Refinancing (English refinancing, funding ) is at banks the name of fundraising for the purpose of granting credit.
Not need to be refinanced only money loans, guarantee loans, however. Because only the granting of money loans is connected to a cash outflow, because the borrower money will be provided in the form of bank money ( cash or rare ) are available. This cash outflow is offset, normally by the lending bank immediately. Such a liquidity adjustment is called refinancing. Behind the refinancing ideas are stimulated by the principle of maturities, whereby a liquidity drain must be not only on amount, but also on time moderately congruent balanced. However, the base theory are within the scope of maturity transformation and the funding of long -term bank loans through short- and medium-term cash investments.
Types and functions of the refinancing
The balance of this cash outflows can be done
- Liabilities by increasing the liabilities ( deposits, issuance of debt securities, interbank trading ); it takes place a balance sheet extension. Equity is usually not used because it primarily be used to finance fixed assets.
- Capitalized by reducing asset positions ( sale of money market instruments, use of the main refinancing, sale of securities, securities lending, repurchase agreements, resolution of inter- bank deposits; formerly rediscount ); it takes place in an asset swap.
A relatively new form of refinancing represent the true sales dar. here are from a lender loans bundled with identical maturities and the same risk structure and sold to investors in securitized form. If it is in the creditor is a credit institution, the equity ratio can be improved, but on the other hand eliminates the interest income from the loans sold. The securitization of subprime mortgages played a central role in the subprime crisis.
The procurement of central bank money is the typical asset- refinancing. The refinancing needs of the banking system over central bank money is the starting point of the monetary policy of the central banks.
Strictly dedicated funding there is in residential mortgages ( mortgage bonds called Mortgage Covered Bonds, which are linked to the mortgage loans in a cover register ), municipal loans / government loans ( through municipal bonds / public Pfandbriefe, called public sector bonds / municipal bonds, also with the cover register ) and development loans ( through development banks ). For development loans that need to be handled through a local bank, the bank has set up a so-called refinancing application to the development bank, which then the bank will provide the funding for forwarding to the final borrowers. Strictly dedicated funding are only a liability to refinance.
The funding is part of the liquidity management of banks. Special sections take this task by monitoring the daily deposit and cash flows, make the asset- liabilities or compensating and reported under the Liquidity Regulation of the Banking Supervision. For the procurement of the money market and the capital market come into question.
Bank operational impact
In a normal (not inverse ) yield a refinance long-term loans with short-term deposits leads to higher interest income, because the short-term deposit rates are lower than the long -term loan rate. Then practice banks of the function of maturity transformation, which in this case leads to a positive transformation result. This is, however, associated with a refinancing risk, because a revolving connection refinancing must be sought. To minimize this risk, banks must meet two key figures:
- The short-term, stress- based liquidity coverage ratio ( liquidity coverage ratio; LCR) is to ensure the solvency of a bank without having to rely on outside help. The highly liquid assets include cash on hand, balances with central banks available and safe government bonds. With markdowns ( discount), however, other securities holdings are included:
The figure indicates whether it is possible, assets may sell it at a loss in order to meet the liquidity requirements under unfavorable conditions for at least 30 days. You will be introduced to 60% from January 2015, their full effectiveness, it was decided in January 2019.
- The medium-term structural funding ratio ( net stable funding ratio, net stable funding ratio ) represents existing refinancing funds ( available stable funding, ASF) to be refinanced assets (required stable funding; RSF) over. You should ensure that in the medium term a bank's assets are at least proportionately refinanced with "stable" liabilities. The liquidity of assets is taken into account:
When " actual existing refinancing " those liabilities are considered available to a bank in stressful situations still at least 1 year. The " required to be refinanced assets" include, for example, highly liquid government bonds; They are taken into account with a weight of 5%. The measure creates incentives to refinance assets with long-term, low volatile liabilities. The key figure is made compulsory from 2018.
The refinancing costs for the lending business are influenced to a considerable degree of uncertainty about the future development of interest rates in the money and capital market. This uncertainty is greater, the further the to forecast interest rates in the future. Interest rate derivatives may be trying to anticipate future developments and hedge the risk.
- In general, funding will be made immediately before or at the latest on lending congruent ( congruent ). From sum transformation is used when initially zero or more refinancing funds are procured, as this corresponds to the actual lending business. There are two types: Credits will be granted, without leading to immediate refinancing, it is a so-called active anticipation. Decides a bank for an active anticipation, so it comes with the granting of loans initially not an immediate refinancing transaction. Consequence is a shortage of liquidity that can be accepted as due to a liquidity surplus. The aim of this active lookahead is an expected interest rate cut in the money market or capital market, which leads later in time to the capitalization refinancing to lower funding costs and thus to an additional prize ( transformation profit).
- Conversely, deriving from a passive anticipation of rising interest rates and by investors looking for (such as issuance of bank bonds ), without at the same time be granted appropriate credit. Until the lending such amounts are interest-bearing - usually with shorter maturities at other banks - placed on the money market temporarily. In case of future loans were granted the temporarily deposited funds will be dissolved and used as a refinancing of the loans.
- The increasing globalization refinancing transactions in foreign currency required or - on the assessment of currency risks - also make desirable. In this case, a currency transformation would be carried out, which is covered by insurance through currency derivatives. Here you can on the one hand refinancing funds in other currencies procure, as they are used as credit. On the other hand, arise in the market credit products which allow the borrower voting rights, the currency in which loans are repaid.
The various sources liabilities are interest rate and term due specifically used. In 2010, loans from German banks to 34% of demand and time deposits of non-banks, 28 % of interbank liabilities, 27 % of bank debt and 9% of savings deposits were refinanced. The proportions of the individual funding sources, both as an interest-induced fluctuate for reasons of minimizing creditor risks.