Montag, 27. April 2009

Mountains or Molehills?

On the week-end, the SZ had front-page news about a "leaked" list of problem assets at German banks. In essence, the article says: "According to a list, there are 816 bn € of problem assets, but we can't really give you a breakdown, and we can't really say how much of a problem those assets really are. Maybe a big one, maybe a small one. Heaven knows."

I find it a bit frustrating how the German press keeps tossing around numbers that are essentially meaningless. Take Hypo Real Estate as an example:

Sure, the bank is a big mess, no doubt about that. But according to the list, it has 267 bn € of problem assets. Their latest financial statements (9/08) tell us that the bank has total assets of 392 bn €.

So 70 % of their whole book (which mostly consists of loans, not subprime securities) is "problem assets"? Well, if you classify every loan that may possibly have to take some sort of haircut due to falling real estate prices as a "potential problem asset", you may end up at 267 bn €. But it is quite inconceivable that HRE will incur losses that come anywhere close to 267 bn €. And because of that, the number as such is meaningless. All it does is tell the public: "The risks are huge." Which they undoubtedly are, but you don't need an arbitrary 816 bn € number for that.

Having said that, I also think it is ridiculous that BaFin now wants to prosecute the people reponsible for the leak. Instead, they should make a full disclosure and tell people exactly what the list means, caveats and limitations and all.

1 Kommentar:

  1. I fully agree. The numbers are ridicules. BaFin says the numbers represent the part of the portfolio that does not fit to new core business of the bank. That probably includes the toxic assets but also many things else.