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Annual Report 2010 - Muenchener Hypothekenbank eG

Cooperative financial Network. We were able to meet inves- tors’ demands for issuer services, which increased as a result of the financial market crisis. stabLe income sitUation in highly competitive markets like residential property financ- ing in germany, additional business does not necessarily lead to a surge in income. Margins cannot be expanded in this area without incurring higher risks, and as a specialist financer we could only realise additional income by accepting risks arising from changing interest rates. however, both of these options are incompatible with our goal of increasing income in a sus- tainable and risk-conscious manner. Therefore, as in 2010, we will have to continue working inten- sively to keep our administrative costs low and to steadily in- crease the efficiency of our processes. As a result, we will be able to achieve a cost-income ratio that is appropriate for the business model of Münchenerhyp in the long term. This is all the more important because the ongoing projects to meet fu- ture supervisory requirements, in particular, will lead to higher additional costs. effects of sUpervisory reqUirements Since the outbreak of the crisis in the financial markets, the credit sector has become subject to increasingly strict and more varied regulations. The intent is to prevent future crises on international, European and national levels, which is under- standable after the experiences of the financial market crisis. however, the new regulations do not sufficiently account for the fact that not every business model generates the same macroeconomic risks. in addition, in some cases the effects of the various regulations appear to be counterproductive. This especially applies to the low-risk mortgage lending busi- ness at traditional Pfandbrief banks like Münchenerhyp. Spe- cifically, the stricter bank credit rules contained in Basel iii, and other requirements like the bank levy, will place a dispro- portionate burden on firms like Münchenerhyp because of their low-risk and low-margin business. in order to counteract this, we would have to accentuate a higher-risk/higher-margin business. however, this would mean a departure from our strategy and is therefore not an option. The significantly narrower definitions of equity capital restrict the accountability of equity capital while simultaneously in- creasing the demand for expensive capital resources. further- more, the higher liquidity requirements increase costs, especially because they are not coordinated with the existing liquidity requirements of the Pfandbrief Law. Without corrections or further coordination, refinancing via Pfandbriefe would be- come significantly more expensive. finally, the threatened in- troduction of the so-called leverage ratio, which establishes an upper limit for a bank’s volume of loan transactions regard- less of the risk levels of the loans issued, creates a false incen- tive to reduce low-risk and low-margin business and to take on higher risks when making loans. The original goal of further limiting high-risk business is thus completely reversed. Law- makers must therefore review the effects of the new rules once more in their entirety before implementing international regu- lations in European and german law, and when creating origi- nal german regulations. great dedication shown by oUr empLoyees The commitment of our employees was one the key founda- tions that enabled us to successfully expand our new business during the past year. They faced special demands associated with the implementation of cost and efficiency measures, in- tensive risk management strategies and projects for fulfilling the new supervisory requirements. We would like to thank them and assure that we recognise their energetic commit- ment to the future of our bank. We would also like to thank the Münchenerhyp committees for their constructive cooper- ation and expert advice. objectives for 2011 This year we plan to further develop our sustainable growth course and continue expanding our new business. As we do this we will continue to place special attention to risks and will maintain our high standards. following our successful efforts