Achievements and opportunities from point of views of the Managing Board
Questions for Markus Bolder
Mr Bolder, you will leave the Managing Board in summer 2017 and take on new responsibilities. What has been the greatest success for you personally in the past seven years?
The EAA essentially started from scratch in 2010. There was no blueprint for such an institution, and we were just a small number of colleagues. First, we had to recruit a good team and set up solid structures. Nonetheless, from the very beginning we were responsible for a portfolio worth billions, and we fulfilled our task of minimising losses. It was a remarkable team effort, one that I am particularly proud of.
What do you see as the most important knowledge you acquired while on the Board?
Two things are important to me. First, I am convinced that the model of the EAA offers clear advantages when it comes to winding up bank balance sheets while keeping losses at a minimum. Second, the wind-up activities change the way we look at banking: existing processes are repeatedly scrutinised, and they are regularly adjusted to match the situation with regard to cost efficiency and risk management.
Questions for Horst Küpker
Mr Küpker, how does the low interest rate environment affect the EAA’s work? In other words, are wind-up activities in this environment a foregone conclusion?
Certainly not. The environment creates incentives to buy for investors who seek to benefit from any subsequent gains. However, the EAA’s business model does not simply call for trying to find buyers and sell off positions. We must first examine whether it is better to maintain certain commitments or restructure them in order to optimise the overall result. Our objective is to safeguard assets. In this way, our wind-up activities will never be a foregone conclusion. In terms of euros and cents, the low interest rates have placed a burden on our earnings, as well-established borrowers paid off loans with high margins early. This effect could not be fully offset through more favourable refinancing models.
What does it mean for the EAA when interest rates, particularly in the United States, rise while the value of the euro falls?
Roughly 40 per cent of the loans and securities in the EAA portfolio are denominated in dollars. By and large, however, we have been able to neutralise the associated risks. We usually refinance dollar positions with issues denominated in dollars, which eliminates exchange rate risks. And our hedging transactions secure us from any remaining market risks, including interest rate increases.
Questions for Matthias Wargers
As the wind-up of the portfolio is far advanced, what will be the role of the EAA in the coming years?
We have indeed made a lot of progress in our work. However, we should not draw the conclusion that the remaining tasks will be completed with ease. We still manage a widely-diversified portfolio worth billions with different requirements, for example, managing an extensive portfolio of life insurance policies in the United States or restructuring energy projects taken over from the former WestLB.
Winding up risk positions is still – or once again – a key topic for the financial industry. How does this impact the EAA?
Current debates do not affect the EAA as an institution, as our tasks are clear. We even see opportunities to complete them faster than originally planned. The experience gained here will also be of great value in the future when it comes to strategically restructuring and adjusting the balance sheets of banks and financial services companies. In addition, the current environment also might make it easier for the EAA to outsource certain tasks as planned.