Annual Report 2010 - Muenchener Hypothekenbank eG

accounted for € 5.5 billion, Public Pfandbriefe for € 1.1 billion, and uncovered securities for € 1.7 billion. outflows in the refinancing business amounted to € 6.1 billion, resulting in net sales volume of € 2.2 billion. ratinG After the rating agencies significantly tightened their creditwor- thiness requirements in 2009, Moody’s only carried out one larger adjustment of its methodology in the past year. in eval- uating subordinated bonds, the subordinate rating for all ger- man banks was placed “on review for downgrade” in anticipa- tion of the restructuring law that was to take effect on the first day of 2011. Moody’s explained that on average this ra- ting was expected to decrease by three levels for german credit institutions. for Münchenerhyp’s subordinated rating, Moody’s made an adjustment of one level, to A3, on february 18, 2011. Since we only have one such subordinated bond on the market and it comes due on June 1, 2011, this reduced rating has only a slight effect on the Bank. The rating still places Münchenerhyp on the same level as the volksbanken Raiffeisenbanken Cooperative financial Network; it also means that we still have a good rating compared to other Pfandbrief banks. The Aaa ratings for our Public Pfand- briefe and Mortgage Pfandbriefe remain unchanged. in the current Credit opinion from January 2011, Moody’s once again comments favourably on the Bank’s loan portfolio, which is more heavily diversified in comparison to other Pfandbrief banks’ portfolios. Moody’s also viewed Münchenerhyp’s risk profile favourably, as the mortgage lending value ratios are moderate in comparison to the market’s figure. The same also applies to the Bank’s close collaboration with and membership in the volksbanken Raiffeisenbanken Cooperative financial Network. Moody’s commented a bit more critically on the Bank’s profit- ability and level of equity in international comparison. fur- thermore, Moody’s also opined that a renewed downturn in the german and international economies could lead to higher adjustments in the area of commercial property loans. rating overview Rating outlook Public Pfandbriefe Aaa stable Mortgage Pfandbriefe Aaa stable uncovered liabilities A1 negative Subordinated liabilities A3 stable Short-term liabilities Prime-1 negative fundamental financial strength C- negative overall leGal conDitions amendment of pfandbrief act The second amendment to the Pfandbrief Act took effect on November 25, 2010. in particular, the amendment clearly defined the legal status of the cover pool should a Pfandbriefbank become insolvent. it also expands the administrator’s access to cash and cash equivalents. The new amendment further strengthens the safety and quality of the Pfandbrief. baseL iii We have been working on the introduction of the internal Ratings Based Approach (iRBA), using the so-called founda- tion-iRBA, since 2009. We submitted our application to use iRBA to the federal financial Supervisory Authority (Bafin) at the end of 2009. Approval of the first rating systems by the Bafin should take place in the summer of 2011. The substantial improvement in the equity capital ratio resulting from the iRBA should already take effect as of 2011. The implementation of the resolutions passed by the Basel Committee on Banking Supervision into german law regarding the treatment of hybrid capital, as well as key liquidity and debt figures, were integrated into our business strategy and the related processes were adjusted as required. 26 | 27 münchener hypothekenbank eg | annUaL report 2010 management report