %


8

Rentevoeten historisch laag

0.00

1.00

2.00

3.00

4.00

5.00

6.00

jan 0

1

me

i 0

1

sep 0

1

jan 0

2

me

i 0

2

sep 0

2

jan 0

3

me

i 0

3

sep 0

3

jan 0

4

me

i 0

4

sep 0

4

jan 0

5

me

i 0

5

sep 0

5

jan 0

6

me

i 0

6

sep 0

6

jan 0

7

me

i 0

7

sep 0

7

jan 0

8

me

i 0

8

sep 0

8

jan 0

9

me

i 0

9

sep 0

9

jan 1

0

me

i 1

0

sep 1

0

jan 1

1

me

i 1

1

sep 1

1

jan 1

2

me

i 1

2

sep 1

2

jan 1

3

me

i 1

3

sep 1

3

jan 1

4

me

i 1

4

sep 1

4

EUR3M IRS10Y ECB Repo


9

Nieuwe regels voor de financiële sector

Impact:

Hogere kost van de kredieten, afhankelijk van het type

Ook voor niet-gebruikte lijnen en liquiditeitslijnen

Belang van de operationele relatie

Betere waardering van de stabiele deposito’s

Meer aandacht voor alternatieve financieringsvormen

Principes:

1. Beschikbaar kapitaal 2. Verbruik in kapitaal(RWA*)

3. Leverage ratio 4. Liquiditeit

BASEL lll

(*) RWA : Risk Weighted Assets




de gevolgen


Agenda

10

Required Capital

=

Exposures x Weighting x 8%

Weighting :

Sovereigns and Regions : 0 %

Local Authorities : 20 %

Corporates : 100 %

Required Capital

=

Exposures x Weighting x 8%

Weighting :

Based on external rating

(standardized approach)

or

Based on internal data

(internal rating based

approach)

From Basel I to Basel II

Basel I: Required capital for credit risk depends on f ixed weights

Basel II: Required capital for credit risk becomes risk sensitive (based on ratings)

11

Evolution regulation

Financial score

Based on various financial

ratios, a.o. EBIT / Turnover.

Qualitative score

Based on different topics, a.o.

business profile, sectorial profile, etc.

Model Rating

Each client is attr ibuted a Rating and a corresponding Probability of Default (PD)

Each transaction a corresponding Loss Given Default (LGD)

Risk Weighted Assets based on PD & LGD !!

Basel II: Ratings, PD’s, LGD’s, …

PD: Probability of Default LGD: Loss Given Default

• Estimate of the likelihood that a client will be unable to

pay its debt obligations over a time horizon of 1 year.

• The percentage of the exposure at default which a bank

expects to lose if a client goes into default.

Final Rating

Mapping to

Probabi l i ty of Default

- Override by analyst possible

- Branch Equivalency

- Country Ceiling

Important for companies:

- Stability and quality of the revenues / cash flows

- Profitability (historical and forecasted)

- liquidity (current ratio,acid test,etc)

- Repayment capacity

- Assets structure / solvency

- Off-balance commitments

- Dependence of a limited number of suppliers/clients

- Competitive position

- Growth perspectives (Market / Sector)

- Quality and risk attitude of the management

- Intensity of the support of the Mother Company

- ….

Important for companies:

- Financial health (rating)

- Seniority of the debt / degree of subordination

- Amount and quality of the collateral

- Jurisdiction

- Netting

- ….

Step 1 : Calculat ion of the PRELIMINARY LGD

Step 2 : Calculat ion of the LGD*

The preliminary LGD is the estimated Loss Given Default parameter

before taking into account the recovery flows coming from collaterals

evaluated individually (e.g. statistical model).

An LGD* is calculated for each exposure by correcting the preliminary

LGD by the effect of the expected recoveries coming form Credit Risk

Mitigants (CRMs).

12


1. Raising the quality of

the regulatory capital

& Introduction of

capital buffers

3. New liquidity ratios 4. Limitation of

overall Leverage

2. Tougher approach of

the risk: additional

RWA (Risk Weighted

Assets)

… and Basel III – the main building blocks

Basel III: New requirements on 4 levels ( instead of only on RWA)

13

Basel I & Basel II only working on RWA whereas Basel III …


…and so much more other new regulations…The cumulative impact of regulation on the banking sector

14


* Includes conservation buffer, but does not include a 0%–2.5% countercyclical buffer.

+ 450 bps

4%

6%

8.5%

Tier 1 Capital

+ 250 bps

8%

10%

10.5%

Total Capital

+ 500 bps

Basel III

Basel I 2%

3%

7%

Common Tier 1*

Basel II

Basel III: Capital & RWA ImpactLess available capital

• Through stricter definition of capital with greater

deductions that emphasize stronger quality.

Higher RWA requirements

• In order to better capture risks related to trading,

securitization, and counterparty exposures.

Signif icant increase in minimum required levels of capital (capital ratio’s = Capital / RWA)

A key driver of the 2007 credit crisis, was a lack of

appropriate assessment of credit exposures and default

probabilities.

Capital add-on for CVA volatility (RWA CVA).

Capital add on for exposures to large financial entity and

to non-regulated financial counterparty (RWA AVC).

Incentive to use Central Counterparties for the clearing

of derivatives.

However, Europe recognizes the importance of :

SME: application of a supporting factor allowing to

reduce RWA.

Non-financial counterparties: exempted of CVA

capital charge.

Trade Finance: reduction of the exposure value for

certain trade finance instruments.

15

Strengthening the banking industry by an increase

of the minimum regulatory ratios with a

grandfathering period until 2019.

Tier 1 & Tier 2 Capital :

Improvement of Tier 1 quality.

Tier 2 capital will be harmonized and

simplified.

Tier 3 eliminated.

Introduce additional capital conservation buffer.

And buffer to protect the banking sector from

periods of excess credit growth (countercyclical

buffer)

Additional deductions from Capital (under

grandfathering : eg. AFS reserve, DTA)

Basel III Building Blocks

Basel III: Liquidity – LCR & NSFR

LCR: Liquidity Coverage Ratio

• Aim : strengthen short-term liquidity profile.

• Level of liquidity buffer to be held to cover short-term

funding gaps under severe liquidity stress.

• Time horizon : 30 days.

NSFR: net Stable Funding Ratio

• Aim : to survive an extended closure of wholesale

unsecured funding markets.

• Minimum acceptable amount of stable funding in an

extended firm-specific stress scenario.

• Time horizon: 1 year.

Available stable funding factors define amount of assets that

would be expected to stay with the institution for an extended

period in an institution specific stress event.

Long term assets (such as Corporates loans) will need to be

matched by long term funding.

LCR

Stock of high quality

liquid assets

Net cash outflows over

30-day horizon

≥ 100% NSFR

Available amount of

stable funding

Required amount of

stable funding

> 100%

Bank will favor unencumbered, high quality liquid assets

that can easily be converted into cash to meet its liquidity

needs for a 30 day time horizon under a severe liquidity

stress scenario.

Outflows according to type of instruments, counterparts,

stability and collateral :

Deposit run-off ranging from 25% (deposits for operational

purposes) to 40% for non-financial corporates.

10% outflow for credit facilities with non-financial

Corporates.

30% outflow for liquidity facilities with non-financial

Corporates.

The bank will need to hold high liquid assets (eg OLO)

against stressed outflows.

16


It is a simple, transparent, non-risk based ratio:

The capital is the Tier 1 Capital.

The total exposure is composed of on and off balance sheet assets.

On-balance sheet: all assets, no netting, no reduction from e.g. collateral, guarantees.

Off-balance sheet: 10% CCF for unconditionally cancellable lines and 20% - 50% 100 % for other off-

balance sheet items , depending of their riskiness ( low- medium – high)

Volumes of assets are limited to 3% of Capital.

Capital

Exposures≥ 3%

Basel III: Leverage

Leverage Ratio

• Is intended to constrain the build-up of leverage in the banking sector.

17


Basel III: Potential impact on pricing - RWA & Leverage

More strict criteria for credits.

Adequate charge of risk costs.

Importance of an active credit risk management of debtors (selection will be sharper).

Even more importance of collateral, guarantee and other mitigants to reduce

counterparty exposure.

Required Capital for RWA and Leverage is not cumulative, one of the two will be

constraining, the highest will need to be considered :

Capital requirement for leverage: 3% of unweighted exposures, including undrawn facilities.

Capital requirement for RWA: 8% of RWA.

Hence, RWA will be constraining starting from an RWA level of 37,5% (= 3% / 8%).

Given their RWA-levels, in most cases Leverage will not be constraining for corporates.

Undrawn facilities which « can be cancelled unconditionally at any time » have beneficial

treatment for the calculation of leverage (10% weighting instead of 100%).

Scarcity of Capital

Required Capital for RWA and Leverage

18


When granting a loan, there’s a choice to make for the bank between LCR eligible (liquid)

assets and other loans (such as a loan to a corporate).

The bank needs to foresee maturity matched funding for each drawn credit facility sheet.

Since funding is more expensive for longer maturities, there will be a trend to facilities with

shorter tenor.

For each undrawn facility, the bank needs to consider an outflow. The outflow rate depends

on the type of facility :

10% on undrawn credit facilities for non-financial corporates.

30% on undrawn liquidity facilities for non-financial corporates.

For these, the bank needs to have the funds available at all time (just as for a drawn facility).

This will result in an increased cost for undrawn facilities.

Basel III: Potential impact on pricing - Liquidity

Drawn facil it ies

Undrawn facil it ies

19


Banks will need to raise new capital or re-organise their balance sheet activities.

Liquidity will be a key driver in the LT strategic choices of banks.

Through leverage ratio, volumes are limited to 3% of Capital : profitability will be under pressure.

Pricing will be adapted taking into account these new constraints / costs. Basel III

favourable products will get a more attractive pricing than less favourable products:

LT loans become less obvious (very few are considered as liquid assets).

Pricing will be more based on collateral as well.

Active management of off-balance sheet will be necessary:

o Non-used credit lines and facilities are to be limited.

o For derivatives, existence of collateral agreements will be important.

Banks will favour stable funding products with outstanding maturities > 1month.

Importance of operational relationship

New products will be developed to better align clients needs with regulatory constraints.

E.g. other forms of financing: asset finance, disintermediation.

Basel III: Impact and solutions

20

Key messages

Focus on real needs

Increase dialogue between banks and

clients

“MUTUAL BENEFICIAL PARTNERSHIP“





de gevolgen


Agenda

21


22

Financieringsbehoeften analyseren in functie van de ontwikkelingsstadia van een onderneming

HIGHER RISK LOWER RISK

PRE-SEED FASE SEED FASE START-UP FASE OPKOMENDE GROEI ONTWIKKELING

Business Angels,

Technology Transfer, Accelerator en Seed Funds

Micro-kredieten

VC Seed & Early Stage

VC Funds, Mezzanine Funds,

Co-Investment Funds

Bancaire kredieten – Alternatieve financiering

Publieke Stock

Markets

SME ontwikkelingsstadia

HOOG RISICO LAAG RISICO

Financierings-

behoeften

Klassieke

bancaire

kredieten

Debt Capital

Markets

Equity Capital

Markets

Asset FinanceBank

Financiering: opportuniteiten & alternatieven (*)

(*) exclusief alternatieve non-bank financiering zoals shadow banking (peer to peer lending, crowdfunding,

micro kredieten, kredietunies)23

Private Equity &

Mezzanine


24

Beter WCM minder behoefte aan WC financieringsbron

Working Capital Management

1

2

3

4

5

CASH &

TREASURY

MANAGEMENT


25Bron : NBB (Schema A en conjunctuurenquête), ECB

¹ Toegekend door de ingezeten banken, inclusief geëffectiseerde kredieten.

Klassieke bancaire financiering

KLASSIEKE

BANCAIRE

KREDIETEN


26

Klassieke bancaire financiering

KLASSIEKE

BANCAIRE

KREDIETEN


27

Asset Financing

Leasing: ondergebruikte financieringsvorm in België (2013)

België: 8,73 % van investeringen (stijgt niet)

EU: 12,5 % van investeringen

USA : > 20 % van investeringen

ASSET

FINANCE

28

Financiering: opportuniteiten & alternatievenAsset Financing

Factoring: groeiende markt – à fortiori in België

Wereldmarkt 2013: 2.230.479 M€; groei van 4 %

Europese markt 2013: 1.354.192 M€; groei van 4 %

Belgische markt 2013: 47.683 M€; groei van 12 %

ASSET

FINANCE

1. Flexibele financieringsformules (ook voor ondernemingen

met een minder sterke balans)

2. Geen algemene zekerheden nodig

3. Bancaire kredietlijnen worden vrijgehouden

4. Lagere RWA

5. 100 % financiering mogelijk bij leasing + prefinanciering BTW

7. Tot 90% en meer financiering (incl BTW) mogelijk bij factoring

29

Financiering: opportuniteiten & alternatievenAsset Financing

2

3

4

5

6

1. Additionele bron van financiering1

Voordelen

7

ASSET

FINANCE

30

Obligatie-uitgifte

Korte Termijn Lange Termijn

Programma Programma Stand-Alone

Short Term Treasury

Notes

“COMMERCIAL PAPER”

Medium Term Treasury

Notes

“MEDIUM TERM NOTES”

(MTN)

Public Retail bond

Private Placement

(EMTN) Eurobond

EMTN

“EURO MTN program”

Meerdere uitgiften per jaar

Recurrente issuer

Belgian Multi-term Treasury Notes Program (CP + MTN)

Financiering: opportuniteiten & alternatievenDebt Capital Markets (Obligaties)

30

DEBT

CAPITAL

MARKETS

31 Bron : Bloomberg

Financiering: opportuniteiten & alternatievenDebt Capital Markets (Obligatie-uitgiften)

Belgian Corporates:

Volumes (in -000-) – primary market – Ytd comparison 2014-2012

31

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2012 2013 2014

Belgian Corporates 2014 vs 2012 ytd

ASSET

FINANCE

DEBT

CAPITAL

MARKETS


32

Aandelenindices noteren rond “all time highs” Commentaar

Stijgende lange termijn trend (met tijdelijke correcties) gunstig voor kapitaalmarkttransacties

De belangrijkste aandelenmarkten bevinden zich reeds meer dan 5

jaar in een positieve lange termijn trend. Deze stijging werd af en

toe onderbroken door tijdelijke gezonde correcties, die gepaard

gaan met een stijging van de volatiliteit.

Dit was ook het geval recent in oktober 2014. Ook deze keer lijkt

het om een tijdelijke correctie te gaan.

Niet alleen de volatiliteit is sindsdien opnieuw afgenomen maar ook

de waarderingen liggen nog steeds op aanvaardbare niveaus zoals

blijkt uit de forward PE en EV / EBITDA ratios van de DJ Stoxx

index.

Toenemende volatiliteit noopt tot voorzichtigheid

1m Volatiliteit Stoxx 600

60.0

80.0

100.0

120.0

140.0

160.0

180.0

11/17/09 11/17/10 11/17/11 11/17/12 11/17/13 11/17/14

BEL-20 MSCI Belgium Stoxx 600 Eurostoxx

Forward PE & EV / EBITDA DJ Stoxx Index

EQUITY

CAPITAL

MARKETS

Aandelenkapitaalmarkttransacties in West-Europa Commentaar

33


Bron : Dealogic Bron : Bloomberg

2014 is het beste jaar sinds 5 jaar op vlak van aandelenmarkt transacties.

Tot op heden werd al €159 miljard opgehaald via de

aandelenmarkten in West Europa.

Op vlak van nieuwe beursintroducties (IPO’s) is 2014 zelfs het beste jaar

sinds 2007 met een waarde van €47 miljard aan IPO’s (201 IPO’s)

De recente kleine correctie heeft wel gezorgd voor een (tijdelijke)

vertraging in nieuwe dossiers en ook een aantal beslissingen tot uitstel

van de transactie tot volgend jaar (oa SPIE in Frankrijk)

Ook in België waren na er de 3 beursintroducties vorig jaar (na 2 jaar

zonder IPO’s) opnieuw 2 beursintroducties (argen-x en Ontex). De

heropleving van de Belgische markt van aandelentransacties was echter

minder uitgesproken dan in West-Europa.

33

IPO’s in West Europa Aandelenkapitaalmarkttransacties in België

159

136132

87

124

245

162

198

valu

e

EQUITY

CAPITAL

MARKETS

Belgisch fonds helpt kmo's met 100 miljoen euro

België heeft met Mezzanine Partners zijn allereerste mezzaninefonds.

Zo'n fonds financiert ondernemingen via achtergestelde leningen en stelt

geen eisen over aandeelhouderschap of dagelijks bestuur. Mezzanine

Partners heeft sinds februari 100 miljoen euro ingezameld. De

initiatiefnemers zijn PMV en Capital@rent.

08 November 2014

34

Financiering: opportuniteiten & alternatievenVerschillende initiatieven

Brussels weighs up options for

€300bn investment funds

The European Commission is considering the

creation of investment funds seeded with cash

from either the EU budget or the European

Investment Bank, as the centrepiece of a new

growth plan. The move is aimed at enticing

private investors to finance European

infrastructure.

16 November 2014

Marcourt va affecter 121 millions d'euros aux pôles

de compétitivité en 2015

Principal élément du Plan Marshall wallon depuis le début des différentes

mesures initiées en 2005 pour relancer l'économie régionale, les pôles de

compétitivité ne devraient pas souffrir du régime d'austérité du

gouvernement wallon. Selon nos informations, celui-ci devrait réserver

un budget d'engagement important pour financer les projets des 6 pôles

en 2015. Il est doté d'un montant de 121 millions d'euros.

16 Octobre 2014

220 mio EUR have been invested by

TDP for the realisation of projects

totalling more than 2 bio of project

value

23 oktober 2014

PRIVATE

EQUITY &

MEZZANINE

Working Capital Management: eerste bron van financiering

35

Conclusies

2

3

4

5

Markt van bedrijfsfinanciering in beweging!1

Leasing & Factoring: nog veel onbenutte opportuniteiten

ECM & DCM winnen aan belang

Klassieke bancaire financiering blijft zeer belangrijk

is open for business inzake alternatieve financiering (Asset

Finance, Debt Capital Markets en Equity Capital Markets).

36

Conclusies

2

3

is open for business in Public & Wholesale Banking én vooral

in Corporate Banking rekening houdend met Bazel 3 en andere

regulatoire hervormingsinitiatieven voor de financiële sector.

1

is open for business in Project Finance (Renewable Energy

en Infrastructure) met ook aandacht voor Financial Advisory

en Project Bonds.

Belfius als gezonde, duurzame Belgische bank-verzekeraar

met het grootste maatschappelijk engagement:

FDSeminar Financiering na Basel III - Peter Vermeiren en Nico De Muijnck

Economy & Finance

Transcript of FDSeminar Financiering na Basel III - Peter Vermeiren en Nico De Muijnck