The prevailing low-interest environment, primarily due to the ECB’s monetary policy, supports the demand of the agricultural sector for special promotional loans. However, low interest rates also weigh on the earnings in the Capital Investment segment and have an impact on the margins in the Promotional Business segment. Further measures introduced by the ECB within the scope of the expanded asset purchase program could lead to an additional charge on earnings due to falling asset yields and margins. A change in the low interest rate environment, e.g. in the wake of a strong rate hike, would be associated with both risks and opportunities for Rentenbank due to the aforementioned factors. The possible specific consequences depend on the extent of interest rate changes as well as on the respective segment and the selected time horizon.
Administrative expenses may be subject to additional burdens resulting from further regulatory requirements which are not yet known. This would have an impact on IT and personnel expenses. Apart from the investments already planned, further changes in the IT and building infrastructure may become necessary.
Depending on the changes in market parameters, measurement losses may arise in the case of a widening of the lending/funding margins in the market. If the margins tighten, this may result in measurement gains.
Despite Rentenbank’s risk-averse new business policy, it cannot be ruled out that additional information regarding the financial position of our business partners, thus adversely affecting their credit quality, will be identified during the course of the current fiscal year. This can result in additional rating downgrades for exposures held in the portfolio and thereby burden the risk coverage potential within the context of the risk-bearing capacity concept.
Net interest income before the allowance for credit losses/promotional contribution of all three segments was slightly above both the prior-year figure and the pro rata projected figure. Net gains/losses from fair value and hedge accounting developed favorably, above all due to effects from reversals driven by residual maturities. On the basis of new business and the results achieved in the current fiscal year, the Board of Managing Directors is confident that the planned volumes in the promotional business and the planned operating profit will be achieved for the fiscal year 2017.
This report on expected developments contains certain forward-looking statements that are based on current expectations, estimates, forecasts, and projections of the Board of Managing Directors and information available to it. These statements include, in particular, statements about our plans, strategies and prospects. Words such as ‘expects,’ ‘anticipates,’ ‘intends,’ ‘plans,’ ‘believes,’ ‘seeks,’ ‘estimates’ and similar expressions are intended to identify such forward-looking statements. These statements are not to be understood as guarantees of future performance, but rather as being dependent upon factors that involve risks and uncertainties and are based on assumptions that may prove to be incorrect. Unless required by law, we shall not be obligated to update forward-looking statements after their publication.
All material risks are concentrated in Rentenbank and are managed by Rentenbank on a group-wide basis. The business activities of subsidiaries are strictly limited. The disclosures made in the risk report primarily relate to the Group. Essential bank-specific aspects of Rentenbank are presented separately.
The Board of Managing Directors determines the Group’s sustainable business strategy on the basis of the company’s mission derived from the relevant legislation. Rentenbank’s business strategy is primarily defined by its promotional mandate and the measures taken to fulfill the mandate. In addition, targets and measures are set for the segments.
As part of a risk inventory, the Group analyzes which risks may have a significant impact on its assets, capital resources, results of operations, or liquidity situation. This represents the basis for the Group’s risk profile. In addition, material risks are identified early using indicators based on quantitative and qualitative risk characteristics, as well as self-assessments. Further procedures include the New Product Process (NPP), ICS key controls, and daily monitoring activities. Concentration effects are given appropriate consideration.
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The risks resulting from business activities are identified, limited, and managed using a risk management system (RMS). Based on the risk-bearing capacity concept, the RMS was established specifically for this purpose. In this context, the Board of Managing Directors has defined a risk strategy, aligned with the overall business strategy, and the associated sub-strategies. These are reviewed at least annually and adjusted, if necessary, by the Board of Managing Directors. In addition, the strategies are discussed with the Risk Committee established by the Board of Supervisory Directors.
The implementation, management and monitoring of limits, which are in line with Rentenbank’s risk-bearing capacity, are an integral part of the RMS.
The risk-bearing capacity concept aims to ensure that the risk coverage potential is sufficient to cover all material risks. It comprises the going concern approach and the gone concern approach with a one-year time horizon. The primary management instrument is the going concern approach. The objective is to sustainably generate a stable and adequate operating profit, while concurrently complying with the regulatory requirements. Under the going concern approach, risks are measured based on a standard scenario and a stress scenario at a confidence level of 95% and 99%. The confidence level represents the probability that the projected losses will not be exceeded.
The management objective of the gone concern approach is to protect lenders (creditor protection). Under this approach, risks are measured using an even higher confidence level of 99.9%.
Rentenbank is an institution supervised by the ECB and is subject to the Supervisory Review and Evaluation Process (SREP).
Rentenbank has established a recovery plan pursuant to the German Recovery and Resolution Act (Sanierungs- und Abwicklungsgesetz - SAG), which is updated at least annually. The key elements of the recovery plan are the defined recovery indicators and their thresholds, as well as the recovery options and the governance and recovery process. The recovery indicators are part of risk reporting and allow Rentenbank to identify crisis situations at an early stage so that mitigating actions can be taken.
Under the Risk Appetite Framework (RAF), Rentenbank defines the framework and guidelines for risk appetite, which are described in the business and risk strategy as well as in the related sub-strategies. The risk appetite is reflected in the established risk limits as well as in the early warning indicators.
As part of the planning process, risk scenarios are also used to evaluate future net assets, financial position, and results of operations. Deviations between the target and actual performance are analyzed in an internal monthly report. The capital plan is defined on the basis of a 10-year time horizon. The risk-bearing capacity and the associated key metrics are planned using a 5-year projection.
The introduction of new products, business types, sales channels or new markets requires an NPP. As part of the NPP, the organizational units involved analyze the risk level, the processes, and the main consequences for risk management. If business processes, IT systems or structures change materially, the proposed changes are analyzed with respect to control procedures and their intensity as part of the impact assessment.
Based on the risk management and controlling processes, the risk manual of the Board of Managing Directors provides a comprehensive overview of all risks in the Group. Risk management functions are primarily performed by the Treasury and Promotional Business divisions (front office functions according to MaRisk) within defined limits. The member of the Board of Managing Directors who is responsible for the back office function is also responsible for the Risk Controlling function. The Finance division, including its Risk Controlling function, and the Financial Institutions division, together with its Credit Risk function, report to this Board member. In the Finance division, the Risk Controlling function is accountable for the regular monitoring of the limits approved by the Board of Managing Directors, as well as for the reporting on market risks, liquidity risks, operational risks, regulatory and reputational risks, and risk-bearing capacity. Risk reporting is based on the level of risk and regulatory requirements. The Financial Institutions division monitors the limits defined for credit risks and is responsible for reporting on credit risks, taking into account risk aspects and regulatory requirements.
The compliance risks relevant to Rentenbank are characterized primarily by the fact that non-compliance with key regulatory requirements may result in fines and penalties, claims for damages, and/or the nullity of contracts. This may put the assets of Rentenbank at risk. Rentenbank’s compliance function, a part of
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the Internal Control System (ICS), acts in collaboration with the organizational units to avoid risks that may arise from non-compliance with the relevant legislation.
The Board of Managing Directors, as well as the Audit Committee and the Risk Committee, which are both established by the Board of Supervisory Directors, are informed of the risk situation at least quarterly. If material risk-relevant information or transactions become known, and in the case of non-compliance with MaRisk, the Board of Managing Directors, Internal Audit department and, if necessary, the heads of divisions or departments concerned must be notified immediately. The Board of Supervisory Directors is immediately informed of the material risk aspects by the Board of Managing Directors.
The Internal Audit department of Rentenbank is active at Group level, performing the function of a Group Audit department. It reviews and assesses the appropriateness of activities and processes, as well as the appropriateness and effectiveness of the RMS and ICS on a risk-based and process-independent basis.
The Group Audit department reports directly to the Board of Managing Directors and carries out its duties independently and on its own initiative. The Board of Managing Directors may issue instructions to perform additional reviews. The members of the Audit Committee as well as the chairmen of the Board of Supervisory Directors and of the Risk Committee may request information directly from the head of Internal Audit.
Risks are monitored generally across segments. If risk monitoring is limited to individual segments, this is stated in the disclosures on the risk types.
Risk reporting is embedded in the management information system and is based on the regulatory requirements as well as the information requirements of the recipients. The Board of Managing Directors and the Board of Supervisory Directors are informed of the Group’s overall risk situation in a quarterly risk report. In addition, the Board of Managing Directors receives daily and monthly reports on credit, market, and liquidity risks.
Credit risk is the risk of a potential loss resulting from a default or a deterioration in the credit quality of business partners. Credit risk comprises credit default risk, settlement risk, and replacement risk. Credit default risk includes counterparty risk, issuer risk, country risk, structural risk, collateral risk, and participation risk.
Issuer, counterparty, and original country risk refer to losses due to defaults or deteriorations in the credit quality of business partners (i.e. counterparties, issuers, countries), taking into account the valuation of collateral. Derivative country risk results from the general economic and political situation in the debtor’s country of incorporation. Derivative country risks are divided into country transfer risks and redenomination risks. Country transfer risk refers to the inability of a solvent foreign borrower to make interest and principal payments when they are due as a result of economic or political instability. Redenomination risk refers to the risk of converting the notional value of a receivable into another currency. In the case of a conversion into a weaker currency based on a fixed exchange rate, this may be equivalent to a partial disappropriation of the creditors.
Structural risks (e.g. cluster or concentration risks) result from the concentration of the lending business in regions, sectors or on borrowers. Collateral risk arises from the lack of recoverability of loan collateral during the loan term or from an incorrect valuation of collateral. Participation risk is the risk of losses incurred due to a negative performance within the portfolio of participations.
The scope of the Group’s business activities is largely defined by Rentenbank’s Governing Law and its statutes. Accordingly, loans for the promotion of agriculture and rural areas are primarily granted to banks in the Federal Republic of Germany, in another EU country or in Norway. A further prerequisite is that the banks are engaged in business activities with companies operating in the agricultural sector or in the associated upstream or downstream industries or in rural development. In addition, standard promotional business may also be conducted with the German federal states. The special promotional loans are limited to Germany as an investment location. Accordingly, Rentenbank’s lending business is mostly limited to the refinancing of banks
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and institutions or credit institutions as defined in Article 4 CRR as well as other interbank transactions. The credit risk of the end borrower is borne by the end borrower’s local bank.
Furthermore, all transactions directly related to the fulfillment of the bank’s tasks may be carried out within the limits of Rentenbank’s Governing Law and its statutes. This also includes the purchase of receivables and securities as well as transactions within the framework of the Group’s treasury management and risk management.
Rentenbank is only exposed to company risks as part of the direct loan business. No agreements were entered into in 2016. In accordance with its credit risk strategy, Rentenbank has not conducted any syndicated loan business for several years now.
Depending on the type of the transaction, the Promotional Business or Treasury divisions are responsible for new business in promotional lending. The Promotional Business division extends all special promotional loans. The Treasury division is responsible for the purchase of securities, promissory notes and registered bonds as well as for the direct loan business as part of the standard promotional business. It is also accountable for new business in the money market and for derivatives. Derivatives are only used as hedging instruments for existing or expected market risks. Furthermore, they are only entered into on the basis of collateral agreements with our counterparties.
As front office functions according to MaRisk, the Treasury and Promotional Business divisions are actively involved in the operations of the standard and securitized promotional business (Treasury), as well as special promotional loans (Promotional Business). In accordance with MaRisk, certain tasks are to be performed separately from the front office. These tasks (i.e. back office functions) are performed by the Financial Institutions and Credit Protection & Participations divisions, while the securitized promotional business is conducted by the Operations Financial Markets department. The Financial Institutions division has an independent second vote in credit decisions and processes new standard promotional loans. The Credit Protection & Participations division evaluates the collateral and administers payment instructions. Both divisions are also responsible for the intensified monitoring and management of non-performing loans. Any necessary measures are taken in consultation with the Board of Managing Directors. The member of the Board of Managing Directors responsible for the back office function is responsible for the process.
The Financial Institutions division formulates a group-wide credit risk strategy and is responsible for its implementation. The credit risk strategy is approved annually by the Board of Managing Directors, which is reported to and discussed with the Risk Committee of the Board of Supervisory Directors. In addition, the Financial Institutions division analyzes credit and country risks, inter alia. Business partners and types of transactions are allocated using Rentenbank’s own rating categories. In addition, the Financial Institutions division prepares proposals for and has the second vote in credit decisions according to MaRisk. It also monitors credit risks on an ongoing basis.
Credit risks are managed, monitored, and reported for individual transactions at the borrower level as well as at the level of the group of connected clients, at the country level and the level of the total loan portfolio. The Financial Institutions division is also responsible for the methodological development, quality assurance, and monitoring of the procedures used to identify, assess and quantify credit risk. The functional and organizational separation of the Financial Institutions and Credit Protection & Participations divisions from the Treasury and Promotional Business divisions ensures independent risk assessment and monitoring. As part of the overall loan portfolio management, the loan portfolio is subdivided by various characteristics. Similar transactions are clustered into product groups.
The credit ratings are determined in accordance with the bank’s internal risk rating system. They are a key instrument for managing credit risks and the relevant internal limits.
The Financial Institutions division (back office function according to MaRisk) is responsible for determining the credit ratings in terms of the bank’s internal risk rating system. This involves allocating individual business partners or types of transactions to one of twenty rating categories. The ten best rating categories AAA to BBB- are assigned to business partners which are subject to low credit risk (Investment
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Grade). The seven further rating categories (BB+ to C) denote latent or increased latent risks and the final three rating categories (DDD to D) are reserved for non-performing loans or exposures in default.
The credit rankings of our business partners are reviewed at least annually based on the assessment of their annual financial statements and their financial position. In addition to the key performance indicators, the analysis also takes into account qualitative characteristics, the background of the company, and other relevant factors, such as protection schemes or state guarantees. In addition, country risks of the country of incorporation of our business partners are taken into account in the determination of the credit quality. In the case of certain products, such as mortgage bonds, the associated collateral or cover assets are regarded as an additional assessment criterion. If new information concerning a deterioration in the financial position or in the economic prospects of a business partner becomes available, the Financial Institutions division reviews the credit rating and, if necessary, adjusts the internal limits. The internal risk rating system is developed on an ongoing basis and reviewed annually.
| Quantification of credit risk |
Credit default risks are measured using statistical methods and are classified according to Rentenbank’s rating system. Historical default rates as published by rating agencies are used to determine expected losses since Rentenbank has no statistically significant historical data of its own due to the very low number of defaults or credit events in the past decades.
In order to assess credit risks, the Group uses a standard scenario to determine the expected annual loss with regard to the loan exposure. The standard scenario is complemented by stress scenarios. These assume a deterioration in credit quality, lower recovery rates, and an increased probability of default. On the basis of these assumptions, the Group estimates the expected annual loss based on full utilization of the established internal limits.
In line with its business model defined by Rentenbank’s Governing Law and its statutes, the Group focuses on interbank business. This results in a sectoral concentration risk. A lump-sum amount (risk buffer) is set aside for this risk.
In accordance with the risk-bearing capacity concept defined in the risk manual, credit risks in the standard scenario are assigned a certain amount of risk coverage potential 1. The established internal limits are monitored daily to ensure compliance with this amount at all times.
In addition to the stress scenarios, which primarily take into account country-specific effects that need to be backed by the risk coverage potential, a further risk scenario determines the risk exposure amount for the gone concern approach. The methodology is based on the Gordy model (so-called One-Factor Model). Moreover, additional extreme scenarios reflect concentration risks in the credit portfolio. However, these are included in neither of the two risk management approaches (i.e. the going concern approach and the gone concern approach). They are therefore not covered by the risk coverage potential. In this context, the main aim is to critically evaluate the results and, if necessary, to determine the related measures, such as reducing internal limits or increasing monitoring intensity. Further stress scenarios can be used on an ad hoc basis to examine the effects of current developments on the risk coverage potential.
Risk limitation ensures that the risks assumed are in line with the business strategy, the risk strategy defined in the risk manual, and the Group’s risk-bearing capacity. Within this context, limits are set both at the borrower level and at the level of a group of connected clients as well as at the level of the overall loan portfolio.
A maximum limit for all credit risk limits as well as an upper limit for unsecured facilities are determined by the Board of Managing Directors. They thus represent upper limits for the granting of credit risk limits. The appropriateness of both upper limits is reviewed with respect to the risk-bearing capacity, taking into account risk buffers. In addition, country exposure limits and country transfer limits have been established.
A limit system manages the level and the structure of all credit risks. Limits are defined for all borrowers, issuers, and counterparties and, if applicable, subdivided by product and maturity. Rentenbank’s risk rating system forms the basis for decisions on establishing limits. In addition, a maximum limit has been set for each group of connected clients. The utilization of the limits is determined according to the individual types of
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business transactions. Furthermore, a certain minimum credit quality is required for certain types of business or limits.
All limits are monitored daily by the relevant back office function. For money market and promotional loan transactions, securitized promotional business as well as for participations, the utilization of the limits is measured using the relevant carrying amounts. For derivatives, the level of utilization of the limits is measured on the basis of the positive fair values of derivative portfolios, taking into account collateral received, if any, and, in the case of negative fair values of derivative portfolios, taking into account cash collateral received. Limit reserves are used as a buffer for credit risk resulting from fluctuations in valuations. The member of the Board of Managing Directors responsible for this back office function receives a daily report on the risk-related limits and their utilization. The Board of Managing Directors is notified immediately if the limits are exceeded.
Rentenbank has entered into collateral agreements with all counterparties of derivative transactions. These agreements provide for cash collateral denominated exclusively in euros to secure the positive fair values from derivatives in excess of the contractual allowance amounts and minimum transfer amounts. The cash collateral largely reduces credit risk.
At the end of each quarter, the Financial Institutions division (back office function) reports the current credit risk development within the context of the overall risk report based on the MaRisk guidelines to the Board of Managing Directors and the Risk Committee established by the Board of Supervisory Directors.
Pursuant to IFRS 7, the maximum exposure to credit risk is to be disclosed without taking into account collateral. Therefore, it corresponds to the carrying amounts or, in the case of irrevocable loan commitments, to the notional amounts of the relevant assets.
Maximum exposure to credit risk pursuant to IFRS 7:
| Dec. 31, 2016
€ million | | Dec. 31, 2015
€ million | | Change in
€ million | |
|
| |
| |
| |
| Loans and advances to banks | 57,511.0 | | 55,457.2 | | 2,053.8 | |
| Loans and advances to customers | 7,496.8 | | 6,380.9 | | 1,115.9 | |
| Fair value changes of hedged items in a portfolio hedge | 1,258.6 | | 1,298.8 | | -40.2 | |
| Positive fair values of derivative financial instruments | 6,549.5 | | 7,238.9 | | -689.4 | |
| Financial investments | 19,254.6 | | 19,912.2 | | -657.6 | |
| Irrevocable loan commitments | 990.0 | | 841.7 | | 148.3 | |
|
| |
| |
| |
| Total | 93,060.5 | | 91,129.7 | | 1,930.8 | |
|
| |
| |
| |
The Group has received collateral in the form of assignments of receivables, guarantor liability as well as state guarantees for the majority of the risk exposures presented. The remaining risk positions mostly include covered bonds, such as German Pfandbriefe.
As regards the positive fair values of derivative financial instruments, the disclosed maximum exposure to credit risk of EUR 6,549.5 million (2015: EUR 7,238.9 million) represents the carrying amounts in the balance sheet at an individual contract level. In contrast, the risk-related economic collateralization is used for risk mitigation at the counterparty level. For transactions in derivative financial instruments, Rentenbank has concluded collateral agreements with all counterparties on the basis of master agreements with netting provisions. In accordance with IFRS 7, the maximum credit risk exposure to derivative financial instruments amounted to EUR 13.6 million as of December 31, 2016 (2015: EUR 185.3 million), taking into account netting agreements and cash collateral.
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Exposure to credit risk by rating category:
| AAA
€ million | | AA
€ million | | A
€ million | | BBB
€ million | | BB-B
€ million | | CCC-C
€ million | | DDD-D
€ million | |
|
| |
| |
| |
| |
| |
| |
| |
| Loans and advances to banks | 17,753.9 | | 3,040.6 | | 26,835.1 | | 9,881.4 | | 0.0 | | 0.0 | | 0.0 | |
| Loans and advances to customers | 7,496.8 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Fair value changes of hedged items in a portfolio hedge | 349.6 | | 7.8 | | 591.6 | | 309.6 | | 0.0 | | 0.0 | | 0.0 | |
| Positive fair values of derivative financial instruments | 2.6 | | 742.1 | | 3,901.1 | | 1,806.1 | | 97.6 | | 0.0 | | 0.0 | |
| Financial investments | 13,217.6 | | 2,799.3 | | 2,191.4 | | 967.4 | | 78.9 | | 0.0 | | 0.0 | |
| Irrevocable loan commitments | 131.8 | | 3.1 | | 529.7 | | 317.4 | | 8.0 | | 0.0 | | 0.0 | |
|
| |
| |
| |
| |
| |
| |
| |
| Total | 38,952.3 | | 6,592.9 | | 34,048.9 | | 13,281.9 | | 184.5 | | 0.0 | | 0.0 | |
| AAA
€ million | | AA
€ million | | A
€ million | | BBB
€ million | | BB-B
€ million | | CCC-C
€ million | | DDD-D
€ million | |
|
| |
| |
| |
| |
| |
| |
| |
| Loans and advances to banks | 16,327.4 | | 2,172.3 | | 28,309.1 | | 8,635.2 | | 0.0 | | 13.2 | | 0.0 | |
| Loans and advances to customers | 6,378.3 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 2.6 | |
| Fair value changes of hedged items in a portfolio hedge | 334.4 | | 10.3 | | 653.4 | | 300.7 | | 0.0 | | 0.0 | | 0.0 | |
| Positive fair values of derivative financial instruments | 6.0 | | 619.3 | | 4,627.7 | | 1,897.5 | | 88.4 | | 0.0 | | 0.0 | |
| Financial investments | 12,479.9 | | 3,224.8 | | 2,974.9 | | 1,088.6 | | 144.0 | | 0.0 | | 0.0 | |
| Irrevocable loan commitments | 120.0 | | 6.9 | | 408.3 | | 306.5 | | 0.0 | | 0.0 | | 0.0 | |
|
| |
| |
| |
| |
| |
| |
| |
| Total | 35,646.0 | | 6,033.6 | | 36,973.4 | | 12,228.5 | | 232.4 | | 13.2 | | 2.6 | |
The aggregation of carrying amounts in the following two tables is based on the country of incorporation and on the level of the legally independent business partner, without taking into account group relationships.
Risk concentration by country:
| Germany | | Europe
(excl. Germany) | | OECD countries
(excl. EU) | | |
|
| |
| |
| | |
| € million | | % | | € million | | % | | € million | | % | |
|
| |
| |
| |
| |
| |
| |
| Loans and advances to banks | 55,962.7 | | 60.1 | | 1,548.2 | | 1.7 | | 0.1 | | 0.0 | |
| Loans and advances to customers | 7,496.8 | | 8.1 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Fair value changes of hedged items in a portfolio hedge | 1,250.9 | | 1.3 | | 7.7 | | 0.0 | | 0.0 | | 0.0 | |
| Positive fair values of derivative financial instruments | 1,429.0 | | 1.5 | | 4,842.4 | | 5.2 | | 278.1 | | 0.3 | |
| Financial investments | 4,043.9 | | 4.3 | | 13,638.7 | | 14.7 | | 1,572.0 | | 1.7 | |
| Irrevocable loan commitments | 989.9 | | 1.1 | | 0.1 | | 0.0 | | 0.0 | | 0.0 | |
|
| |
| |
| |
| |
| |
| |
| Total | 71,173.2 | | 76.5 | | 20,037.1 | | 21.5 | | 1,850.2 | | 2.0 | |
| Germany | | Europe
(excl. Germany) | | OECD countries
(excl. EU) | | |
|
| |
| |
| | |
| € million | | % | | € million | | % | | € million | | % | |
|
| |
| |
| |
| |
| |
| |
| Loans and advances to banks | 53,903.6 | | 59.2 | | 1,297.8 | | 1.4 | | 255.8 | | 0.3 | |
| Loans and advances to customers | 6,350.9 | | 7.0 | | 30.0 | | 0.0 | | 0.0 | | 0.0 | |
| Fair value changes of hedged items in a portfolio hedge | 1,292.6 | | 1.4 | | 6.2 | | 0.0 | | 0.0 | | 0.0 | |
| Positive fair values of derivative financial instruments | 1,491.5 | | 1.6 | | 5,747.4 | | 6.3 | | 0.0 | | 0.0 | |
| Financial investments | 3,869.5 | | 4.3 | | 14,369.1 | | 15.8 | | 1,673.6 | | 1.8 | |
| Irrevocable loan commitments | 835.4 | | 0.9 | | 0.0 | | 0.0 | | 6.3 | | 0.0 | |
|
| |
| |
| |
| |
| |
| |
| Total | 67,743.5 | | 74.4 | | 21,450.5 | | 23.5 | | 1,935.7 | | 2.1 | |
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Risk concentration by group of counterparty:
| Private-sector banks/other banks | | Foreign banks | | Public-sector banks | | |
|
| |
| |
| | |
| € million | | % | | € million | | % | | € million | | % | |
|
| |
| |
| |
| |
| |
| |
| Loans and advances to banks | 10,049.7 | | 10.8 | | 1,548.3 | | 1.7 | | 32,572.9 | | 35.0 | |
| Loans and advances to customers | 1.5 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Fair value changes of hedged items in a portfolio hedge | 227.9 | | 0.2 | | 7.7 | | 0.0 | | 620.3 | | 0.7 | |
| Positive fair values of derivative financial instruments | 1,085.1 | | 1.2 | | 4,849.7 | | 5.2 | | 210.6 | | 0.2 | |
| Financial investments | 2,554.3 | | 2.7 | | 14,347.5 | | 15.4 | | 735.6 | | 0.8 | |
| Irrevocable loan commitments | 143.9 | | 0.2 | | 0.1 | | 0.0 | | 493.8 | | 0.5 | |
|
| |
| |
| |
| |
| |
| |
| Total | 14,062.4 | | 15.1 | | 20,753.3 | | 22.3 | | 34,633.2 | | 37.2 | |
| Cooperative banks | | Central banks | | Non-banks | | |
|
| |
| |
| | |
| € million | | % | | € million | | % | | € million | | % | |
|
| |
| |
| |
| |
| |
| |
| Loans and advances to banks | 12,840.1 | | 13.8 | | 500.0 | | 0.5 | | 0.0 | | 0.0 | |
| Loans and advances to customers | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 7,495.3 | | 8.1 | |
| Fair value changes of hedged items in a portfolio hedge | 402.7 | | 0.5 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Positive fair values of derivative financial instruments | 133.3 | | 0.1 | | 0.0 | | 0.0 | | 270.8 | | 0.3 | |
| Financial investments | 131.9 | | 0.1 | | 0.0 | | 0.0 | | 1,485.3 | | 1.6 | |
| Irrevocable loan commitments | 352.2 | | 0.4 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
|
| |
| |
| |
| |
| |
| |
| Total | 13,860.2 | | 14.9 | | 500.0 | | 0.5 | | 9,251.4 | | 10.0 | |
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| Private-sector banks/other banks | | Foreign banks | | Public-sector banks | | |
|
| |
| |
| | |
| € million | | % | | € million | | % | | € million | | % | |
|
| |
| |
| |
| |
| |
| |
| Loans and advances to banks | 8,650.4 | | 9.5 | | 1,553.6 | | 1.7 | | 32,790.1 | | 36.0 | |
| Loans and advances to customers | 1.7 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Fair value changes of hedged items in a portfolio hedge | 228.9 | | 0.3 | | 6.2 | | 0.0 | | 625.4 | | 0.7 | |
| Positive fair values of derivative financial instruments | 1,078.2 | | 1.2 | | 4,982.4 | | 5.5 | | 244.3 | | 0.3 | |
| Financial investments | 2,672.1 | | 2.9 | | 14,461.8 | | 15.9 | | 616.7 | | 0.7 | |
| Irrevocable loan commitments | 220.8 | | 0.2 | | 6.3 | | 0.0 | | 316.5 | | 0.3 | |
|
| |
| |
| |
| |
| |
| |
| Total | 12,852.1 | | 14.1 | | 21,010.3 | | 23.1 | | 34,593.0 | | 38.0 | |
| Cooperative banks | | Non-banks | |
|
| |
| |
| € million | | % | | € million | | % | |
|
| |
| |
| |
| |
| Loans and advances to banks | 12,463.1 | | 13.7 | | 0.0 | | 0.0 | |
| Loans and advances to customers | 0.0 | | 0.0 | | 6,379.2 | | 7.0 | |
| Fair value changes of hedged items in a portfolio hedge | 438.3 | | 0.5 | | 0.0 | | 0.0 | |
| Positive fair values of derivative financial instruments | 168.4 | | 0.2 | | 765.6 | | 0.8 | |
| Financial investments | 130.9 | | 0.1 | | 2,030.7 | | 2.2 | |
| Irrevocable loan commitments | 298.1 | | 0.3 | | 0.0 | | 0.0 | |
|
| |
| |
| |
| |
| Total | 13,498.8 | | 14.8 | | 9,175.5 | | 10.0 | |
Carrying amounts in the peripheral eurozone countries:
Dec. 31, 2016
| Italy | | Portugal | | Spain | | Total | |
|
| |
| |
| |
| |
| € million | | € million | | € million | | € million | |
|
| |
| |
| |
| |
| Government bonds | 318.9 | | 78.9 | | 92.6 | | 490.4 | |
| Bonds and promissory notes of banks | 124.3 | | 20.9 | | 641.1 | | 786.3 | |
| Positive fair values of derivative financial instruments | | | | | 0.0 | | 0.0 | |
|
| |
| |
| |
| |
| Gross exposure | 443.2 | | 99.8 | | 733.7 | | 1,276.7 | |
| Collateral | 124.3 | | 20.9 | | 641.1 | | 786.3 | |
|
| |
| |
| |
| |
| Net exposure | 318.9 | | 78.9 | | 92.6 | | 490.4 | |
Dec. 31, 2015
| Italy | | Portugal | | Spain | | Total | |
|
| |
| |
| |
| |
| € million | | € million | | € million | | € million | |
|
| |
| |
| |
| |
| Government bonds | 319.6 | | 79.9 | | 93.2 | | 492.7 | |
| Bonds and promissory notes of banks | 448.4 | | 94.2 | | 1,381.8 | | 1,924.4 | |
| Positive fair values of derivative financial instruments | | | | | 4.7 | | 4.7 | |
|
| |
| |
| |
| |
| Gross exposure | 768.0 | | 174.1 | | 1,479.7 | | 2,421.8 | |
| Collateral | 377.6 | | 94.2 | | 1,381.7 | | 1,853.5 | |
|
| |
| |
| |
| |
| Net exposure | 390.4 | | 79.9 | | 98.0 | | 568.3 | |
The peripheral eurozone countries are monitored closely due to their strained economic and fiscal situation.
There are no available credit limits with counterparties located in the peripheral eurozone countries. Until further notice, only derivatives that are backed by cash collateral may be concluded with counterparties from Italy and Spain.
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The government bonds of the peripheral eurozone countries as well as bonds and promissory notes issued by banks from these countries are assigned to the following measurement categories under IFRS:
| Government bonds | | Bonds and promissory
notes of banks | |
|
| |
| |
| Dec. 31, 2016 | | Dec. 31, 2015 | | Dec. 31, 2016 | | Dec. 31, 2015 | |
| € million | | € million | | € million | | € million | |
|
| |
| |
| |
| |
| Available for sale | 305.2 | | 308.0 | | 705.1 | | 1,823.4 | |
| Held to maturity | 143.2 | | 144.1 | | 0.0 | | 0.0 | |
| Loans and receivables | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Designated as at fair value | 42.0 | | 40.6 | | 81.2 | | 101.0 | |
|
| |
| |
| |
| |
| Total | 490.4 | | 492.7 | | 786.3 | | 1,924.4 | |
| Allowances for credit losses |
In the case of exposures at risk of default, allowances for credit losses are recognized at the level of individual exposures. In this context, impairments resulting from payment defaults are only determined for losses already incurred. The impairment is determined based on the difference between the carrying amount and the present value of the expected cash flows. The method is described in more detail in Note 9 to the consolidated financial statements.
At the level of the annual financial statements of Rentenbank, a specific valuation allowance of EUR 2.4 million was reversed since the exposure was terminated before maturity. This valuation allowance had not been recognized at Group level as the related exposure was measured at fair value through profit or loss in the consolidated financial statements. In the year under review, another specific valuation allowance on loans and advances, amounting to EUR 2.0 million under HGB and to EUR 2.2 million under IFRS, was reversed upon maturity of the exposure and its full repayment. Accordingly, there were no specific valuation allowances at bank or Group level.
The Group recognized a portfolio valuation allowance of EUR 20.0 million (2015: EUR 16.3 million) for latent risks based on an expected loss model. The method is described in Note 9 to the consolidated financial statements. Rentenbank recognized a general valuation allowance of EUR 18.6 million (2015: EUR 16.2 million) in its annual financial statements.
The basis of the calculations for measuring expected losses under the standard scenario is the expected loss related to the amount of utilization, taking into account 1-year probabilities of default. As of December 31, 2016, the cumulative expected loss amounted to EUR 65.5 million (2015: EUR 67.7 million), including a lump-sum amount of EUR 50 million (risk buffer) for sectoral concentration risks in the banking sector.
The year-on-year decline is attributable to redemptions as well as credit enhancements of individual exposures. In the fiscal year 2016, the average expected loss, calculated on a monthly basis, amounted to EUR 66.4 million (2015: EUR 64.7 million). In relation to the risk coverage potential allocated to credit risks as of the reporting date, the average potential utilization was 25.6% (2015: 24.9%). The maximum utilization amounted to EUR 67.8 million (2015: EUR 67.7 million). It was thus below the limit of EUR 260.0 million approved by the Board of Managing Directors for the standard scenario. The lowest utilization during the reporting year was EUR 65.5 million (2015: EUR 63.3 million).
Under the first stress scenario, the expected loss is calculated based on full utilization of all prescribed limits, taking into account 1-year probabilities of default. As of December 31, 2016, the expected loss under this stress scenario amounted to EUR 79.0 million (2015: EUR 81.0 million). Under two further scenarios, we simulate an increase in default probabilities by a country-specific factor (at least twice as high), deterioration of credit quality (by at least two notches), and lower recovery ratios for potential losses of collateralized transactions. The stress scenario simulating the highest risk exposure is included in the calculation of the risk coverage potential, as part of determining the risk-bearing capacity. As of the reporting date, the maximum expected loss calculated under the stress scenarios described above was EUR 123.0 million (2015: EUR 145.5 million). The year-on-year decrease is – by analogy with the standard scenario – attributable to redemptions as well as credit enhancements of individual exposures in the lower rating categories.
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A lump-sum risk buffer of EUR 50.0 million for concentration risks within the banking sector is also included in the calculations to measure potential credit defaults in the stress scenarios.
Market risk is defined by Rentenbank as the potential loss resulting from changes in market variables. It comprises interest rate risks, spread risks, and other price risks. Other price risks include currency and volatility risks which, however, are relevant only to a very small extent (e.g. foreign currency risks).
Interest rate risks exist to a small extent from open fixed-interest positions. The major influencing factors are market rates as well as the amounts and terms of open positions. The risk is recognized in the operating profit when the open positions are closed.
Spread risks are classified as credit spread risks, cross-currency basis swap risks, and basis swap risks.
Open currency positions result, to a very limited extent, from fractional amounts related to settlements in foreign currencies. The measurement of hedged item and hedging instrument at fair value results in different market values in foreign currencies. The translation of foreign currency position into the euro leads to corresponding net measurement gains/losses. There is also a corresponding valuation risk related to future changes in exchange rates.
Further market risks, such as equity risk and commodity risk, are not relevant due to Rentenbank’s business model.
The Group takes into account the different effects of market risks on financial reporting and classifies market risks that result from items accounted for at fair value as IFRS valuation risks.
The IFRS valuation risk is realized if the buy-and-hold strategy is breached or if a business partner defaults and the collateral is insufficient.
IFRS valuation risks are reflected mainly in net gains/losses from fair value and hedge accounting, thus affecting equity and regulatory own funds. However, in the case of regulatory own funds, prudential filters are applied to offset the net measurement gains/losses on own issues.
IFRS valuation risks are given appropriate consideration in the risk-bearing capacity calculation, especially due to their impact on regulatory own funds.
Rentenbank does not have a trading book pursuant to Article 4(1) points (85) and (86) CRR.
The objectives of market risk management are the qualitative and quantitative identification, assessment, monitoring, and management of market risks. These tasks are performed by the Risk Controlling and Risk Management functions.
The Risk Controlling function quantifies market risks, monitors operating limits and risks as part of the risk-bearing capacity concept, and prepares risk reports. It reports to the member of the Board of Managing Directors who is responsible for the back office function.
The Treasury division manages market risks.
The Operations Financial Markets department and the Financial Institutions division monitor the market conformity of concluded transactions.
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| Quantification of market risks |
The Group limits its exposure to interest rate risk to the extent possible, especially through the use of derivatives. Derivatives are entered into on the basis of micro or macro relationships. The effectiveness of micro hedges is monitored daily using valuation units established for the hedging relationships. These economic micro or macro relationships are recognized in accordance with IFRS as hedging relationships accounted for in the balance sheet.
Gains or losses from maturity transformation are realized from money market transactions and, to a lesser extent, from the special promotional business. Generating income by taking interest rate risks is not a part of Rentenbank’s business strategy.
Gains or losses from maturity transformation result from short-term open positions as not all of the special promotional loans are instantly hedged due to their low volumes.
To quantify and monitor interest rate risks, the Group determines daily the corresponding present value sensitivity of all interest rate-sensitive transactions carried out in the Promotional Business and Treasury Management segments.
At Group level, a similar analysis is conducted quarterly. In accordance with regulatory requirements, Rentenbank is required to determine and report the impact of sudden and unexpected interest rate changes on its open positions in the banking book on a quarterly basis. The analysis examines whether the negative change in the present value exceeds 20% of total own funds. In accordance with regulatory provisions, equity is not taken into account in this assessment.
Interest rate risks may not exceed the risk limits determined by resolution of the Board of Managing Directors. Compliance with the limits is monitored daily and reported to the Board of Managing Directors.
Changes in market parameters in the case of cross-currency basis swap spreads, basis swap spreads, credit spreads, exchange rates, as well as other prices, impact the valuation of financial instruments. Balance sheet items are hedged against interest rate and currency risks using corresponding hedges. In order to recognize economic hedging relationships, the allocation of foreign currency-denominated hedged items is based on the fair value option. This involves measuring both the hedging instruments and the hedged items at fair value. The valuation using the aforementioned market parameters results in significant fluctuations in value, even if there is a perfect hedging relationship in terms of cash flows.
The potential effects of IFRS valuation risks with regard to management objectives are taken into account in the risk coverage potential as part of the risk-bearing capacity analysis.
Under the standard scenario, the present value sensitivities of all open interest rate-sensitive transactions in the money market business and lending business portfolios are calculated daily, assuming a parallel shift in the interest rate curve. The results are compared with the relevant limits. The calculation is based on the assumption that the predicted value changes will not be exceeded with a probability of 95%. IFRS valuation risks are not taken into account in the standard scenario since this management approach focuses on the risk of unexpected losses in relation to the operating profit under both HGB and IFRS.
In order to estimate risks arising from extraordinary changes in market conditions, additional scenarios for interest rate changes are calculated for the money market business and lending business portfolios on a regular and an ad hoc basis. The monthly stress scenario also assumes a parallel shift in the interest rate curve.
To determine IFRS valuation risks, the calculations assume an increase in the basis swap spreads, the exchange rates, and in other prices as well as a reduction of cross-currency basis swap spreads and credit
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spreads. When aggregating individual risks, risk-mitigating correlation effects are only taken into account if they arise between cross-currency basis swap spreads and credit spreads.
Under the stress scenario, the predicted risk values will not be exceeded with a probability of 99%.
Risk buffer
Model inaccuracies and simplifications are given appropriate consideration by means of a risk buffer.
Under the standard scenario, the risk coverage potential allocated to market risk amounted to EUR 19 million (2015: EUR 19 million).
Compliance with limits is monitored daily and is reported to the Board of Managing Directors. The Audit Committee and the Risk Committee of the Board of Supervisory Directors are informed quarterly of the outcomes of the risk analyses.
The methods used to assess market risks and the market parameters underlying the standard and stress scenarios are validated at least annually.
In the case of money market business and lending business, the scenario parameters are validated daily using historical interest rate trends.
To monitor interest rate risks at an overall bank level, the results from the daily scenario analyses are validated quarterly using a model based on present values.
The assumptions and market parameters of the standard and stress scenarios were validated during the fiscal year 2016. The risk exposures of and adjustments to the standard and stress scenarios are described in the following.
As of December 31, 2016, market risk in the money market business and lending business segments was EUR 2.0 million (2015: EUR 10.4 million) in the case of a parallel shift in the interest rate curve of 40 basis points (bps). This equals a 10.5% utilization of the risk limit (2015: 54.7%). The average limit utilization in the fiscal year 2016 was EUR 2.3 million (2015: EUR 3.2 million) or 12.1% (2015: 20.4%). The maximum risk for the reporting year amounted to EUR 10.4 million (2015: EUR 10.5 million), while the lowest utilization was EUR 0.0 million (2015: EUR 0.0 million). No limits were exceeded in 2015 and 2016.
The risk buffer was increased to EUR 14.4 million (2015: EUR 7.0 million) during validation.
The stress scenarios assume a parallel shift of 60 bps (2015: 60 bps) in the interest rate curves. As of the reporting date, the risk exposure amounted to EUR 3.1 million (2015: EUR 15.4 million).
The costs for interest rate basis swaps with different maturities and denominated in the same currency amounted to EUR 231.6 million (2015: EUR 215.7 million) based on a parallel increase in the basis swap spreads by 11 bps (2015: 10 bps) and a widening of OIS IBOR spreads by 75 bps (2015: 79 bps).
A decrease in the cross-currency basis swap spread by 111 bps (2015: 109 bps) is assumed in relation to the costs for interest rate basis swaps with the same maturity and denominated in different currencies. This resulted in a sensitivity of EUR -1,681.0 million (2015: EUR -1,336.3 million).
The credit spreads are based on a debtor’s credit rating (structural credit quality), collateralization of products, and market-specific parameters (market liquidity in particular), among others. To measure sensitivity
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under the stress scenario, a parallel shift of -80 bps (-89 bps) and a parallel shift -108 bps (118 bps) are assumed for the lending and funding businesses, respectively. The risk exposure was EUR 1,867.9 million (2015: EUR -1,508.7 million).
The potential valuation loss in the case of an increase in the swaption volatilities by 118 bps (2015: 118 bps) amounted to EUR 14.7 million (2015: EUR 12.3 million) and in the case of an increase in cap/floor volatilities by 237 bps (2015: 237 bps) to EUR 2.0 million (2015: EUR 0.6 million).
The risk exposure to the translation of foreign currency positions into the euro assuming an exchange rate change of 35% (2015: 44%) amounted to EUR 69.5 million (2015: EUR 97.9 million).
The risk buffer amounted to EUR 24.5 million (2015: EUR 14.5 million).
Interest rate risks in the banking book
In accordance with BaFin Circular 11/2011 (BA), sudden and unexpected interest rate changes were simulated using a parallel shift of +(-)200 bps. As of the reporting date, the risk exposure in the case of rising interest rates amounted to EUR 418.3 million (2015: EUR 417.0 million). The ratio based on regulatory own funds amounted to 10.8% (2015: 11.4%). At no point during 2016 or 2015 did the ratio exceed the reporting threshold of 20%.
No material risk was identified for any currency in 2016 or 2015. The following table presents a breakdown of the notional amounts by foreign currency:
| Notional amounts | | |
| in € million | USD | | AUD | | GBP | | NZD | | CHF | | NOK | | JPY | | Other | | Total | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| Assets | | |
| Loans and advances to banks | 0.1 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.1 | |
| Loans and advances to customers | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Financial investments | 702.1 | | 55.3 | | 2,296.7 | | 0.0 | | 1,072.4 | | 0.0 | | 229.2 | | 234.1 | | 4,589.8 | |
| Positive fair values of derivative financial instruments | 34,006.9 | | 9,545.3 | | 2,494.0 | | 2,293.2 | | 819.4 | | 979.5 | | 654.8 | | 1,631.9 | | 52,425.0 | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| Total assets | 34,709.1 | | 9,600.6 | | 4,790.7 | | 2,293.2 | | 1,891.8 | | 979.5 | | 884.0 | | 1,866.0 | | 57,014.9 | |
| Liabilities | | |
| Liabilities to banks | 0.0 | | 0.0 | | 1.3 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 1.3 | |
| Liabilities to customers | 99.6 | | 0.0 | | 11.7 | | 13.9 | | 0.0 | | 0.0 | | 40.5 | | 0.0 | | 165.7 | |
| Securitized liabilities | 33,652.3 | | 9,544.4 | | 2,482.0 | | 2,279.3 | | 819.4 | | 979.5 | | 290.1 | | 1,631.7 | | 51,678.7 | |
| Subordinated liabilities | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 405.2 | | 0.0 | | 405.2 | |
| Negative fair values of derivative financial instruments | 957.1 | | 56.2 | | 2,297.0 | | 0.0 | | 1,072.4 | | 0.0 | | 148.2 | | 234.3 | | 4,765.2 | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| Total liabilities | 34,709.0 | | 9,600.6 | | 4,792.0 | | 2,293.2 | | 1,891.8 | | 979.5 | | 884.0 | | 1,866.0 | | 57,016.1 | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| Net currency position (assets) | 0.1 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.1 | |
| Net currency position (liabilities) | 0.0 | | 0.0 | | -1.3 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | -1.3 | |
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| Notional amounts | | |
| in € million | USD | | AUD | | GBP | | NZD | | CHF | | NOK | | JPY | | Other | | Total | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| Assets | | |
| Loans and advances to banks | 0.1 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.1 | |
| Loans and advances to customers | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Financial assets | 688.9 | | 50.3 | | 2,272.5 | | 0.0 | | 765.2 | | 0.0 | | 216.4 | | 231.1 | | 4,224.4 | |
| Positive fair values of derivative financial instruments | 30,187.3 | | 9,949.2 | | 2,536.1 | | 2,235.8 | | 1,190.4 | | 958.0 | | 704.2 | | 2,119.9 | | 49,880.9 | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| Total assets | 30,876.3 | | 9,999.5 | | 4,808.6 | | 2,235.8 | | 1,955.6 | | 958.0 | | 920.6 | | 2,351.0 | | 54,105.4 | |
| Liabilities | | |
| Liabilities to banks | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Liabilities to customers | 96.4 | | 0.0 | | 13.6 | | 13.2 | | 0.0 | | 0.0 | | 38.1 | | 0.0 | | 161.3 | |
| Securitized liabilities | 29,820.7 | | 9,949.2 | | 2,521.9 | | 2,222.6 | | 1,190.6 | | 958.0 | | 360.9 | | 2,119.3 | | 49,143.2 | |
| Subordinated liabilities | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 381.5 | | 0.0 | | 381.5 | |
| Negative fair values of derivative financial instruments | 959.1 | | 50.3 | | 2,273.1 | | 0.0 | | 765.0 | | 0.0 | | 140.1 | | 231.7 | | 4,419.3 | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| Total liabilities | 30,876.2 | | 9,999.5 | | 4,808.6 | | 2,235.8 | | 1,955.6 | | 958.0 | | 920.6 | | 2,351.0 | | 54,105.3 | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| Net currency position (assets) | 0.1 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.1 | |
| Net currency position (liabilities) | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
Liquidity risk is defined as the risk that the Group is not able to meet its current or future payment obligations without restrictions or that the Group is unable to raise the required funds on the expected terms and conditions.
Market liquidity risk is defined as the risk that the Group may not able to sell assets instantaneously or that they can only be sold at a loss.
| Controlling and monitoring |
Rentenbank’s open cash balances are limited by an amount defined by the Board of Managing Directors on the basis of the funding opportunities available to Rentenbank. The Finance division monitors the liquidity position and the utilization of the limits daily and submits reports to the Board of Managing Directors and the Treasury division.
Instruments available for managing the short-term liquidity position include interbank funds, collateralized money market funds, the issuance of ECP, and open-market transactions with the Deutsche Bundesbank. In addition, Rentenbank may purchase securities for liquidity management purposes. It may also borrow funds with terms of up to two years via the Euro Medium Term Note program (EMTN program) or by issuing promissory notes, global bonds, and domestic financial instruments.
In order to limit short-term liquidity risks of up to one month, the imputed liquidity requirement under stress assumptions may not exceed either the amount of liquid assets pursuant to the Liquidity Coverage Ratio (LCR) or the freely available funding potential. In addition, liquidity risks are limited to a period of up to one week pursuant to MaRisk.
For terms of one month to two years, the imputed liquidity requirement is limited to the freely available funding potential.
In addition, for the purpose of calculating medium and long-term liquidity, expected cash inflows and outflows over the next 2 to 15 years are aggregated into quarterly segments and carried forward. The cumulative cash flows may not fall below the limit set by the Board of Managing Directors.
The appropriateness of the stress scenarios as well as the underlying assumptions and methods to assess the liquidity position are reviewed at least annually.
Under the risk-bearing capacity concept, liquidity risks are not covered by the risk coverage potential, but by counterbalancing capacity or liquid assets. Rentenbank’s triple-A ratings and the guarantee of the Federal
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Republic of Germany enable the Group to raise additional funds in the interbank markets at all times. Cash funds are also obtained from Eurex Clearing AG (collateralized money market funds in the form of securities repurchase agreements) and from the German Central Bank (Deutsche Bundesbank) (in the form of pledged securities and credit claims as eligible collateral in accordance with the KEV (Krediteinreichungsverfahren) procedure).
In accordance with the LCR, the bonds issued by Rentenbank are classified as liquid assets in the EU. Our bonds also qualify as highly liquid assets in other jurisdictions, such as the United States and Canada.
Stress scenarios are intended to examine the effects of unexpected events on Rentenbank’s liquidity position. The liquidity stress scenarios developed for this purpose are an integral part of the internal control model. They are calculated and monitored monthly. The scenario analyses comprise price declines of securities, simultaneous drawdowns of all irrevocable credit commitments, defaults by major borrowers, and calls of cash collateral. A scenario mix is used to simulate the cumulative occurrence of liquidity stress scenarios. Liquidity stress tests are also performed on an ad hoc basis if risk-related events occur.
| Liquidity ratios pursuant to the Liquidity Regulation |
Pursuant to the German Liquidity Regulation (Liquiditätsverordnung), cash balances and payment obligations are determined daily for the various cash-related on-balance sheet and off-balance sheet transactions. These are weighted according to regulatory requirements and a ratio is calculated. Moreover, these ratios are also calculated and extrapolated for future reporting. In the 2016 reporting year, the monthly reported liquidity ratio for the period of up to 30 days was between 2.59 and 4.04 (2015: 2.40 and 3.65, respectively), thus significantly exceeding the 1.0 ratio defined by regulatory requirements.
| Liquidity ratios pursuant to the CRR |
The regulatory liquidity ratios LCR and NSFR (Net Stable Funding Ratio) serve to limit short-term as well as medium and long-term liquidity risks. The objective is to enable banks to remain liquid even during periods of stress by holding a liquidity buffer and maintaining stable funding. In 2016, the minimum LCR requirement (i.e. the ratio of high-quality liquid assets to total net cash outflows under stress scenarios) was 0.7. The required ratio will increase until it reaches 1.0 in 2018. The minimum requirement for the NSFR (i.e. the ratio of the amount of available stable funding relative to the amount of required stable funding) is 1.0. The introduction is planned for 2019 at earliest in connection with the entry into force of CRR II.
The minimum LCR and the currently expected minimum NSFR were complied with in the reporting year 2016.
The Board of Managing Directors is provided with a daily report on the short-term liquidity projection and with a monthly liquidity risk report on medium and long-term liquidity. The latter also includes the results of the scenario analyses, the liquidity ratios LCR and NSFR, and the calculation of the liquidity buffer pursuant to MaRisk. The Audit Committee and the Risk Committee of the Board of Supervisory Directors are informed on a quarterly basis.
Liquidity was secured at all times during the reporting year, even under stress assumptions. All liquidity limits and regulatory liquidity ratios were fully complied with.
Operational risks arise from failed or inadequate systems and processes, people, or external events. Operational risks also include legal risks, risks from money laundering, terrorist financing or other criminal acts, behavioral risks, risks from outsourcing, operating risks, and event or environmental risks. In the Group’s view,
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they do not comprise entrepreneurial risks, such as business risks, regulatory risks, reputational risks, or pension risks.
| Controlling and monitoring |
All operational risks are aggregated and analyzed on a centralized basis by the Risk Controlling function. It is responsible for the use of instruments and the methodological development of risk identification, assessment, management and communication. Operational risks are managed by the relevant organizational units.
Legal risk is managed and monitored by the Legal & Human Resources division. It informs the Board of Managing Directors of the current or potential legal disputes both on an ad-hoc basis as well as in semi-annual reports. Legal risks from business transactions are largely reduced by the Group using standardized contracts. The Legal department is involved early in decision-making and significant projects are to be carried out in collaboration with the Legal & Human Resources division. Legal disputes are recorded immediately in the loss event database. They are monitored using a defined risk indicator for the purpose of early risk identification.
In addition, Rentenbank has established a Compliance function and a central unit for the prevention of money laundering, terrorist financing, and other criminal acts. Such risks are identified on the basis of a hazard analysis in accordance with Section 25h KWG. As these may put the Group’s assets at risk, organizational measures are defined to optimize risk prevention. For this purpose, the Group also analyzes whether general and bank-specific requirements for an effective organization are complied with.
Risks involved in outsourcing are regarded as operational risks. Rentenbank uses decentralized monitoring for outsourcing arrangements, comprising risk management and risk monitoring. A distinction is made between significant and insignificant outsourcing based on a standardized risk analysis. Significant outsourcing is subject to specific requirements, in particular with respect to the contract, the intervals of the risk analysis, and reporting.
Operating risks as well as event or environmental risks are identified on a group-wide basis. They are managed and monitored based on their materiality.
The Group has appointed an Information Security Officer (ISO) and implemented an Information Security Management System (ISMS). The ISO monitors compliance with the requirements defined by the ISMS and ensures the confidentiality, availability, and integrity of the IT systems. The ISO is involved in the case of critical IT-related incidents.
An emergency manual describes the disaster prevention measures and the emergency procedures in the event of a disaster. Further emergency plans are to be applied in the case of potential business disruptions. The outsourcing of time-critical activities and processes is also included in these plans.
| Quantification of operational risk |
As part of the risk-bearing capacity concept for the standard scenario, operational risks are quantified using a process based on the regulatory basic indicator approach. The risk assumed under the stress scenario is twice the number of incidents assumed under the standard scenario.
All loss events and near incidents are recorded in a loss event database by operational risk officers on a decentralized basis. The Risk Controlling function is accountable for the analysis and aggregation of the incidents as well as for the methodological development of the instruments used.
Rentenbank also carries out self-assessments in the form of workshops. At least annually, material operational risk scenarios are analyzed and assessed with regard to the business processes that are significant for Rentenbank’s business model. This also involves defining subsequent measures (e.g. regarding fraud prevention).
The limit for operational risks is derived using the modified regulatory basis indicator approach. Reports are prepared on a quarterly basis.
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The risk value for operational risk in the standard scenario amounted to EUR 23.6 million as of the reporting date (2015: EUR 24.6 million). Under the stress scenario, the risk exposure amounted to EUR 47.3 million (2015: EUR 49.2 million) as of the reporting date.
In the fiscal year 2016, four significant incidents (valued at more than EUR 5 thousand) were entered into the loss event database with a potential net loss of EUR 231 thousand. Four significant single losses resulting from operational risks had been incurred in the prior year.
| Regulatory and reputational risks |
Regulatory risk is the risk that a change in the regulatory environment could adversely affect the Group’s business activities or operating profit and that regulatory requirements are not sufficiently met.
Reputational risks refer to the risk of negative economic effects resulting from damage to the Group’s reputation.
| Controlling and monitoring |
Regulatory risks are managed through active involvement in regulatory projects as well as other legal initiatives affecting Rentenbank and by identifying potential consequences for Rentenbank. The Regulatory working group plays a central role in the process. In particular, it is responsible for monitoring and evaluating regulatory and other legal initiatives, as well as for strengthening the compliance structure. To this end, the Regulatory working group initiates and monitors implementation projects. It reports to the Board of Managing Directors on a regular basis.
A code of conduct and professional external corporate communications contribute to the management of reputational risks.
Regulatory and reputational risks are quantified and monitored in a stress scenario as part of the income planning. To this end, regulatory and reputational risks are assumed to have monetary effects (e.g. increased funding costs or unexpected operating and personnel expenses) on the implementation of regulatory requirements. Furthermore, regulatory and reputational risks are identified within the framework of self-assessments.
Losses incurred are monitored in the loss event database as well as in the monthly target/actual comparisons in the income statement.
Under the standard scenario, the risk limit allocated to regulatory and reputational risks amounts to EUR 24.0 million (2015: EUR 23.0 million). Reports are prepared on a quarterly basis.
As of the reporting date, the risk value determined for regulatory and reputational risks amounted to EUR 23.4 million (2015: EUR 22.2 million) in the standard scenario and to EUR 46.8 million (2015: EUR 44.5 million) in the stress scenario.
As in the prior year, no loss incurring events related to regulatory or reputational risks occurred during the reporting period.
| Risk-bearing capacity – going concern approach |
The going concern approach assumes that an entity will continue in operation for the foreseeable future. It also monitors the achievement of the management objectives “Generating a stable adequate operating profit (operating profit under HGB)” and “Complying with regulatory requirements”. This involves comparing
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credit risks, market risks, and operational risks arising from the standard and stress scenarios, as well as the Group’s regulatory and reputational risks, with an amount of the risk coverage potential.
After deducting regulatory capital requirements, taking into account prudential filters, sufficient regulatory own funds must be available to cover the risks from conservative stress scenarios. Regulatory own funds were determined using a total capital ratio of 13.91%, in accordance with the warning threshold defined in the recovery plan. In 2015, Rentenbank determined regulatory own funds on the basis of the warning threshold of 12.0% of the Common Equity Tier 1 capital ratio (CET1 ratio).
Risk coverage potential
The risk coverage potential is used to cover expected and unexpected losses. It is derived from the consolidated figures under IFRS. Risk coverage potential 1 is used to cover risks from the standard scenarios, while risk coverage potential 2 covers risks from the stress scenarios.
The following table provides a breakdown of the risk coverage potential as of the balance sheet date:
| Dec. 31, 2016
€ million | | Dec. 31, 2015
€ million | |
|
| |
| |
| Available operating profit | 151.4 | | 187.8 | |
| Retained earnings (pro rata) | 201.0 | | 156.2 | |
|
| |
| |
| Risk coverage potential 1 | 352.4 | | 344.0 | |
|
| |
| |
| Retained earnings (pro rata) | 1,263.5 | | 1,118.9 | |
| Own credit risk and DVA | -0.1 | | -0.1 | |
| Revaluation reserve | 65.4 | | 61.6 | |
| Undisclosed liabilities from securities | -3.3 | | -3.7 | |
|
| |
| |
| Risk coverage potential 2 | 1,677.9 | | 1,520.7 | |
|
| |
| |
| Retained earnings (pro rata) | 2,000.0 | | 2,200.0 | |
| Subscribed capital (capital stock) | 135.0 | | 135.0 | |
|
| |
| |
| Risk coverage potential 3 | 3,812.9 | | 3,855.7 | |
The allocation of risk coverage potential 1 to the risk types credit risk, market risk, and operational risk as well as regulatory and reputational risk is presented in the following table:
| Allocated risk covering potential | |
|
| |
| Dec. 31, 2016 | | Dec. 31, 2015 |
|
| |
| |
| € million | | % | | € million | | % | |
|
| |
| |
| |
| |
| Credit risk | 260.0 | | 73.8 | | 260.0 | | 75.6 | |
| Market risk | 33.4 | | 9.5 | | 26.0 | | 7.5 | |
| Operational risk | 35.0 | | 9.9 | | 35.0 | | 10.2 | |
| Regulatory and reputational risk | 24.0 | | 6.8 | | 23.0 | | 6.7 | |
|
| |
| |
| |
| |
| Total risk exposure | 352.4 | | 100.0 | | 344.0 | | 100.0 | |
|
| |
| |
| |
| |
| Risk coverage potential 1 | 352.4 | | 100.0 | | 344.0 | | 100.0 | |
|
| |
| |
| |
| |
Risk coverage potential 2 is used as an overall limit and is not allocated to the individual risk types.
Risk scenarios
A distinction is made between standard and stress scenarios.
The standard scenarios assume credit defaults, potential changes in market prices as well as the occurrence of significant operational, regulatory and reputational damages.
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The risk exposures of the individual risk types as well as the utilization of the risk coverage potential are presented in the following table:
| Standard scenarios | |
|
| |
| Dec. 31, 2016 | | Dec. 31, 2015 |
|
| |
| |
| € million | | % | | € million | | % | |
|
| |
| |
| |
| |
| Credit risk | 65.5 | | 50.8 | | 67.7 | | 51.3 | |
| Market risk | 16.4 | | 12.7 | | 17.4 | | 13.2 | |
| Operational risk | 23.6 | | 18.3 | | 24.6 | | 18.7 | |
| Regulatory and reputational risk | 23.4 | | 18.2 | | 22.2 | | 16.8 | |
|
| |
| |
| |
| |
| Total risk exposure | 128.9 | | 100.0 | | 131.9 | | 100.0 | |
|
| |
| |
| |
| |
| Risk covering potential 1 | 352.4 | | | | 344.0 | | |
|
| |
| |
| |
| |
| Utilization | | | 36.6 | | | | 38.3 | |
A lump sum amount of EUR 50 million (risk buffer) is included in the credit risk scenarios to account for sectoral concentration risks.
The warning indicator (risk appetite) of 80% of risk coverage potential 1 was not exceeded in 2016 and 2015.
For credit risk within the total loan portfolio, we assume full utilization of all internal counterparty limits, deteriorations in the credit quality of our counterparties, higher country-specific probabilities of default as well as higher loss given default rates within the overall loan portfolio.
The stress scenarios for market risks include a parallel shift in the yield curves, spreads, volatilities, and exchange rates.
For operational risks and regulatory and reputational risks, we assume a number of incidents that is twice as high under the stress scenario as under the standard scenario.
The following tables present the risk exposures as well as the utilization of the risk coverage potential:
| Stress scenarios | |
|
| |
| Dec. 31, 2016 | | Dec. 31, 2015 | |
|
| |
| |
| € million | | % | | € million | | % | |
|
| |
| |
| |
| |
| Credit risk | 123.0 | | 16.4 | | 145.5 | | 18.9 | |
| Market risk | 532.3 | | 71.0 | | 529.1 | | 68.9 | |
| Operational risk | 47.3 | | 6.3 | | 49.2 | | 6.4 | |
| Regulatory and reputational risk | 46.8 | | 6.2 | | 44.5 | | 5.8 | |
|
| |
| |
| |
| |
| Total risk exposure | 749.4 | | 99.9 | | 768.3 | | 100.0 | |
|
| |
| |
| |
| |
| Risk covering potential 2 | 1,677.9 | | | | 1,520.7 | | |
|
| |
| |
| |
| |
| Utilization | | | 44.7 | | | | 50.5 | |
| Stress scenarios | |
|
| |
| Dec. 31, 2016 | | Dec. 31, 2015 | |
|
| |
| |
| |
| |
| € million | | % | | € million | | % | |
|
| |
| |
| |
| |
| Market risk (interest rate risks) | 3.1 | | 0.6 | | 15.4 | | 2.9 | |
| Market risk (IFRS valuation risks) | 504.7 | | 94.8 | | 499.2 | | 94.4 | |
| Of which cross-currency basis swap spreads | -1,681.0 | | | | -1,336.0 | | |
| Of which basis swap spreads | 231.6 | | | | 215.7 | | |
| Of which credit spreads | 1,867.9 | | | | 1,508.7 | | |
| Of which cap/floor volatilities | 2.0 | | | | 0.6 | | |
| Of which swaption volatilities | 14.7 | | | | 12.3 | | |
| Of which currency translation | 69.5 | | | | 97.9 | | |
|
| |
| |
| |
| |
| Market risk (risk buffer) | 24.5 | | 4.6 | | 14.5 | | 2.7 | |
|
| |
| |
| |
| |
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The warning indicator of 80% of risk coverage potential 2 (risk appetite) was not exceeded in 2016 and 2015.
After fulfilling the regulatory minimum capital ratios, risk coverage potential 2 available as of the reporting date was sufficient to cover risk exposures under the stress scenarios.
Under the 5-year planning report of December 31, 2016, there is also sufficient capital available to cover the stress scenarios under the going concern approach after complying with the regulatory capital requirements.
| Risk-bearing capacity – gone concern approach |
As an additional risk management approach, risk-bearing capacity is analyzed using the gone concern approach. Under this approach, the Group focuses on creditor protection. Therefore, all hidden reserves and liabilities are taken into account in the risk coverage potential. Unplanned or unrealized profits (available operating profit) are not taken into account. Under the gone concern approach, the remaining amount of the risk coverage potential must be sufficient to cover the effects arising from the more conservative stress scenarios. Gone concern scenarios are simulated for credit, market, operational risks, and regulatory and reputational risks using a probability of 99.9%.
Gone concern scenarios for credit risk and market risks are determined using the same assumptions as in the stress scenarios, but based on the higher probability of 99.9%. Under the gone concern approach, risks from all positions are analyzed irrespective of their accounting. As regards operational risk as well as regulatory and reputational risk, we assume a risk exposure that is four times higher than under the standard scenario.
Apart from creditor protection, this risk management approach also serves to observe and critically evaluate the results. This did not result in any adjustments to the going concern approach. Under the gone concern approach, the risk-bearing capacity was maintained at all times during 2016 and 2015.
Inverse stress tests and economic downturn
Credit, market, liquidity, operational risks, and regulatory and reputational risks were also subject to an inverse stress test. The starting point is the maximum loss to be borne in the amount of the risk coverage potential. The assumed scenarios have a low probability of occurrence.
The effects of an economic downturn are also assessed. The Group’s risk-bearing capacity was not at risk under this scenario during 2016 and 2015.
Under the recovery plan, Rentenbank has developed various stress scenarios that are tailored to the bank’s risk profile and could each trigger a near-default situation if no recovery measures were initiated. This involved analyzing scenarios that develop quickly and gradually as well as idiosyncratic, market-wide, and combined scenarios. A near-default situation occurs if at least one recovery indicator has exceeded or fallen below its threshold and Rentenbank is still in a position to act independently. The stress scenarios were analyzed according to their development over time and were quantified using all of the defined recovery indicators.
| Regulatory capital ratios |
The Group applies the waiver provision by virtue of Article 7(3) CRR on an individual basis in accordance with Article 6(1) CRR. Eligible own funds and risk-weighted assets are presented in accordance with IFRS. Both the total capital ratio of 25.7% (2015: 23.2%) and the Tier 1 capital ratio of 23.2% (2015: 20.2%) were above regulatory requirements, as well as above the minimum requirements set by the ECB.
| Financial reporting process |
The tasks of the financial reporting process range from account allocation and processing of transactions to preparation of the required annual and consolidated financial statements.
The objectives of the accounting-related ICS/RMS are to comply with financial reporting standards and regulations, as well as to ensure the propriety of accounting.
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The consolidated financial statements of Rentenbank are prepared on a voluntary basis pursuant to Section 315a (1) sentence 1 HGB in accordance with all IFRS required to be applied in the EU for the reporting period and the additional requirements of German commercial law under Section 315a (1) HGB, taking into account the uniform accounting policies set out in the Group Manual. Rentenbank prepares its financial statements in accordance with HGB and the German Regulation on the Accounting of Banks and Financial Services Institutions (Verordnung über die Rechnungslegung der Kreditinstitute und Finanzdienstleistungsinstitute – RechKredV).
The rules are documented in manuals and work instructions. The Finance division monitors these on a regular basis and adjusts them, if necessary, to take into account any changes in legal, regulatory and process-related requirements. The involvement of the Finance division in the New Product Process ensures that new products are included in a proper manner in the financial reporting system.
The documentation of the financial reporting process complies with German Generally Accepted Accounting Principles (Grundsätze ordnungsmäßiger Buchführung – GoB) and is presented in a manner comprehensible to knowledgeable third parties. The relevant records are kept in accordance with the statutory retention periods.
There is a clear separation of functions of the organizational units primarily involved in the financial reporting process. Money market transactions, loans, securities, and liabilities are entered in separate sub-ledgers by different organizational units. The data is transferred from the sub-ledgers to the general ledger via automated interfaces. The Finance division is responsible for accounting, the definition of account allocation rules, methodology for booking transactions, parameterization of the accounting software, and the administration of the financial accounting system.
Fair value measurement is performed daily on an automated basis using external market prices or accepted valuation models.
The annual financial statements of the subsidiaries included in the consolidated financial statements are reconciled to IFRS, taking into account group-wide accounting policies, and are included in Rentenbank’s consolidated financial statements by way of full consolidation. The entire process, including consolidation measures, is subject to the principle of dual control as well as to mandatory plausibility and consistency checks.
Rentenbank uses internally developed financial accounting software. The granting of authorizations for necessary tasks only is intended to protect the financial reporting process against unauthorized access. Plausibility checks are conducted to avoid errors. In addition, the principle of dual control, standardized reconciliation routines as well as target/actual comparisons are intended to ensure that errors are identified and corrected in a timely fashion. These measures also ensure the correct recognition, presentation, and measurement of assets and liabilities.
The Internal Audit department regularly performs process-independent reviews to assess whether the accounting-related ICS/RMS functions efficiently.
Timely, reliable and relevant reports are provided to the responsible persons within the framework of the management information system. The Board of Supervisory Directors and its committees are regularly informed about current business developments by the Board of Managing Directors. In addition, information about extraordinary events is provided without delay.
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Voluntary Consolidated Financial Statements
Consolidated statement of comprehensive income
for the period from January 1 to December 31, 2016
| | | | Notes | | Jan. 1 to
Dec. 31, 2016
€ million | | Jan. 1 to
Dec. 31, 2015
€ million | |
| | | |
| |
| |
| |
| 1) | Income statement | | |
| | Interest income | | | 3,567.3 | | 3,734.4 | |
| | Interest expense | | | 3,233.9 | | 3,403.4 | |
| | | | |
| |
| |
| | Net interest income | 25 | | 333.4 | | 331.0 | |
| | Allowance for credit losses/promotional contribution | 26 | | 20.6 | | 18.6 | |
| | | Of which additions to promotional contribution | | | 89.3 | | 82.1 | |
| | | Of which utilization of promotional contribution | | | 70.2 | | 67.3 | |
| | | | | | | | | |
| | Net interest income after allowance for credit losses/promotional contribution | | | 312.8 | | 312.4 | |
| | Fee and commission income | | | 0.1 | | 0.2 | |
| | Fee and commission expenses | | | 2.3 | | 2.4 | |
| | Net fee and commission income | 27 | | -2.2 | | -2.2 | |
| | Administrative expenses | 28 | | 67.3 | | 65.0 | |
| | Other operating income/expenses | 29 | | -3.0 | | -4.4 | |
| | Net gains/losses from fair value and hedge accounting | 30 | | -235.0 | | 204.9 | |
| | Income taxes | 31 | | -1.2 | | -2.6 | |
| | | | |
| |
| |
| | Group’s net income | | | 4.1 | | 443.1 | |
| | | | |
| 2) | Other comprehensive income | | |
| | Items that may be reclassified subsequently to profit or loss when specific conditions are met: | | |
| | Net gains/losses on available-for-sale instruments | 53 | | 11.4 | | -56.5 | |
| | Items that will not be reclassified to profit or loss: | | |
| | Actuarial gains/losses on pension obligations | 50 | | -7.6 | | 5.7 | |
| | | | |
| |
| |
| | Other comprehensive income | | | 3.8 | | -50.8 | |
| | | | |
| |
| |
| 3) | Group’s total comprehensive income | | | 7.9 | | 392.3 | |
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| For informational purposes: Reconciliation to distributable profit |
| | Jan. 1 to
Dec. 31, 2016
€ million | | Jan. 1 to
Dec. 31, 2015
€ million | |
| |
| |
| |
| Group’s net income | | 4.1 | | 443.1 | |
| Releases from retained earnings | | | |
| a) from guarantee reserve pursuant to Section 2 (3) of Rentenbank’s Governing Law | | 21.6 | | 23.1 | |
| b) from other retained earnings | | 54.9 | | 0.0 | |
| Allocations to retained earnings | | | |
| a) to principal reserve pursuant to Section 2 (2) of Rentenbank’s Governing Law | | 65.8 | | 65.9 | |
| b) to other retained earnings | | 0.0 | | 386.0 | |
| |
| |
| |
| Distributable profit | | 14.8 | | 14.3 | |
| |
| |
| |
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Consolidated balance sheet as of December 31, 2016 |
| Notes | | Dec. 31, 2016
€ million | | Dec. 31, 2015
€ million | |
|
| |
| |
| |
| Assets | | |
| Cash and balances with central banks | 34 | | 6.7 | | 21.2 | |
| Loans and advances to banks | 35 | | 57,511.0 | | 55,457.2 | |
| Of which promotional contribution | 37 | | -356.8 | | -343.7 | |
| Loans and advances to customers | 36 | | 7,496.8 | | 6,380.9 | |
| Of which promotional contribution | 37 | | 0.0 | | 0.0 | |
| Fair value changes of hedged items in a portfolio hedge | 38 | | 1,258.6 | | 1,298.8 | |
| Positive fair values of derivative financial instruments | 39 | | 6,549.5 | | 7,238.9 | |
| Financial investment | 40 | | 19,254.6 | | 19,912.2 | |
| Investment property | 41 | | 13.9 | | 14.4 | |
| Property and equipment | 42 | | 22.3 | | 22.6 | |
| Intangible assets | 43 | | 11.6 | | 12.9 | |
| Current income tax assets | 44 | | 0.2 | | 1.2 | |
| Other assets | 45 | | 2,920.6 | | 2,932.3 | |
| | |
| |
| |
| Total assets | | | 95,045.8 | | 93,292.6 | |
| | |
| |
| |
| Notes | | Dec. 31, 2016
€ million | | Dec. 31, 2015
€ million | |
|
| |
| |
| |
| Liabilities and equity | | |
| Liabilities to banks | 46 | | 2,448.5 | | 2,829.3 | |
| Liabilities to customers | 47 | | 4,189.0 | | 4,408.3 | |
| Securitized liabilities | 48 | | 73,831.8 | | 71,544.9 | |
| Negative fair values of derivative financial instruments | 49 | | 7,333.1 | | 7,152.9 | |
| Provisions | 50 | | 172.8 | | 161.1 | |
| Subordinated liabilities | 51 | | 740.7 | | 729.4 | |
| Other liabilities | 52 | | 2,650.4 | | 2,780.8 | |
| Equity | 53 | | 3,679.5 | | 3,685.9 | |
| Subscribed capital | | | 135.0 | | 135.0 | |
| Retained earnings | | | 3,464.2 | | 3,474.9 | |
| Revaluation reserve | | | 65.5 | | 61.7 | |
| Distributable profit | | | 14.8 | | 14.3 | |
| | |
| |
| |
| Total liabilities and equity | | | 95,045.8 | | 93,292.6 | |
| | |
| |
| |
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Consolidated statement of changes in equity |
| € million | Subscribed capital | | Retained earnings | | Revaluation reserve | | Distributable profit | | Total equity | |
|
| |
| |
| |
| |
| |
| Jan. 1, 2016 | 135.0 | | 3,474.9 | | 61.7 | | 14.3 | | 3,685.9 | |
| Group’s net income | | | -10.7 | | | | 14.8 | | 4.1 | |
| Unrealized gains/losses on available-for-sale instruments | | | | | 11.4 | | | | 11.4 | |
| Actuarial gains/losses on pension obligations | | | | | -7.6 | | | | -7.6 | |
| |
| |
| |
| |
| |
| |
| Group’s total comprehensive income | 0.0 | | -10.7 | | 3.8 | | 14.8 | | 7.9 | |
| |
| |
| |
| |
| |
| |
| Appropriation of distributable profit | | | | | | | -14.3 | | -14.3 | |
| |
| |
| |
| |
| |
| |
| Dec. 31, 2016 | 135.0 | | 3,464.2 | | 65.5 | | 14.8 | | 3,679.5 | |
| |
| |
| |
| |
| |
| |
| € million | Subscribed capital | | Retained earnings | | Revaluation reserve | | Distributable profit | | Total equity | |
|
| |
| |
| |
| |
| |
| Jan. 1, 2015 | 135.0 | | 3,046.1 | | 112.5 | | 13.8 | | 3,307.4 | |
| Group’s net income | | | 428.8 | | | | 14.3 | | 443.1 | |
| Unrealized gains/losses on available-for-sale instruments | | | | | -56.5 | | | | -56.5 | |
| Actuarial gains/losses on pension obligations | | | | | 5.7 | | | | 5.7 | |
| |
| |
| |
| |
| |
| |
| Group’s total comprehensive income | 0.0 | | 428.8 | | -50.8 | | 14.3 | | 392.3 | |
| |
| |
| |
| |
| |
| |
| Appropriation of distributable profit | | | | | | | -13.8 | | -13.8 | |
| |
| |
| |
| |
| |
| |
| Dec. 31, 2015 | 135.0 | | 3,474.9 | | 61.7 | | 14.3 | | 3,685.9 | |
| |
| |
| |
| |
| |
| |
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Consolidated cash flow statement |
| | | 2016 | | 2015 | |
| Notes | | € million | | € million | |
|
| |
| |
| |
| Group’s net income | | | 4.1 | | 443.1 | |
| Non-cash items included in Group’s net income and reconciliation to cash flow from operating activities: | | |
| Amortization, depreciation and allowance of intangible assets, property and equipment, and investment property | 28 | | 7.0 | | 6.2 | |
| Allowance for credit losses/promotional contribution | 26 | | 15.7 | | 16.7 | |
| Additions to/reversals of provisions | 50 | | 27.9 | | 12.3 | |
| Gains/losses from the disposal of property and equipment | | | 0.1 | | 0.1 | |
| Change in other non-cash items | | | 0.0 | | 0.2 | |
| Net gains/losses from fair value and hedge accounting | 30 | | 240.0 | | -201.9 | |
| Net interest income | 25 | | -333.4 | | -331.0 | |
| | |
| |
| |
| Subtotal | | | -38.6 | | -54.3 | |
| Changes in assets and liabilities after adjustment of non-cash items: | | |
| Loans and advances to banks | 35 | | -2,063.7 | | -4,068.0 | |
| Loans and advances to customers | 36 | | -1,115.5 | | -851.6 | |
| Positive fair values of derivative financial instruments | 39 | | 689.4 | | -1,280.5 | |
| Financial assets | 40 | | 225.4 | | 8.6 | |
| Other assets | | | 52.9 | | -63.6 | |
| Liabilities to banks | 46 | | -380.8 | | 644.6 | |
| Liabilities to customers | 47 | | -219.3 | | -546.4 | |
| Securitized liabilities | 48 | | 2,286.9 | | 2,366.1 | |
| Negative fair values of derivative financial instruments | 49 | | 180.2 | | 342.3 | |
| Other liabilities | | | -137.7 | | 1,201.3 | |
| Interest received | 25 | | 3,560.4 | | 3,727.8 | |
| Dividends received | 25 | | 6.9 | | 6.6 | |
| Interest paid | 25 | | -3,233.9 | | -3,403.4 | |
| Valuation adjustments | | | -240.0 | | 201.9 | |
| | |
| |
| |
| Cash flows from operating activities | | | -427.4 | | -1,768.6 | |
| Proceeds from repayment/disposal of: | | |
| Financial investments | 40 | | 3,372.6 | | 5,260.7 | |
| Property and equipment | 42 | | 0.2 | | 0.1 | |
| Payments for acquisition of: | | |
| Financial investments | 40 | | -2,940.3 | | -3,480.3 | |
| Intangible assets and property and equipment | 42.43 | | -5.3 | | -5.9 | |
| | |
| |
| |
| Cash flows from investing activities | | | 427.2 | | 1,774.6 | |
| Subordinated liabilities | 51 | | 0.0 | | 0.0 | |
| Appropriation of distributable profit pursuant to Section 9 of Rentenbank’s Governing Law | | | -14.3 | | -13.8 | |
| | |
| |
| |
| Cash flows from financing activities | | | -14.3 | | -13.8 | |
| | |
| |
| |
| Cash and cash equivalents at beginning of period | | | 21.2 | | 29.0 | |
| Cash flows from operating activities | | | -427.4 | | -1,768.6 | |
| Cash flows from investing activities | | | 427.2 | | 1,774.6 | |
| Cash flows from financing activities | | | -14.3 | | -13.8 | |
| | |
| |
| |
| Cash and cash equivalents at end of period | | | 6.7 | | 21.2 | |
The consolidated cash flow statement shows the changes in cash and cash equivalents for the fiscal years 2016 and 2015 from operating, investing, and financing activities. Cash and cash equivalents correspond to cash and balances with central banks reported in the consolidated balance sheet.
Cash flows from operating activities were determined using the indirect method. Under this method, the Group’s net income is adjusted for non-cash items, such as depreciation, amortization, measurement gains or losses, and additions or reversals of provisions. The Group’s adjusted net income is further adjusted for cash-related changes in assets and liabilities attributable to operating activities. Interest paid and received, together with dividends, are classified as cash flows from operating activities. Cash flows from investing and financing activities were directly derived from financial accounting.
The Group’s liquidity management focuses on Rentenbank. The consolidated cash flow statement, prepared in accordance with IAS 7, is only of limited informative value as an indicator of the liquidity position. For further details on the Group’s liquidity management, please refer to the information provided in the combined management report.
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| Notes to the consolidated financial statements |
| Application of new or amended standards and interpretations |
| (2) | Accounting estimates and judgments |
| (3) | Scope of consolidation |
| (4) | Consolidation principles |
| (6) | Determination of the fair value for financial instruments |
| (8) | Hybrid financial instruments (embedded derivatives) 88 |
| (9) | Impairment of financial assets |
| (10) | Foreign currency translation |
| (11) | Repurchase agreements, collateralized loans, and securities lending transactions |
| (12) | Accounting for leases |
| (13) | Allowance for credit losses/promotional contribution |
| (15) | Property and equipment |
| (17) | Impairment of non-financial assets |
| (19) | Tax assets/liabilities |
| (20) | Pension provisions for pensions and similar obligations |
| (24) | Contingent liabilities and other commitments |
| Notes to the consolidated statement of comprehensive income |
| (26) | Allowance for credit losses/promotional contribution |
| (27) | Net fee and commission income |
| (28) | Administrative expenses |
| (29) | Other operating income/expenses |
| (30) | Net gains/losses from fair value and hedge accounting |
| (32) | Disclosures on segment reporting |
| Notes to the balance sheet |
| (34) | Cash and balances with central banks |
| (35) | Loans and advances to banks |
| (36) | Loans and advances to customers |
| (37) | Allowance for credit losses/promotional contribution in the lending business |
| (38) | Fair value changes of hedged items in a portfolio hedge |
| (39) | Positive fair values of derivative financial instruments |
| (40) | Financial investments |
| (42) | Property and equipment |
| (44) | Current income tax assets |
| (47) | Liabilities to customers |
| (48) | Securitized liabilities |
| (49) | Negative fair values of derivative financial instruments |
| (51) | Subordinated liabilities |
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| Notes to financial instruments |
| (54) | Reconciliation of carrying amounts to categories |
| (55) | Financial instruments designated as at fair value |
| (56) | Net gains or losses by measurement category |
| (57) | Disclosures on the fair value of financial instruments measured at fair value |
| (58) | Disclosure on the fair value of financial instruments measured at amortized cost |
| (62) | Country-by-country reporting |
| (63) | Assets pledged and received as collateral |
| (64) | Contingent liabilities and other commitments |
| (65) | List of participations |
| (66) | Related party disclosures |
| Additional disclosures pursuant to the German Commercial Code (HGB) |
| (67) | Average number of employees |
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The consolidated financial statements of Rentenbank were prepared on a voluntary basis* pursuant to Section 315a (1) of the German Commercial Code (Handelsgesetzbuch – HGB) and in accordance with all International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) for the fiscal year 2016 and the additional requirements applicable under Section 315a (1) HGB. They are based on Regulation No 1606/2002 of the European Parliament and of the Council of July 19, 2002 and the regulations through which IFRS were incorporated into EU law. IFRS encompass the individual standards referred to as IFRS as well as the International Accounting Standards (IAS) and the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and the Standing Interpretations Committee (SIC).
The voluntary consolidated financial statements (hereinafter referred to as the consolidated financial statements) comprise the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement, and the notes to the consolidated financial statements. In addition, a combined management report has been prepared, comprising the group management report and the management report of Landwirtschaftliche Rentenbank (Rentenbank). The consolidated financial statements and the combined management report were prepared by the Board of Managing Directors of Rentenbank. The consolidated financial statements and the combined management report are approved and authorized for publication after approval by the Board of Supervisory Directors on April 6, 2017.
The presentation currency is the euro (EUR). The amounts presented in the consolidated financial statements are rounded to the nearest million euros unless otherwise indicated. Due to rounding, figures may not add up precisely to the totals provided. However, this does not affect the quality of the report. The reporting year corresponds to the calendar year.
Qualitative disclosures on credit, liquidity and market risks resulting from financial instruments in accordance with IFRS 7.31-42 are presented in the combined management report.
The expanded disclosure requirements on country-by-country reporting pursuant to Section 26a of the German Banking Act (Kreditwesengesetz – KWG) are presented in Note 62.
| Application of new or amended standards and interpretations |
| | Currently applicable IFRS |
In the fiscal year 2016, the following standards and interpretations are required to be applied for the first time:
| | IFRS 14 Regulatory Deferral Accounts |
This standard permits rate-regulated companies to continue to apply local GAAP to regulatory deferral accounts upon transition to IFRS.
The European Commission decided not to adopt this interim standard, but to wait for the finalization of the rules regarding the accounting for regulatory deferral accounts by the IASB.
| | Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations |
This standard clarifies that interests acquired in a joint operation in which the activity constitutes a business, as defined in IFRS 3, are generally subject to all of the provisions of IFRS 3.
The amendments do not have any impact on Rentenbank’s consolidated financial statements.
| * | Taking into account the exemption as set out in Section 290 (5) in conjunction with Section 296 (2) HGB, Rentenbank is not required by law to prepare consolidated financial statements in accordance with the German Commercial Code. Consequently, pursuant to Section 315a HGB, Rentenbank is not required to prepare consolidated financial statements in accordance with IFRS. Therefore, the consolidated financial statements of Rentenbank are prepared on a voluntary basis. |
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| | Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortization |
These standards clarify that revenue-based methods for calculating depreciation and amortization on property, plant and equipment or intangible assets are not considered to be an appropriate manifestation of consumption. Under the revised provisions, intangible assets may be amortized using such revenue-based methods only in specified circumstances.
The amendments do not have any impact on Rentenbank’s consolidated financial statements.
| Amendments to IAS 16 and IAS 41: Agriculture – Bearer Plants |
These standards permit bearer plants, such as grapevines, to be accounted for as property, plant and equipment if certain criteria are met.
The amendments do not have any impact on Rentenbank’s consolidated financial statements.
| | Amendments to IAS 27: Equity Method in Separate Financial Statements |
This standard allows the application of the equity method as an additional accounting option for investments in subsidiaries, joint ventures and associates in separate financial statements if the reporting entity prepares these statements in compliance with IFRS.
The amendments do not have any impact on Rentenbank’s consolidated financial statements.
| | Amendments to IFRS 10 and IAS 28: Sales or Contributions of Assets between an Investor and its Associate or Joint Venture |
The amendments clarify that in the case of transactions with an associate or joint venture, the amount of gain or loss to be recognized depends on the fact whether the sale or contribution of assets constitutes a business.
The effective date of these amendments has been postponed indefinitely. On the basis of the current version of the standard, the amendments are not expected to have any impact on Rentenbank’s consolidated financial statements.
| | Annual Improvements to IFRSs 2012-2014 Cycle |
The Annual Improvements project made amendments to four standards. The objective is to clarify existing IFRSs by changing the wording in individual IFRSs. The amendments concern IFRS 5, IFRS 7, IAS 19, and IAS 34.
The first-time application of the Annual Improvements to IFRSs 2012-2014 Cycle does not result in any changes in Rentenbank’s consolidated financial statements.
| | Amendments to IAS 1: Disclosure Initiative |
The amendments clarify the assessment of the materiality of disclosure requirements as well as presentation and structuring issues.
The amended provisions do not have any impact on Rentenbank’s consolidated financial statements.
| | Amendments to IFRS 10, IFRS 12 and IFRS 28: Investment Entities – Applying the Consolidation Exception |
The amendments clarify the application of the exception to the requirement to consolidate subsidiaries in accordance with IFRS 10, as well as the corresponding disclosure requirements in accordance with IFRS 12. They apply to parent companies that meet the criteria of an investment entity as defined in this standard.
The amendments do not have any impact on Rentenbank’s consolidated financial statements.
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Amendments to IAS 19 – Defined Benefit Plans: Employee Contributions and the Annual Improvements to IFRSs 2010-2012 Cycle were already applied in 2015. This did not have any impact on Rentenbank’s consolidated financial statements.
| | IFRS applicable in future |
The following IFRS pronouncements were not effective as of the reporting date. Unless otherwise noted, the relevant IFRSs have already been endorsed by the EU. The related provisions are not applied early in Rentenbank’s consolidated financial statements.
| | Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealized Losses |
The amendments to IAS 12 clarify the recognition of deferred tax assets on temporary differences from unrealized losses.
The amendments are required to be applied for the first time in the fiscal year 2017. Since Rentenbank is exempt from taxation as a parent company, these amendments are not expected to have any material impact on Rentenbank’s consolidated financial statements. The amendments have yet to be endorsed by the EU.
| | Amendments to IAS 7: Disclosure Initiative |
This standard complements the existing disclosure requirements on the statement of cash flows. The objective is to improve the transparency of changes in liabilities arising from an entity’s financing activities.
The amendments are required to be applied for the first time in the fiscal year 2017. They are not expected to have a material impact on Rentenbank’s consolidated financial statements. The amendments have yet to be endorsed by the EU.
| | IFRS 9 Financial Instruments |
This standard provides guidance for the accounting for financial instruments and replaces large portions of IAS 39. In the future, financial assets will be classified and measured according to their contractual cash flow characteristics and the business models under which they are held. The relevant category and, in particular, the subsequent measurement are determined depending on these factors. In accordance with IFRS 9, there are three categories for financial assets: measured at amortized cost, measured at fair value through profit or loss, and measured at fair value through other comprehensive income.
Loss allowances will no longer be restricted to losses already incurred, but will also extend to expected losses. The presentation of recognized hedging relationships is also subject to new regulations under IFRS 9 and will be more strongly based on risk management.
The macro hedge accounting project has not yet been finalized by the standard setter. Therefore, when applying IFRS 9 for the first time, the Group has an accounting policy choice to continue to apply the hedge accounting requirements of IAS 39 instead of IFRS 9. Rentenbank waits for the completion of the project and uses the option.
The European Commission decided to adopt IFRS 9 Financial Instruments into EU law. The endorsement was effected in the fourth quarter of 2016. The standard is required to be applied for the first time in the fiscal year 2018.
In preparation of the implementation project of the new standard, planned for 2017, a comprehensive preliminary analysis was conducted in the fiscal year 2016 for phase I (classification and measurement) and phase II (impairment).
Due to its buy-and-hold strategy, Rentenbank expects that the business model for the relevant instruments will be defined consistently as “hold”. A preliminary analysis of the debt instruments in the lending and securities business showed that the cash-flow criterion is met in almost all instances. Based on current information, the majority of the portfolio of debt instruments will be classified at amortized cost, resulting from the combination of the “hold” business model and the fulfillment of the cash-flow criterion. The necessary or voluntary reclassifications are expected to result in corresponding effects in net gains/losses from fair value and hedge accounting as well as in the revaluation reserve. Upon completion of the preliminary analysis, it was not
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yet possible to make precise statements, nor to quantify the impact of the changes in the measurement classes.
In accordance with IFRS 9, the allowance for credit losses has to take into account both incurred losses and expected losses. The new standard prescribes the use of an expected credit loss model (ECL model) for determining expected losses. The ECL model is applied to debt instruments that are measured subsequently at amortized cost or at fair value through other comprehensive income.
The allowance for credit losses is measured at an amount equal to expected losses within the next twelve months (12-month ECL) or at an amount equal to expected losses that arise over the entire term of the financial instrument (lifetime ECL). The lifetime ECL has to be applied if credit risk has increased significantly since initial recognition. IFRS 9 allows entities to use practical expedients in the determination of a significant increase in credit risk and the associated classification of the debt instruments with regard to the ECL model. One of the practical expedients is the lump-sum recognition of the 12-month ECL for debt instruments that have a low credit risk as of the reporting date (low credit risk exemption). Rentenbank does use any further practical expedients due to the composition of its credit portfolio.
A significant aspect in the application of the ECL model is giving appropriate consideration to future-oriented information. This is particularly relevant to determining and applying default probabilities.
Within the framework of the preliminary analysis, the major technical aspects of the ECL model were designed and examined as to the possible technical implementation methods. Apart from determining the necessary data basis for the ECL model, this also included the possibility to apply the practical expedients permitted under IFRS 9. Another outcome of the preliminary analysis is the prototypical determination of the ECL model to estimate any potential effects of the new standard and to comply with regulatory reporting requirements. On the basis of the current framework, Rentenbank does not expect the new standard to have a material impact on the amount of the allowance for credit losses.
In addition to the technical design, one of the key results of the preliminary analysis is a rough IT model which represents the basis for the implementation of phases I and II until initial application.
As part of the implementation project, the findings gathered from the preliminary analysis need to be validated with regard to classification. They also have to be supplemented by data on new business. In addition, a decision has to be made regarding the extent to which the option to measure equity instruments at fair value through other comprehensive income will be applied.
At Rentenbank, the fair value option is only applied to debt instruments due to accounting mismatches. Therefore, a decision has to be made within the context of the implementation project whether the Group will continue to use the fair value option or whether it will be abandoned. Moreover, the Group plans to implement a process to classify new business, to update the Group Manual and all internal working papers, as well as to implement regulatory requirements.
This will be accompanied by the IT-specific implementation of the classification requirements, along with the associated measurement routine and the classification at the date of transition, as well as the IT-specific implementation for the determination of impairment. The implementation will take place in 2017.
| | IFRS 15 Revenue from Contracts with Customers |
The standard includes the new regulations on revenue recognition and replaces IAS 18 Revenue and IAS 11 Construction Contracts as well as some of the associated interpretations.
IFRS 15 applies to contracts with customers in relation to the sale of goods or the provision of services. Exceptions have been introduced for financial instruments and leases, inter alia.
The standard is required to be applied for the first time in the fiscal year 2018. Rentenbank does not expect this standard to have any impact since the bank’s material revenues are generated from contracts with customers that are within the scope of application of other standards (IFRS 9, IFRS 16). Revenues not related to Rentenbank’s banking operations represent an insignificant amount.
| | Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions |
The amendments consist of clarifications regarding the classification and measurement of share-based
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payment transactions and affect, in particular, the accounting for cash-settled share-based payment transactions that include a performance condition, the classification of share-based payment transactions with net settlement features, and the accounting for modifications of share-based payment transactions.
The amendments are required to be applied for the first time in the fiscal year 2018. They are not expected to have any impact on Rentenbank’s consolidated financial statements. The amendments have yet to be endorsed by the EU.
| | Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 |
The amendments aim to reduce the effects of the different effective dates of IFRS 9 and the forthcoming standard IFRS 4, in particular on entities whose activities are predominantly connected with insurance.
The amendments are required to be applied for the first time in the fiscal year 2018. However, they are not relevant to Rentenbank’s consolidated financial statements. The amendments have yet to be endorsed by the EU.
| | Amendments to IFRS 15 – Clarifications to IFRS 15 |
The amendments clarify various requirements of IFRS 15, but also other practical expedients upon transition to the new standard. In addition to the clarifications, the amended standard includes two further practical expedients to reduce cost and complexity for an entity when it first applies the new standard.
The amendments are required to be applied for the first time in the fiscal year 2018. They are not expected to have any impact on Rentenbank’s consolidated financial statements. The amendments have yet to be endorsed by the EU.
| | Annual Improvements to IFRS Standards 2014-2016 Cycle |
The amendments from the Annual Improvements to IFRS Standards 2014-2016 Cycle are required to be applied for the first time in the fiscal year 2017 (amendments to IFRS 12) and in the fiscal year 2018 (amendments to IFRS 1 and IAS 28).
They are not expected to have any impact on Rentenbank’s consolidated financial statements. The amendments have yet to be endorsed by the EU.
| | Amendments to IAS 40: Transfers of Investment Property |
The amendments are intended to clarify the requirements regarding transfers to, or from, investment properties.
The amendments are required to be applied for the first time in the fiscal year 2018. They are not expected to have any impact on Rentenbank’s consolidated financial statements. The amendments have yet to be endorsed by the EU.
| | IFRIC 22: Foreign Currency Transactions and Advance Consideration |
This interpretation clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency.
The amendments are required to be applied for the first time in the fiscal year 2018. Based on current information, the initial application of these amendments is not expected to have a material impact on Rentenbank’s consolidated financial statements. The amendments have yet to be endorsed by the EU.
The standard specifies the recognition of leases. IFRS 16 replaces the previously applicable standard IAS 17 and three interpretations related to leases.
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The standard introduces a single lessee accounting model. It requires lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value (recognition optional in both cases). Lessors continue to classify leases as operating or finance.
The amendments are required to be applied for the first time in the fiscal year 2019. Due to the short-term nature of the bank’s lease contracts and the immateriality of its existing lease obligations, these amendments are not expected to have any impact on Rentenbank’s consolidated financial statements. The amendments have yet to be endorsed by the EU.
The Group’s accounting policies are based on the going-concern assumption. In accordance with IFRS 10.19, the Rentenbank Group prepares its consolidated financial statements using uniform accounting policies. These policies have been consistently applied for the reporting periods presented unless otherwise indicated. The annual financial statements of the consolidated companies are prepared as of the reporting date of the consolidated financial statements of Rentenbank.
The measurement of items included in the consolidated financial statements is based on both fair values and (amortized) cost. Income and expenses are recognized and reported on an accrual accounting basis in the period in which they are earned or incurred. In the case of financial instruments, directly attributable transaction costs (e.g. commissions) as well as interest components paid on a one-off basis (e.g. premiums and discounts, upfront/back-end payments for derivatives) are amortized through profit or loss over the term of the relevant financial instrument based on the effective interest method and directly offset against the respective balance sheet item. Pro rata interest is reported in the balance sheet item in which the underlying financial instrument is recognized.
| (2) | Accounting estimates and judgments |
For the purpose of determining the assets, liabilities, income and expenses reported in the consolidated financial statements, estimates and assumptions were made in accordance with the relevant financial reporting standards. These are based on past experience as well as on factors such as planning and expectations of future events. The judgments are validated on an ongoing basis. They may be subject to change and may have a material impact on the financial position and results of operations.
In particular, estimates materially affect:
| • | the assessment of the recoverability of assets, |
| • | the determination of the allowance for credit losses, |
| • | the determination of the fair value of financial instruments, especially taking into consideration Credit Valuation Adjustments (net exposure of derivatives with a positive fair value) and Debit Valuation Adjustments (net exposure of derivatives with a negative fair value), and |
| • | the calculation of pension obligations as well as of other provisions. |
To the extent that the estimates were material, the assumptions made are explained in detail within the context of the relevant accounting policies.
Judgments made concerning available accounting options are described in the relevant sections.
| (3) | Scope of consolidation |
The consolidated financial statements of Rentenbank for the fiscal year 2016 include Rentenbank as the Group’s parent company and its two subsidiaries LR Beteiligungsgesellschaft mbH (LRB), Frankfurt am Main, and DSV Silo- und Verwaltungsgesellschaft mbH (DSV), Frankfurt am Main. A detailed list of Rentenbank’s participations is included in Note 65.
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Two companies (Getreide-Import-Gesellschaft mbH, Frankfurt am Main, and Deutsche Bauernsiedlung – Deutsche Gesellschaft für Landentwicklung GmbH (DGL), Frankfurt am Main) were not included in the consolidated financial statements as a subsidiary or an associate, respectively, due to their minor significance for the assessment of the Group’s financial position and results of operations. The interests held in these companies are reported as financial investments. Based on the data from the financial statements of these two companies, their share of the Group’s total assets and the result before net gains/losses from fair value and hedge accounting amounted to less than 0.1% each. The data is based on the financial statements for the fiscal year ended December 31, 2016 for Getreide-Import-Gesellschaft mbH, Frankfurt am Main, and on the financial statements for the fiscal year ended December 31, 2015 for Deutsche Bauernsiedlung – Deutsche Gesellschaft für Landentwicklung GmbH (DGL), Frankfurt am Main. The financial statements of DGL for the fiscal year 2016 were not available, but they are not expected to deviate significantly from the previous year.
Further information on the associates and consolidated companies is included in Note 65.
| (4) | Consolidation principles |
The consolidation of subsidiaries is based on IFRS 10.B86. Intra-group receivables and liabilities are eliminated on consolidation, as are expenses, income, and intercompany profits or losses arising from intra-Group financial and services transactions.
Financial assets and financial liabilities are initially recognized when the company becomes a party to the contractual provisions of the financial instrument.
All financial assets and financial liabilities, including all derivative financial instruments, are recognized in the balance sheet in accordance with IAS 39. Spot transactions of non-derivative financial instruments are recognized on the settlement date and spot transactions of derivative instruments on the trade date.
Financial instruments are measured at fair value which usually equals the purchase or sale price (middle rate) on the transaction date. Subsequent measurement of financial assets and liabilities depends on the classification in accordance with IAS 39. For details on the determination of fair value, please refer to Note 6.
Financial assets are derecognized when the contractual rights to cash flows from the financial assets expire or when they are transferred to third parties and no substantial risks and rewards associated with the financial assets are retained. Financial liabilities are derecognized when they are extinguished.
Categories of financial instruments
Financial assets/liabilities at fair value through profit or loss
This category comprises two sub-categories:
| • | Financial assets or liabilities held for trading |
| • | Financial assets or liabilities designated as at fair value |
The held-for-trading sub-category includes all derivatives as well as financial assets or liabilities acquired or incurred for the purpose of selling them in the near term. In the Group, these comprise only derivatives, including embedded derivatives required to be separated. Derivatives are used exclusively to hedge existing or expected market risks (mainly interest rate and currency risks).
Certain financial assets or liabilities can be designated as at fair value upon initial recognition (fair value option). In accordance with IAS 39, the fair value option may only be applied if:
| • | Its application eliminates or reduces accounting mismatches that would otherwise arise; or |
| • | The financial assets and/or liabilities are part of a portfolio managed on a fair value basis; or |
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| • | The financial assets or financial liabilities contain embedded derivatives required to be separated. |
The fair value option is elected for financial assets and liabilities if there is an economic hedging relationship between financial assets or liabilities and derivatives and if the restrictive hedge accounting provisions (Note 7) cannot be applied on a permanent basis. The classification to the fair value option mostly applies to hedging relationships that involve foreign currency instruments or products with option features. These financial assets and liabilities would otherwise be measured at amortized cost or at fair value, with changes in fair value recognized outside profit or loss, whereas hedging derivatives have to be measured at fair value through profit or loss. This potential accounting mismatch is eliminated by applying the fair value option.
The financial assets or liabilities classified as financial assets/liabilities at fair value through profit or loss are measured at fair value through profit or loss. Gains or losses from fair value changes are recognized in net gains/losses from fair value and hedge accounting. Any impairment losses or reversals of impairment losses are reflected in the measurement.
Income or expenses from the amortization of premiums or discounts are reported as accrued interest in net interest income.
The loans and receivables category includes all financial assets that meet all of the following criteria:
| • | Not quoted in an active market |
| • | Fixed or determinable payments |
This category does not include the following:
| • | Financial assets held for trading and financial assets to which the fair value option was applied |
| • | Financial assets designated as available for sale upon initial recognition |
| • | Financial assets for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration (e.g. index certificates whose repayment depends on the development of the relevant index) |
Financial assets classified as loans and receivables are measured at amortized cost. Any premiums or discounts as well as other transaction costs are added directly to or deducted directly from the relevant balance sheet item and amortized using the effective interest method. Income or expenses from amortization are reported as accrued interest in net interest income.
Any impairment losses or reversals of impairment losses are offset directly against the carrying amount and recognized in the consolidated statement of comprehensive income in the allowance for credit losses.
The held-to-maturity category includes all financial assets that meet all of the following criteria:
| • | Fixed or determinable payments |
| • | Positive intention and ability to hold these financial assets to maturity |
This category does not include the following:
| • | Financial assets designated as at fair value or available for sale upon initial recognition |
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| • | Financial assets which are, by definition, classified as loans and receivables |
Financial assets of the held-to-maturity category are measured at amortized cost. Any premiums or discounts as well as other transaction costs are added directly to or deducted directly from the relevant balance sheet item and amortized using the effective interest method. Income or expenses from amortization are reported as accrued interest in net interest income. Any impairment losses or reversals of impairment losses are offset directly against the carrying amount and recognized in the consolidated statement of comprehensive income within net gains/losses on financial investments.
The available-for-sale category includes all financial assets that are not allocated to any of the other categories for financial assets. In the Group, these assets primarily include fixed-income securities that are hedged against interest rate risks through hedging instruments. In addition, this category includes participations.
Available-for-sale financial assets are measured at fair value outside profit or loss. Gains or losses from fair value changes are recognized in the revaluation reserve in equity or outside profit or loss in other comprehensive income presented in the consolidated statement of comprehensive income.
Income or expenses from the amortization of premiums or discounts are reported as accrued interest in net interest income.
On disposal or in the case of impairment, the cumulative gains or losses recorded in the revaluation reserve are reclassified to net gains/losses on financial investments reported in the consolidated statement of comprehensive income.
Unquoted equity instruments, whose fair value cannot be reliably determined, are measured at cost less any impairment losses. In the Group, this relates to participations included in financial investments.
Other liabilities include all financial liabilities that do not fall into the category of financial liabilities at fair value through profit or loss.
Financial liabilities classified as other liabilities are measured at amortized cost. Any premiums or discounts as well as other transaction costs are added directly to or deducted directly from the relevant balance sheet item and amortized using the effective interest method. Income or expenses from amortization are reported as accrued interest in net interest income.
Overview of classes of financial instruments used within the Group:
| Financial assets | | |
| Class | Measurement category | |
| Cash and balances with central banks | Loans and receivables | |
| Loans and advances to banks | Loans and receivables
Designated as at fair value | |
| - Promissory notes /registered bonds | | |
| - Special promotional loans | | |
| - Other | | |
| Loans and advances to customers | Loans and receivables
Designated as at fair value | |
| Fair value changes of hedged items in a portfolio hedge | Loans and receivables | |
| Positive fair values of derivative financial investments | Held for trading | |
| Financial investments | Available for Sale
Held to Maturity
Designated as at Fair Value | |
| Other assets (cash collateral) | Loans and receivables | |
| Irrevocable loan commitments | — | |
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| Financial liabilities | | |
| Class | Measurement category | |
| Liabilities to banks | Other Liabilities
Designated as at Fair Value | |
| Liabilities to customers | Other Liabilities
Designated as at Fair Value | |
| Other liabilities | Other Liabilities
Designated as at Fair Value | |
| - Medium-term notes | | |
| - Global bonds | | |
| - ECP | | |
| - Other | | |
| | | |
| Negative fair values of derivative financial instruments | Held for trading | |
| Subordinated liabilities | Other Liabilities
Designated as at Fair Value | |
| Other liabilities (cash collateral) | Other liabilities | |
Reclassification of financial assets
In accordance with IAS 39, non-derivative financial assets that were originally acquired for trading purposes and which are no longer intended for sale in the near term may be reclassified from the held-for-trading category only in exceptional circumstances. As Rentenbank does not have a trading book, only derivative hedging instruments are included in the held-for-trading category. Reclassification to another category is not possible.
Financial assets that would have met the definition of loans and receivables upon initial recognition (e.g. promissory notes) may be reclassified from the held-for-trading and available-for-sale categories if the reporting entity has the intention and ability to hold such financial assets for the foreseeable future or to maturity.
Financial assets of the available-for-sale category may be reclassified to the held-to-maturity category if the reporting entity has the intention and ability to hold such financial assets to maturity. A reverse reclassification from the held-to-maturity category to the available-for-sale category is only possible in certain circumstances.
| (6) | Determination of the fair value for financial instruments |
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Quoted prices are determined using various valuation techniques and inputs. The inputs used are assigned to one of the following three levels in accordance with IFRS 13:
| • | Level 1: quoted prices for identical assets or liabilities in active markets, excluding mixed prices |
| • | Level 2: quoted prices (other than quoted prices included in Level 1) calculated on the basis of observable inputs, taking into account mixed prices |
| • | Level 3: quoted prices determined on the basis of unobservable inputs, taking into account mixed prices |
Quoted prices are obtained from pricing services as middle rates. In terms of the allocation of quoted prices to the hierarchy levels, additional information about the pricing source used is taken into account (e.g. sales volume). In accordance with IFRS 13, no mixed prices – such as those calculated by Bloomberg – were used as Level 1 quoted prices.
For financial instruments for which there are no quoted prices for identical assets or liabilities in active markets, the fair value is determined using generally accepted valuation models that are based significantly on observable (Level 2) or unobservable (Level 3) inputs for the asset or liability concerned.
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In this context, the fair value of contracts without option features is determined on the basis of the discounted expected future cash flows (discounted cash flow or DCF method). In the case of non-derivative financial assets and liabilities, the deposit/swap curve plus a transaction-specific credit spread are used for discounting. Credit spreads are distinguished by rating, maturity, currency, and the degree of collateralization. The credit quality of the Federal Republic of Germany is taken into account in the credit spreads for Rentenbank’s own financial liabilities by way of the institutional liability and the statutory refinancing guarantee. Deciding which sources of market data may be used to derive credit spreads leaves scope for discretion. Changes in the market data sources affect the fair values of the financial instruments presented in the consolidated financial statements. In addition, determining expected future cash flows for the rating categories of DDD to D also requires making judgments.
As a result of the existing netting and collateral agreements with all business partners, the discounting of derivatives is based on the OIS (Overnight Interest Rate Swap) curve as well as on basis swap spreads and cross-currency (CCY) basis swap spreads. They are distinguished by maturity and currency and obtained from external market data providers.
Measurement of contracts with option features (option-based contracts) is based on standard option pricing models. Apart from the interest rate curves and spreads mentioned above, volatilities and correlations between observable market data are also taken into account in the calculation.
In order to account for the credit risk with respect to the business partner’s credit quality, a Credit Valuation Adjustment (CVA) for derivatives and a Debit Valuation Adjustment (DVA) for own credit risk are taken into account.
The calculation of CVA and DVA is based on the expected loss model. Under this model, CVA and DVA are calculated by multiplying the potential future exposure, the default probability and the loss given default (LGD). The calculation is based on the established netting pools.
The potential future exposure is calculated by initially determining the balance of positive and negative fair values for each netting pool, taking into account the collateral received or provided (net exposure). In next step, the net exposure is increased by value at risk, which is calculated using a predefined 10-day holding period and a 95% confidence level.
The probabilities of default and the loss given default rates are obtained from the data of credit risk management.
An increase in own credit spreads leads to measurement gains as the value of the liabilities decreases. In contrast, declining credit spreads result in measurement losses as the value of the liabilities increases. For financial assets, increasing credit spreads lead to measurement losses, and declining credit spreads to measurement gains.
Under hedge accounting, only the changes in the fair value of the hedged item attributable to the hedged risk are taken into account. In this context, the hedged risk within the Group is limited to the interest rate risk of the deposit/swap curve. The fair value based on interest rate changes is determined by discounting contractual cash flows using the deposit/swap curve plus the constant transaction-specific margin.
The valuation processes, including the definition of valuation techniques and the determination of the inputs, are defined by the Finance division. The Finance division also analyzes the results from fair value measurement and reports these to the Board of Managing Directors and the relevant managers. The plausibility of net measurement gains/losses is verified daily based on changes in the underlying market data.
The inputs used in the valuation models are validated on an ongoing basis. For this purpose, the fair value of a transaction calculated using the valuation model on the trade date is compared with the transaction price.
Rentenbank enters into derivatives only for the purpose of hedging existing or anticipated market risks. Derivatives are always measured at fair value through profit or loss. By contrast, the hedged items are initially measured either at amortized cost or at fair value, with changes in fair value recognized outside profit or loss in the revaluation reserve. Without implementing any further measures, the different approaches would result in
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accounting mismatches and thus in fluctuations in the income statement.
IFRS permit these economic hedging relationships to be accounted for under hedge accounting rules. If the associated very restrictive requirements cannot be met on a permanent basis, the hedged items are designated by Rentenbank as at fair value upon initial recognition.
Hedging relationships accounted for in the balance sheet are divided into fair value hedges and cash flow hedges. According to Rentenbank’s business strategy, interest rate risks are transformed into a floating, EUR-denominated interest rate mainly by using derivatives. Accordingly, only fair value hedges are used to account for these hedging relationships.
The Group uses fair value hedges exclusively to hedge interest rate risks. The changes in the fair value of the hedged item attributable to the hedged interest rate risk are recognized in profit or loss, irrespective of the category. In this way, the changes in the fair value of the derivatives recognized in profit or loss are largely offset.
Large-volume transactions are generally hedged on an individual basis (micro hedges). The special promotional loans issued under the promotional mandate were mainly hedged on a portfolio basis (macro hedges) due to the small volume of individual transactions.
When a transaction is entered into, the relationship between the hedged item and the hedging instrument is documented, including the risk type being hedged.
In addition, an assessment whether the hedge is highly effective is documented both at inception (ex-ante effectiveness) and on an ongoing basis (ex-ante and ex-post effectiveness).
Micro hedges involve one or more similar hedged items forming a hedging relationship with one or more derivative hedging instruments. Ex-ante effectiveness is assumed from the beginning of the hedging period if the material features of the hedging derivative are in line with those of the hedged item (critical terms match). Any changes arising from transactions during the hedging period are also reviewed under the critical terms match method. Ex-ante effectiveness is thus permanently demonstrated. Ex-post effectiveness is measured as of the balance sheet dates using a regression analysis. A hedging relationship is deemed effective when the slope of the linear regression line, determined on the basis of the changes in the fair value of the hedged items and hedging instruments attributable to interest rate changes, is between -0.8 and -1.25. In addition, the quality of the regression, measured by the coefficient of determination, must be equal to or greater than 0.8. The semi-annual regression analysis is based on data from the preceding six months. In the case of effective hedges, the carrying amount of the hedged items is adjusted for the change in the fair value attributable to interest rate changes and, together with the changes in the fair value of the hedging instrument, recognized in net gains/losses from fair value and hedge accounting.
Hedge accounting requirements may not be applied for ineffective hedging relationships in the relevant period. For this period, the hedged item is measured according to its category. The changes in the fair value of the designated hedged item, attributable to interest rate changes and recognized in the previous effective hedging periods, are amortized over their remaining term using the effective interest method. These fair value changes are recognized in net gains/losses from fair value and hedge accounting.
Items hedged using portfolio-based fair value hedges (macro hedges) are allocated to quarterly maturity bands at the beginning of each hedging period. The allocation is based on the maturities of the individual expected cash flows. For each maturity band, interest rate swaps are determined as hedging instruments at an amount equal to or less than the notional amount of the accumulated underlying hedged items. The length of the hedging period is usually one month. If new business within a particular maturity band exceeds a certain volume during the hedging period, the hedging relationship for this maturity band may be terminated early and redefined.
In contrast to micro hedges, the ex-ante effectiveness for macro hedges is determined on the basis of a sensitivity analysis, involving a 100 basis points parallel shift in the relevant interest rate curve. The ex-post effectiveness is assessed on the basis of the dollar-offset method. Under this method, the fair value changes of the hedged item attributable to interest rate changes are compared with those of the hedging instrument. The hedge is deemed effective if the ratio of the fair value changes of the hedged item to those of the hedging instrument is within a range of -80% to -125%.
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As regards effective maturity bands, the fair value changes of the hedged items attributable to interest rate changes are recognized in the income statement in net gains/losses from fair value and hedge accounting together with the offsetting changes in the fair value of the hedging instruments at the end of the hedging period. In contrast to micro hedge accounting, the carrying amount of the individual hedged items is not adjusted. Instead, the adjustments to the carrying amounts of the hedged items are reported separately in the balance sheet as fair value changes of hedged items in a portfolio hedge. These fair value changes are amortized over the terms of the relevant time bands and charged against net gains/losses from fair value and hedge accounting or, in the case of an unscheduled repayment of financial instruments, derecognized on a pro rata basis. Fair value changes of hedged items attributable to interest rate changes are not recognized for ineffective maturity bands.
| (8) | Hybrid financial instruments (embedded derivatives) |
Hybrid financial instruments are transactions that comprise a host contract and one or more derivative financial instruments. Embedded derivatives are an integral component of the host contract and cannot be traded separately.
Certain embedded derivatives are accounted for as stand-alone derivatives if their economic characteristics and risks are not closely related to those of the host contract. Furthermore, separation is required when derivative components of hybrid financial instruments are also traded in the market as stand-alone derivatives. A prerequisite is that the hybrid financial instrument is not already measured at fair value through profit or loss.
The Group generally allocates all structured products with embedded derivatives, all of which are hedged by hedging derivatives and otherwise required to be separated, to the designated as at fair value category. They do not include liquidity assistance loans which are callable daily and where the host contract belongs to the loans and receivables category.
In the case of embedded derivatives that are not required to be separated from the host contract (e.g. interest cap options), the measurement of the entire structured product is based on the category of the host contract. Embedded derivatives required to be separated are measured at fair value through profit or loss.
Embedded derivatives not required to be separated are reported in the relevant consolidated balance sheet item, together with the associated host contract. Based on their current market value, embedded derivatives required to be separated are reported either in positive fair values of derivative financial instruments or in negative fair values of derivative financial instruments.
For settlement (clearing system) and legal reasons (e.g. the definition of a loan in accordance with the German Civil Code – BGB), interest rates for floating rate transactions are floored at zero without having been explicitly agreed upon (virtual floor).
Negative interest affects the measurement of floating rate transactions with a virtual floor. In substance, the virtual floor corresponds economically to a floor option with a corresponding option value. Interest that does not have to be paid results in a positive option value (lending business) or a negative option value (funding business).
| (9) | Impairment of financial assets |
At the end of each month, Rentenbank assesses whether there is any objective evidence that all interest and principal payments may not be made in accordance with the contractual terms. The assessment is based on the following criteria:
| • | Credit rating as non-investment grade |
| • | Non-performing, forborne or restructured exposures |
| • | Significant deterioration in the business partner’s credit quality |
| • | Significant deterioration in the credit quality of the business partner’s country of incorporation |
Judgment is required to determine the materiality aspect of a credit quality deterioration and the criteria for the credit ratings. The criteria for monitoring credit risks and for determining credit ratings are set out in
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detail in the combined management report.
Due to the measurement at fair value, financial assets of the designated as at fair value category do not have to be assessed for impairment separately since these are already taken into account and recognized in profit or loss.
Loans and advances and financial assets measured at (amortized) cost
Rentenbank assesses the recoverability of individually significant receivables for significant single exposures and securities as well as of receivables of small amounts on an individual basis. If there is objective evidence of impairment, the impairment loss is determined as the difference between the carrying amount and the present value of the expected cash flows. The expected cash flows are determined on the basis of qualified estimates. They take into account the business partner’s financial position as well as the liquidation of collateral and other relevant factors, such as protection schemes or state guarantees. The original effective interest rate is used as the discount rate for fixed-interest loans and advances as well as for the fixed-interest securities. In contrast, floating-rate loans and advances and floating-rate securities are discounted at the current effective interest rate. In the case of participations measured at cost, the discount rate is the current market rate of return for a similar financial asset. The adjustments to the valuation of loans and advances are recognized in the income statement in the allowance for credit losses/promotional contribution, while held-to-maturity securities and participations are included in net gains/losses on financial investments.
In accordance with IFRS, impairments resulting from payment defaults are only determined for losses already incurred. Since Rentenbank generally extends loans to other banks, any potential losses are identified in a timely manner. Based on a model of expected losses, a portfolio valuation allowance is recognized for loans and advances as well as for securities measured at (amortized) cost to account for any existing residual risk of not having identified risks already materialized. The carrying amounts of the portfolios are weighted using probabilities of default and the loss given default rates, derived from the product rating or the business partner’s rating. Since the number of defaults within the Group is statistically insignificant, default probabilities are determined on the basis of external data provided by rating agencies. The loss given default, in contrast, is determined using regulatory standards.
Assets with a rating of DDD to D (non-performing loans) are discounted on the basis of the deposit/swap curve since defaults are already taken into account in the estimate of the expected future cash flows.
Available-for-sale financial assets measured at fair value
If there is objective evidence that financial assets are impaired, the amount of the impairment loss is measured as the difference between the amortized cost and current fair value. The loss calculated in this manner is recognized as an adjustment to the revaluation reserve in net gains/losses on financial investments.
If the conditions giving rise to the impairment of debt instruments no longer apply, the impairment loss has to be reversed through profit or loss.
| (10) | Foreign currency translation |
Monetary foreign currency positions are translated daily using the closing rate. The Group does not hold any non-monetary items (e.g. property and equipment) denominated in foreign currencies.
Net gains/losses on foreign currency translation are recognized in the consolidated statement of comprehensive income. Hedged currency exposures are included in net gains/losses from fair value and hedge accounting, while open currency positions from payment settlement accounts are recorded in other operating income/expenses.
Expenses and income are translated at the closing rate ruling on the date upon which they affect profit or loss.
| (11) | Repurchase agreements, collateralized loans, and securities lending transactions |
In addition to collateralized loans with the Deutsche Bundesbank, repurchase agreements (repo agreements) are entered into with Eurex Clearing AG. These repo agreements are characterized by the
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borrowing or lending of funds against the provision or receipt of collateral from a pool of deposited securities (basket of securities), see Note 63.
| (12) | Accounting for leases |
In accordance with IAS 17, leases have to be classified as either finance leases or operating leases. The allocation is based on an assessment of the economic substance in relation to the risks and rewards of the lessee and the lessor. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the leased asset from the lessor to the lessee. The discriminating factor is solely the economic ownership, not the ownership under civil law. In all other cases, the lease is classified as an operating lease.
The Group acts as a lessee. The contracts concluded are classified as operating leases and relate to office equipment and motor vehicles. The lease payments are recognized as administrative expenses. There were no subleases.
| (13) | Allowance for credit losses/promotional contribution |
Allowance for credit losses/promotional contribution, reported in the consolidated statement of comprehensive income, primarily includes the discounted promotional expenses for the special promotional loans as well as their utilization over the remaining term. The promotional expenses are calculated as the difference between the interest rate of the special promotional loan granted at a reduced rate of interest and the funding rate at the date of the loan commitment plus an administrative cost rate.
In addition, this item comprises valuation allowances and write-downs of loans and advances as a result of payment defaults, as well as income from recoveries of loans and advances previously written off.
Property rented to third parties and property acquired for investment purposes (i.e. for generating yield) are reported separately in the balance sheet as investment property in accordance with IAS 40, provided that they are held with the intention to earn rentals and/or for capital appreciation.
Investment property is measured initially at cost, including transaction costs. Similar to property and equipment, investment property is subsequently measured at cost less any accumulated depreciation and any accumulated impairment losses. Depreciation and impairment losses are recognized as administrative expenses.
| (15) | Property and equipment |
Property and equipment includes owner-occupied land and buildings as well as operating and office equipment.
Property and equipment is recognized initially at cost and subsequently measured at amortized cost less any accumulated depreciation and any accumulated impairment losses. Depreciation is recognized using the straight-line method over the estimated useful life of the assets, ranging from 33 to 50 years for buildings and from 3 to 6 years for operating and office equipment. Land is not subject to depreciation.
Low-value assets are recognized as expenses immediately.
Depreciation and impairment losses are recognized in administrative expenses.
Intangible assets include purchased and internally generated software.
They are recognized at cost and amortized on a straight-line basis over a period of four years. Any impairment losses are recognized in the income statement. Amortization and impairment losses are recognized in administrative expenses.
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| (17) | Impairment of non-financial assets |
Property and equipment, investment property, and intangible assets are tested for impairment at each balance sheet date. If there are impairment indicators, the recoverable amount (the higher of an asset’s fair value less costs to sell and its value in use) is determined and compared with the carrying amount. If the recoverable amount is less than the carrying amount, the difference is recognized as an impairment loss in administrative expenses.
Other assets include cash collateral provided within the framework of collateral agreements for derivatives. They also comprise assets which, considered separately, are not significant in relation to the amount of total assets and cannot be allocated to any other balance sheet item. They are recognized at cost which corresponds to their notional amounts.
| (19) | Tax assets/liabilities |
Tax assets and tax liabilities comprise current income tax assets/liabilities and deferred tax assets/liabilities and can only occur at the consolidated subsidiaries LRB and DSV. Rentenbank is exempt from corporation tax in accordance with Section 5 (1) No. 2 of the German Corporation Tax Act (Körperschaftssteuergesetz – KStG) and trade tax in accordance with Section 3 No. 2 of the German Trade Tax Act (Gewerbesteuergesetz – GewStG).
Current income tax assets, which are refunded by the taxing authority, and tax liabilities are calculated using the current tax rates. There were no deferred tax assets and liabilities in the year under review.
| (20) | Provisions for pensions and similar obligations |
Pension obligations are based on direct commitments. These commitments provide for (early) old-age pensions, disability pensions, surviving dependent benefits, and continuation of salary payments in the event of death. In addition to the pension obligations to the members of the Board of Managing Directors based on individual agreements, there are obligations to employees based on various benefit plans depending on the employee’s date of entry.
The amount of the retirement benefits depends on the relevant length of service and the pensionable remuneration. After commencement of the benefit payments, the pensions will be increased based on various factors, such as adjusted collective wage agreements, inflation adjustments or a fixed percentage. Accordingly, the amount of Rentenbank’s pension obligations depends particularly on the development of income and inflation.
In the case of benefit commitments where payments from statutory pension schemes and, in some cases, further pension payments are taken into account, the obligation is directly linked to the development of statutory pension schemes.
All pension obligations are funded internally. There are no plan assets.
The amount of the provisions recognized for defined benefit obligations is based on the present value of the volume of pension obligations as of the balance sheet date. The amount of the pension obligations is determined annually by an independent actuary using the projected unit credit method.
Changes in provisions are recognized in profit or loss as current service cost and interest expense as part of personnel expenses. They are also recognized outside profit or loss in other comprehensive income (i.e. in equity) as actuarial gains or losses. Current service cost represents the benefits earned in the current service period. Interest expense represents the present value effect that is attributable to the reduction of the period until fulfillment of the obligations by one year. Actuarial gains and losses arise from differences between the actual and the expected development of the measurement bases and the parameters.
The present value of the pension obligations depends on various parameters that require making assumptions and estimates. Changes in these assumptions and estimates affect the carrying amount of the reported pension provisions. One of the most significant parameters is the interest rate used to discount the pension obligations. This rate is based on the interest rate applicable as of the balance sheet date for EUR-
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denominated, high-quality corporate bonds with residual maturities that match those of the pension obligations.
Provisions are recognized for uncertain obligations to third parties and onerous contracts. The amount recognized is based on the best estimate of the expenditure required to settle the obligation. Changes in these estimates affect the carrying amount of the reported provisions. Non-current provisions are discounted when the effect of the time value of money is material. Provisions are recognized and reversed through profit or loss in administrative expenses or in other operating income/expenses.
Other liabilities comprise cash collateral received within the framework of collateral agreements for derivatives. In addition, the measurement of the outstanding commitments for special promotional loans is recognized in other liabilities. They also include liabilities which, considered separately, are not significant in relation to the amount of total liabilities and cannot be allocated to any other balance sheet item. Other liabilities are recognized at cost, except for the discounted promotional contribution for the outstanding special promotional loan commitments.
In accordance with IFRS, equity consists of subscribed capital, retained earnings, the revaluation reserve, and distributable profit.
Subscribed capital represents paid-in capital. It was formed by contributions provided by the German agricultural and forestry sectors between 1949 and 1958. Subscribed capital is not linked with any rights. Retained earnings comprise the principal reserve and the guarantee reserve, formed in accordance with Rentenbank’s Governing Law and transferred from the financial statements prepared under HGB, as well as other retained earnings.
The revaluation reserve primarily includes actuarial gains or losses on pension obligations (see Note 20) and the changes in the fair value of available-for-sale securities attributable to changes in credit spreads. Fair value changes attributable to changes in credit spreads result from changes in risk premiums. Fair value changes attributable to interest rate changes in relation to these securities which are part of effective hedging relationships are reported in net gains/losses from fair value and hedge accounting, together with the fair value changes of the related hedging derivatives.
| (24) | Contingent liabilities and other commitments |
Contingent liabilities arise from past events that either
| • | lead to possible obligations whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group (e.g. indemnities); or |
| • | result in a present obligation which is not likely to result in a reduction in net assets or where the settlement amount cannot be estimated with sufficient reliability (e.g. pending litigation). |
These obligations are not recognized pursuant to IAS 37.27. Contingent liabilities are disclosed in Note 64.
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| Notes to the consolidated statement of comprehensive income |
| Jan. 1 to
Dec. 31, 2016 | | Jan. 1 to
Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Interest income from | | |
| Loans and advances to banks and customers | 1,035.0 | | 1,159.2 | | -124.2 | |
| Derivative financial instruments | 2,056.4 | | 2,013.1 | | 43.3 | |
| Financial investments | 469.0 | | 555.5 | | -86.5 | |
| Current income from | | |
| Participation | 6.9 | | 6.6 | | 0.3 | |
|
| |
| |
| |
| Total interest income | 3,567.3 | | 3,734.4 | | -167.1 | |
|
| |
| |
| |
| Of which income from financial instruments that are not measured at fair value through profit or loss | 1,357.5 | | 1,551.2 | | -193.7 | |
| Interest expenses for | | |
| Liabilities to banks and customers | 171.5 | | 191.4 | | -19.9 | |
| Securitized liabilities | 1,478.3 | | 1,641.6 | | -163.3 | |
| Derivative financial instruments | 1,566.1 | | 1,552.6 | | 13.5 | |
| Subordinated liabilities | 17.5 | | 17.4 | | 0.1 | |
| Other | 0.5 | | 0.4 | | 0.1 | |
|
| |
| |
| |
| Total interest expenses | 3,233.9 | | 3,403.4 | | -169.5 | |
| Of which expenses from financial instruments that are not measured at fair value through profit or loss | 373.1 | | 452.5 | | -79.4 | |
|
| |
| |
| |
| Net interest income | 333.4 | | 331.0 | | 2.4 | |
|
| |
| |
| |
Interest expenses are reported including negative interest from money market liabilities and cash collateral received in the amount of EUR 7.3 million (i.e. reducing expenses by this amount). Interest income from cash collateral provided as well as from loan and money market receivables is reported net of negative interest of EUR 19.6 million (i.e. reducing income by this amount). For reasons of materiality, the income statement items are not further broken down.
| (26) | Allowance for credit losses/promotional contribution |
| Jan. 1 to
Dec. 31, 2016 | | Jan. 1 to
Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Expenses for additions to promotional contribution | 89.3 | | 82.1 | | 7.2 | |
| Income from utilization of promotional contribution | 70.2 | | 67.3 | | 2.9 | |
| Additions to portfolio valuation allowances | 3.7 | | 2.1 | | 1.6 | |
| Reversals of portfolio valuation allowances | 0.0 | | 0.5 | | -0.5 | |
| Additions to specific valuation allowances | 0.0 | | 2.2 | | -2.2 | |
| Reversals of specific valuation allowances | 2.2 | | 0.0 | | 2.2 | |
| Recoveries of loans and advances previously written off | 0.0 | | 0.0 | | 0.0 | |
|
| |
| |
| |
| Allowance for credit losses/promotional contribution | 20.6 | | 18.6 | | 2.0 | |
|
| |
| |
| |
Allowance for credit losses/promotional contribution primarily includes the discounted future expenses for special promotional loans (i.e. additions to promotional contribution) as well as their utilization over the remaining term. Reversals of specific valuation allowances refer to promissory notes/registered bonds included in loans and advances to banks.
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| (27) | Net fee and commission income |
| Jan. 1 to
Dec. 31, 2016 | | Jan. 1 to
Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Fee and commission income from | | |
| Compensation for administrative expenses | 0.1 | | 0.2 | | -0.1 | |
|
| |
| |
| |
| Total fee and commission income | 0.1 | | 0.2 | | -0.1 | |
| Of which income from financial instruments that are not measured at fair value through profit or loss | 0.1 | | 0.2 | | -0.1 | |
| Fee and commission expenses for | | |
| Custody fees | 1.7 | | 1.9 | | -0.2 | |
| O ther | 0.6 | | 0.5 | | 0.1 | |
|
| |
| |
| |
| Total fee and commission expenses | 2.3 | | 2.4 | | -0.1 | |
| Of which expenses from financial instruments that are not measured at fair value through profit or loss | 1.4 | | 1.6 | | -0.2 | |
|
| |
| |
| |
| Net fee and commission income | -2.2 | | -2.2 | | 0.0 | |
| (28) | Administrative expenses |
| Jan. 1 to
Dec. 31, 2016 | | Jan. 1 to
Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Personnel expenses | 34.5 | | 33.8 | | 0.7 | |
| Depreciation and amortization | | |
| Intangible assets | 5.7 | | 4.9 | | 0.8 | |
| Of which internally generated software | 0.1 | | 0.1 | | 0.0 | |
| IT equipment | 0.6 | | 0.6 | | 0.0 | |
| Residential and office buildings | 0.5 | | 0.5 | | 0.0 | |
| Office equipment and vehicles | 0.1 | | 0.1 | | 0.0 | |
| Technical and other equipment | 0.1 | | 0.1 | | 0.0 | |
|
| |
| |
| |
| Total depreciation and amortization | 7.0 | | 6.2 | | 0.8 | |
| Other administrative expenses | | |
| IT licenses, fees, consulting services | 10.2 | | 10.9 | | -0.7 | |
| Software maintenance | 2.1 | | 1.5 | | 0.6 | |
| Public relations | 1.9 | | 1.8 | | 0.1 | |
| Audits, contributions, donations | 4.2 | | 3.5 | | 0.7 | |
| Funding | 1.4 | | 1.4 | | 0.0 | |
| Occupancy cost | 1.0 | | 1.1 | | -0.1 | |
| Other | 5.0 | | 4.8 | | 0.2 | |
|
| |
| |
| |
| Total other administrative expenses | 25.8 | | 25.0 | | 0.8 | |
|
| |
| |
| |
| Administrative expenses | 67.3 | | 65.0 | | 2.3 | |
Other administrative expenses include lease expenses of EUR 184.1 thousand (2015: EUR 193.5 thousand). Future lease payments can be broken down as follows:
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| Jan. 1 to
Dec. 31, 2016 | | Jan. 1 to
Dec. 31, 2015 | | Change in | |
| € thousand | | € thousand | | € thousand | |
|
| |
| |
| |
| Future lease payments | | |
| up to 1 year | 115.6 | | 44.8 | | 70.8 | |
| more than 1 year up to 5 years | 196.0 | | 135.9 | | 60.1 | |
| more than 5 years | 0.0 | | 0.0 | | 0.0 | |
The payments are minimum lease payments (fixed lease payments). There were no restrictions imposed by lease agreements. As of year-end 2016, the Group had 19 (2015: 20) lease agreements. Some of the leases for operating and office equipment provide for renewal or purchase options.
| (29) | Other operating income/expenses |
| | | Jan. 1 to
Dec. 31, 2016 | | Jan. 1 to
Dec. 31, 2015 | | Change in | |
| | | € million | | € million | | € million | |
| | |
| |
| |
| |
| Other operating income | | |
| Rental income | 1.9 | | 1.8 | | 0.1 | |
| Reversals of provisions | 0.2 | | 0.8 | | -0.6 | |
| Reimbursements of expenses from third parties | 0.6 | | 0.3 | | 0.3 | |
| Other income | 1.4 | | 1.1 | | 0.3 | |
|
| |
| |
| |
| Total other operating income | 4.1 | | 4.0 | | 0.1 | |
| Other operating expenses | | |
| Capital increase of Rehwinkel Foundation | 0.0 | | 2.0 | | -2.0 | |
| Additions to provisions | 5.5 | | 4.9 | | 0.6 | |
| | - Of which promotion of research and innovation | 3.0 | | 3.0 | | 0.0 | |
| Bank-owned housing | 0.5 | | 0.6 | | -0.1 | |
| Other expenses | 1.1 | | 0.9 | | 0.2 | |
|
| |
| |
| |
| Total other operating expenses | 7.1 | | 8.4 | | -1.3 | |
|
| |
| |
| |
| Other operating income/expenses | -3.0 | | -4.4 | | 1.4 | |
| (30) | Net gains/losses from fair value and hedge accounting |
| Jan. 1 to
Dec. 31, 2016 | | Jan. 1 to
Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Measurement result | | |
| Fair value measurement | | |
| Hedged items | 273.4 | | 225.2 | | 48.2 | |
| Derivatives | -474.0 | | -27.5 | | -446.5 | |
| Net gains/losses on foreign currency translation | 26.2 | | 5.7 | | 20.5 | |
|
| |
| |
| |
| Fair value measurement, total | -174.4 | | 203.4 | | -377.8 | |
| Micro hedge accounting | | |
| Hedged items | 295.2 | | 66.4 | | 228.8 | |
| Hedging instruments | -302.0 | | -65.5 | | -236.5 | |
|
| |
| |
| |
| Micro hedge accounting, total | -6.8 | | 0.9 | | -7.7 | |
| Macro hedge accounting | | |
| Hedged items | 403.6 | | 87.4 | | 316.2 | |
| Hedging instruments | -462.4 | | -89.8 | | -372.6 | |
| Macro hedge accounting, total | -58.8 | | -2.4 | | -56.4 | |
|
| |
| |
| |
| Total net measurement result gains/losses | -240.0 | | 201.9 | | -441.9 | |
| Total realized gains/losses | 5.0 | | 3.0 | | 2.0 | |
|
| |
| |
| |
| Net gains/losses from fair value and hedge accounting | -235.0 | | 204.9 | | -439.9 | |
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Derivatives and financial instruments of the financial assets/liabilities at fair value through profit or loss category are measured at fair value. Changes in fair value are recognized in profit or loss as unrealized gains or losses in net gains/losses from fair value measurement.
Net gains/losses from micro hedge accounting also include the changes in the fair value of hedged items in effective hedging relationships attributable to changes in the deposit/swap curve. In the case of ineffectiveness, hedge accounting is discontinued and the previously recognized fair value changes of the hedged items attributable to interest rate changes are amortized over the remaining term in net gains/losses from fair value measurement.
The Group has no open foreign currency positions. However, measurement at fair value results in net gains/losses on foreign currency translation shown in the above table.
Gains/losses from the sale or repurchase of financial instruments of the financial assets/liabilities at fair value through profit or loss categories are recognized as realized gains or losses in net gains/losses from fair value and hedge accounting. This also applies to financial instruments that are part of a recognized hedging relationship.
Income and expenses from the amortization of premiums/discounts and upfront payments, which represent part of the fair value changes, are recognized in net interest income as they are similar in nature to interest.
| Jan. 1 to
Dec. 31, 2016 | | Jan. 1 to
Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Deferred taxes on temporary differences | 0.0 | | -0.2 | | 0.2 | |
| Current income taxes | -1.2 | | -2.4 | | 1.2 | |
|
| |
| |
| |
| Income taxes | -1.2 | | -2.6 | | 1.4 | |
| (32) | Disclosures on segment reporting |
In accordance with IFRS 8, significant results are to be presented by operating segment and country. The segments were defined on the basis of the Group’s organizational and management structure as well as on its internal financial reporting. Our operating segments are as follows:
This segment comprises the promotional business and the related funding activities. It includes the earnings of Rentenbank and of all its subsidiaries, including those of their participations.
This segment includes the contributions from the investment of Rentenbank’s total capital and of medium to long-term provisions in the form of securities and promotional loans (part of the new promotional business) and the direct participations of Rentenbank.
This segment comprises the results of the Group’s activities securing and managing its liquidity as well as of its short-term interest rate management. Transactions made in this segment have a fixed-interest period of up to one year (e.g. overnight and term deposits, Euro Commercial Paper (ECP), securities, and promissory notes).
The segments are managed exclusively in Frankfurt am Main on a centralized basis. All income and expenses are generated at this location. Consequently, we do not present information by geographical region as
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required by IFRS 8.
The earnings in the segment report are presented net in accordance with the spread-based management approach of Rentenbank. Segment assets and liabilities relate to transactions with third parties. Accordingly, the earnings are generated exclusively with external counterparties. There are no intra-group transactions between the segments. There are no material differences between the internal reporting and financial reporting under IFRS. Due to the lack of intra-group transactions and due to the agreement between the internal reporting lines and the external financial reporting, further reconciliations have not been included.
The distribution of the components of net interest income, net fee and commission income, and net gains/losses on financial investments as well as net gains/losses from fair value and hedge accounting is made on the basis of individual transactions. Administrative expenses, other operating income/expenses, and income taxes from the consolidated subsidiaries are allocated to the relevant segments either directly or indirectly using allocation keys. These keys are mainly based on the number of the respective employees, consumption of resources, and other allocations of resources.
Segment assets and liabilities are allocated to the individual segments according to their contributions to the income statement.
| Promotional Business | | Capital Investment | | Treasury Management | | Total | | |
| Jan. 1 to Dec. 31 | 2016 | | 2015 | | 2016 | | 2015 | | 2016 | | 2015 | | 2016 | | 2015 | |
| € million | | € million | | € million | | € million | | € million | | € million | | € million | | € million | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| Net interest income before allowance for credit losses/promotional contribution | 172.8 | | 190.5 | | 118.8 | | 116.7 | | 41.8 | | 23.8 | | 333.4 | | 331.0 | |
| Allowance for credit losses/promotional contribution | 20.6 | | 18.6 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 20.6 | | 18.6 | |
| Net fee and commission income | -2.1 | | -2.0 | | 0.0 | | 0.0 | | -0.1 | | -0.2 | | -2.2 | | -2.2 | |
| Administrative expenses | 51.5 | | 49.1 | | 9.8 | | 9.4 | | 6.0 | | 6.5 | | 67.3 | | 65.0 | |
| Other operating income/expense | -3.0 | | -4.4 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | | -3.0 | | -4.4 | |
| Income taxes | -0.2 | | -2.6 | | -1.0 | | 0.0 | | 0.0 | | 0.0 | | -1.2 | | -2.6 | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| Operating result | 95.4 | | 113.8 | | 108.0 | | 107.3 | | 35.7 | | 17.1 | | 239.1 | | 238.2 | |
| Net gains/losses from fair value and hedge accounting | -240.8 | | 201.6 | | 0.0 | | 0.0 | | 5.8 | | 3.3 | | -235.0 | | 204.9 | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| Group’s net income | -145.4 | | 315.4 | | 108.0 | | 107.3 | | 41.5 | | 20.4 | | 4.1 | | 443.1 | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| Dec. 31 | 2016 | | 2015 | | 2016 | | 2015 | | 2016 | | 2015 | | 2016 | | 2015 | |
| € million | | € million | | € million | | € million | | € million | | € million | | € million | | € million | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| Segment assets | 81.4 | | 81.2 | | 4.6 | | 4.4 | | 9.0 | | 7.7 | | 95.0 | | 93.3 | |
Segment liabilities
(incl. equity) | 81.5 | | 82.1 | | 4.6 | | 4.4 | | 8.9 | | 6.8 | | 95.0 | | 93.3 | |
As in the previous year, interest income generated from transactions with a single counterparty did not account for 10% or more of total interest income.
| Notes to the balance sheet |
| (34) | Cash and balances with central banks |
| Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Cash on hand | 0.2 | | 0.1 | | 0.1 | |
| Balances with central banks | 6.5 | | 21.1 | | -14.6 | |
|
| |
| |
| |
| Total | 6.7 | | 21.2 | | -14.5 | |
As in the previous year, balances with central banks consist of balances with the Deutsche Bundesbank.
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| (35) | Loans and advances to banks |
| Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Repayable on demand | 874.8 | | 2.4 | | 872.4 | |
| Term deposits | 2,824.6 | | 2,627.7 | | 196.9 | |
| Promissory notes /registered bonds | 12,284.3 | | 13,038.2 | | -753.9 | |
| Special promotional loans | 41,426.8 | | 39,688.9 | | 1,737.9 | |
| Of which promotional contribution | -356.8 | | -343.7 | | -13.1 | |
| Other | 100.5 | | 100.0 | | 0.5 | |
|
| |
| |
| |
| Total | 57,511.0 | | 55,457.2 | | 2,053.8 | |
|
| |
| |
| |
| Of which due after more than 12 months | 49,719.3 | | 48,704.1 | | 1,015.2 | |
| (36) | Loans and advances to customers |
| Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Repayable on demand | 0.1 | | 0.1 | | 0.0 | |
| Medium and long-term loans | 0.0 | | 30.0 | | -30.0 | |
| Promissory notes | 7,300.8 | | 6,096.4 | | 1,204.4 | |
| Of which municipal loans | 7,300.8 | | 6,093.9 | | 1,206.9 | |
| Special promotional loans | 194.5 | | 252.7 | | -58.2 | |
| Of which promotional contribution | 0.0 | | 0.0 | | 0.0 | |
| Other | 1.4 | | 1.7 | | -0.3 | |
|
| |
| |
| |
| Total | 7,496.8 | | 6,380.9 | | 1,115.9 | |
|
| |
| |
| |
| Of which due after more than 12 months | 7,050.7 | | 5,900.8 | | 1,149.9 | |
| (37) | Allowance for credit losses/promotional contribution in the lending business |
| Promotional contribution | | Specific valuation allowances | | Portfolio valuation allowances | | |
| 2016 | | 2015 | | 2016 | | 2015 | | 2016 | | 2015 | |
| € million | | € million | | € million | | € million | | € million | | € million | |
|
| |
| |
| |
| |
| |
| |
| As of Jan. 1 | 358.1 | | 343.3 | | 2.2 | | 0.0 | | 16.3 | | 14.7 | |
| Additions | 89.3 | | 82.1 | | 0.0 | | 2.2 | | 3.7 | | 2.1 | |
| Utilization | 70.2 | | 67.3 | | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Reversals | 0.0 | | 0.0 | | 2.2 | | 0.0 | | 0.0 | | 0.5 | |
|
| |
| |
| |
| |
| |
| |
| As of Dec. 31 | 377.2 | | 358.1 | | 0.0 | | 2.2 | | 20.0 | | 16.3 | |
|
| |
| |
| |
| |
| |
| |
| Of which: | | |
| Loans and advances to banks | 356.8 | | 343.7 | | 0.0 | | 2.2 | | 17.1 | | 14.0 | |
| Loans and advances to customers | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 1.5 | | 1.1 | |
| Loan commitments | 20.4 | | 14.4 | | 0.0 | | 0.0 | | 0.4 | | 0.3 | |
| Financial assets | 0.0 | | 0.0 | | 0.0 | | 0.0 | | 1.0 | | 0.9 | |
| (38) | Fair value changes of hedged items in a portfolio hedge |
| Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Fair value changes of loans attributable to interest changes (macro hedge accounting) | 1,258.6 | | 1,298.8 | | -40.2 | |
| Of which due after more than 12 months | 1,243.5 | | 1,283.2 | | -39.7 | |
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| (39) | Positive fair values of derivative financial instruments |
The following table presents a breakdown of derivatives by economic hedging relationship:
| Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| As hedging instruments for: | | |
| Hedged items in hedge accounting (fair value hedge) | 1,289.7 | | 1,355.4 | | -65.7 | |
| Hedged items designated as at fair value | 5,254.3 | | 5,886.4 | | -632.1 | |
| Other hedged items | 19.1 | | 22.9 | | -3.8 | |
| Credit Value Adjustments | -13.6 | | -25.8 | | 12.2 | |
|
| |
| |
| |
| Total | 6,549.5 | | 7,238.9 | | -689.4 | |
|
| |
| |
| |
| Of which due after more than 12 months | 4,525.0 | | 5,216.8 | | -691.8 | |
Derivatives used to hedge other hedged items mainly result from hedging relationships that were ineffective in accordance with the hedge accounting criteria.
| (40) | Financial investments |
| Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Bonds and notes | 19,135.6 | | 19,793.2 | | -657.6 | |
| Participation | 118.8 | | 118.8 | | 0.0 | |
| Other financial investments | 0.2 | | 0.2 | | 0.0 | |
|
| |
| |
| |
| Total | 19,254.6 | | 19,912.2 | | -657.6 | |
|
| |
| |
| |
| Of which: | | |
| due after more than 12 months | 15,679.2 | | 16,212.5 | | -533.3 | |
| eligible as collateral | 15,576.2 | | 16,903.3 | | -1,327.1 | |
Participations were recognized at cost due to the absence of both quoted prices and relevant measurement parameters in accordance with IAS 39.46 (c). No write-downs were necessary as of December 31, 2016.
Investment property includes one property that is fully leased to third parties. The estimated useful life is 33 years.
There were no restrictions that could impede a disposal of this property.
The impairment test required by IAS 36 did not result in an impairment loss on investment property.
Changes in investment property were as follows:
| 2016 | | 2015 | |
| Cost | € million | | € million | |
|
| |
| |
| Cost as of Jan. 1 | 19.8 | | 19.8 | |
| Additions | 0.0 | | 0.0 | |
| Disposals | 0.0 | | 0.0 | |
| Reclassifications | 0.0 | | 0.0 | |
| Balance as of Dec. 31 | 19.8 | | 19.8 | |
| Accumulated depreciation | | |
| Balance as of Jan. 1 | -5.4 | | -4.9 | |
| Depreciation | -0.5 | | -0.5 | |
| Balance as of Dec. 31 | -5.9 | | -5.4 | |
|
| |
| |
| Carrying amount as of Dec. 31 | 13.9 | | 14.4 | |
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The fair value of the property amounted to EUR 28.7 million (2015: EUR 20.3 million), based on the current independent expert opinion.
Rental income of EUR 1.0 million (2015: EUR 0.9 million) was reported in other operating income. Expenditures directly attributable to the property in the amount of EUR 47.3 thousand (2015: EUR 58.2 thousand) as well as real property tax of EUR 35.9 thousand (2015: EUR 35.9 thousand) were reported in other operating expenses.
| (42) | Property and equipment |
Land and buildings include the owner-occupied office building at Hochstrasse 2, Frankfurt am Main, Germany. In addition, Rentenbank owns housing for employees that is not classified as investment property in accordance with IAS 40.9 (c). Instead, it is subject to the requirements of IAS 16 and thus classified as property and equipment.
Changes in property and equipment were as follows:
| Land and buildings | | Operating and office equipment | | Total | | |
| 2016 | | 2015 | | 2016 | | 2015 | | 2016 | | 2015 | |
| Cost | € million | | € million | | € million | | € million | | € million | | € million | |
|
| |
| |
| |
| |
| |
| |
| as of Jan. 1 | 23.1 | | 23.1 | | 11.7 | | 10.9 | | 34.8 | | 34.0 | |
| Additions | 0.0 | | 0.0 | | 0.8 | | 1.3 | | 0.8 | | 1.3 | |
| Disposals | 0.0 | | 0.0 | | 1.7 | | 0.5 | | 1.7 | | 0.5 | |
|
| |
| |
| |
| |
| |
| |
| Balance as of Dec. 31 | 23.1 | | 23.1 | | 10.8 | | 11.7 | | 33.9 | | 34.8 | |
| Accumulated depreciation | | |
| as of Jan. 1 | -1.8 | | -1.8 | | -10.4 | | -9.9 | | -12.2 | | -11.7 | |
| Depreciation | 0.0 | | 0.0 | | -0.8 | | -0.8 | | -0.8 | | -0.8 | |
| Disposals | 0.0 | | 0.0 | | 1.4 | | 0.3 | | 1.4 | | 0.3 | |
|
| |
| |
| |
| |
| |
| |
| Balance as of Dec. 31 | -1.8 | | -1.8 | | -9.8 | | -10.4 | | -11.6 | | -12.2 | |
| Carrying amount as of Dec. 31 | 21.3 | | 21.3 | | 1.0 | | 1.3 | | 22.3 | | 22.6 | |
|
| |
| |
| |
| |
| |
| |
Land was tested for impairment on the basis of current standard land values. As in the previous year, the impairment test did not indicate any impairment losses for 2016.
Intangible assets held in the Group comprise purchased and internally generated software.
Amortization is recognized in administrative expenses. As in the previous year, no impairment losses were required to be recognized in accordance with IAS 36.
Changes in intangible assets were as follows:
| Acquired software | | Internally generated software | | Total | | |
| 2016 | | 2015 | | 2016 | | 2015 | | 2016 | | 2015 | |
| Cost | € million | | € million | | € million | | € million | | € million | | € million | |
|
| |
| |
| |
| |
| |
| |
| as of Jan. 1 | 26.5 | | 22.4 | | 1.4 | | 3.3 | | 27.9 | | 25.7 | |
| Additions | 4.5 | | 4.6 | | 0.0 | | 0.0 | | 4.5 | | 4.6 | |
| Disposals | -0.3 | | -0.5 | | -0.1 | | -1.9 | | -0.4 | | -2.4 | |
|
| |
| |
| |
| |
| |
| |
| Balance as of Dec. 31 | 30.7 | | 26.5 | | 1.3 | | 1.4 | | 32.0 | | 27.9 | |
| Accumulated amortization | | |
| as of Jan. 1 | -14.0 | | -9.3 | | -1.0 | | -2.8 | | -15.0 | | -12.1 | |
| Amortization | -5.6 | | -4.8 | | -0.1 | | -0.1 | | -5.7 | | -4.9 | |
| Disposals | 0.3 | | 0.1 | | 0.0 | | 1.9 | | 0.3 | | 2.0 | |
|
| |
| |
| |
| |
| |
| |
| Balance as of Dec. 31 | -19.3 | | -14.0 | | -1.1 | | -1.0 | | -20.4 | | -15.0 | |
| Carrying amount as of Dec. 31 | 11.4 | | 12.5 | | 0.2 | | 0.4 | | 11.6 | | 12.9 | |
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| (44) | Current income tax assets |
| Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Tax refund claims | 0.1 | | 1.0 | | -0.9 | |
| Income tax assets | 0.1 | | 0.2 | | -0.1 | |
|
| |
| |
| |
| Total | 0.2 | | 1.2 | | -1.0 | |
Tax refund claims against the tax authorities resulted from transactions subject to capital gains tax. In addition, current income tax assets resulted from the prepayments of tax in excess of the taxes owed as stated in the tax assessment notice. Payment is expected to be received in the fiscal year 2017.
| Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Cash collateral from collateral management | | |
| (payable on demand) | 2,918.3 | | 2,930.4 | | -12.1 | |
| Prepaid expenses | 1.8 | | 1.6 | | 0.2 | |
| Other | 0.5 | | 0.3 | | 0.2 | |
|
| |
| |
| |
| Total | 2,920.6 | | 2,932.3 | | -11.7 | |
| Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Repayable on demand | 6.4 | | 0.1 | | 6.3 | |
| Term deposits | 0.0 | | 290.0 | | -290.0 | |
| Registered bonds and promissory notes | 1,307.7 | | 1,219.7 | | 88.0 | |
| Global loans | 1,134.4 | | 1,319.5 | | -185.1 | |
|
| |
| |
| |
| Total | 2,448.5 | | 2,829.3 | | -380.8 | |
|
| |
| |
| |
| Of which due after more than 12 months | 1,870.2 | | 2,452.0 | | -581.8 | |
| (47) | Liabilities to customers |
| Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Repayable on demand | 153.4 | | 135.2 | | 18.2 | |
| Term deposits | 44.1 | | 30.1 | | 14.0 | |
| Registered bonds and promissory notes | 3,931.6 | | 4,184.8 | | -253.2 | |
| Loan agreements | 42.4 | | 40.5 | | 1.9 | |
| Other | 17.5 | | 17.7 | | -0.2 | |
|
| |
| |
| |
| Total | 4,189.0 | | 4,408.3 | | -219.3 | |
|
| |
| |
| |
| Of which due after more than 12 months | 3,957.2 | | 3,833.6 | | 123.6 | |
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| (48) | Securitized liabilities |
| Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Medium-term notes | 51,844.4 | | 51,777.6 | | 66.8 | |
| Global bonds | 16,026.8 | | 16,192.3 | | -165.5 | |
| Euro commercial paper | 5,901.6 | | 3,514.4 | | 2,387.2 | |
| Bearer bonds | 59.0 | | 60.6 | | -1.6 | |
|
| |
| |
| |
| Total | 73,831.8 | | 71,544.9 | | 2,286.9 | |
|
| |
| |
| |
| Of which due after more than 12 months | 54,480.0 | | 54,528.7 | | -48.7 | |
| (49) | Negative fair values of derivative financial instruments |
The following table presents a breakdown of derivatives by economic hedging relationship:
| Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| As hedging instruments for: | | |
Hedged items hedge accounting
(fair value hedge) | 3,992.2 | | 4,780.4 | | -788.2 | |
| Hedged items designated as at fair value | 2,076.0 | | 2,198.5 | | -122.5 | |
| Other hedged items | 1,265.0 | | 174.1 | | 1,090.9 | |
| Debit Valuation Adjustment | -0.1 | | -0.1 | | 0.0 | |
|
| |
| |
| |
| Total | 7,333.1 | | 7,152.9 | | 180.2 | |
|
| |
| |
| |
| Of which due after more than 12 months | 6,156.3 | | 6,244.6 | | -88.3 | |
Derivatives used to hedge other hedged items mainly result from hedging relationships that were ineffective in accordance with the hedge accounting criteria.
| Dec. 31, 2015 | | Utilization | | Reversals | | Additions | | Dec. 31, 2016 | |
| € million | | € million | | € million | | € million | | € million | |
|
| |
| |
| |
| |
| |
| Provisions for pensions and similar obligations | 139.3 | | 6.0 | | 0.0 | | 14.3 | | 147.6 | |
| Other provisions | 21.8 | | 10.2 | | 0.0 | | 13.6 | | 25.2 | |
|
| |
| |
| |
| |
| |
| Total | 161.1 | | 16.2 | | 0.0 | | 27.9 | | 172.8 | |
|
| |
| |
| |
| |
| |
| a) | Provisions for pensions and similar obligations |
The following table shows changes in the present value of pension obligations and deferred compensation as well as the amounts recognized in the consolidated statement of comprehensive income:
| Jan. 1 to
Dec. 31, 2016 | | Jan. 1 to
Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
Present value of pension obligations
as of Jan. 1 | 139.3 | | 144.1 | | -4.8 | |
| Current service cost | 3.6 | | 3.8 | | -0.2 | |
| Interest expense | 2.9 | | 2.8 | | 0.1 | |
| Deferred compensation | 0.2 | | 0.2 | | 0.0 | |
Actuarial gains (-)/
losses (+) from changes in | | | |
| demographic assumptions | -2.3 | | 1.9 | | -4.2 | |
| financial assumptions | 9.9 | | -7.6 | | 17.5 | |
| Pension benefits paid | -6.0 | | -5.9 | | -0.1 | |
|
| |
| |
| |
Present value of pension obligations
as of Dec. 31 | 147.6 | | 139.3 | | 8.3 | |
|
| |
| |
| |
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Current service cost and interest expense are recognized as administrative expenses, while deferred compensation is reported as part of net interest income. Actuarial gains or losses are included in the revaluation reserve.
The breakdown of the present value of the pension obligations by beneficiary is as follows:
| Dec. 31, 2016 | | Dec. 31, 2015 | |
| € million | | € million | |
|
| |
| |
| Active employees | 64.0 | | 57.4 | |
| Leavers with vested benefits | 4.6 | | 4.2 | |
| Pensioners | 79.0 | | 77.7 | |
|
| |
| |
| Total | 147.6 | | 139.3 | |
Of the pension provisions, EUR 141.7 million (2015: EUR 133.4 million) were due after more than twelve months.
Pension obligations were primarily calculated on the basis of the following actuarial assumptions:
| Dec. 31, 2016 | | Dec. 31, 2015 | |
|
| |
| |
| Discount rate | 1.72% | | 2.18% | |
| Expected rate of salary increases | | | | |
| Increase based on collective wage agreement | 2.25% | | 2.25% | |
| Career trend until the age of 45 | 1.00% | | 1.00% | |
| Expected rate of pension increases | 1.50% | | 1.50% | |
| Rate of inflation | 1.50% | | 1.50% | |
| Employee turnover | 2.00% | | 2.00% | |
The values were calculated using the 2005G mortality tables (© Richttafeln 2005G), developed by Klaus Heubeck and fully adjusted in 2011.
The sensitivity analysis shows how the pension obligations would have been affected by changes in the significant measurement assumptions as of December 31, 2016:
| | | Impact on pension obligations | | Impact on pension obligations | |
| | | Dec. 31, 2016 | | Dec. 31, 2015 | |
| Scenario | | € million | | € million | |
| | |
| |
| |
| Discount rate1) | 0.75% | | -15.5 | | -14.2 | |
| -0.75% | | 18.8 | | 17.1 | |
| Rate of salary increases | 0.50% | | 8.5 | | 8.9 | |
| -0.50% | | -7.8 | | -8.0 | |
| Rate of inflation/rate of pension increases2) | 0.50% | | 2.7 | | 1.8 | |
| -0.50% | | -2.4 | | -1.7 | |
| Life expectancy | + 1 year | | 9.3 | | 8.4 | |
| - 1 year | | -9.2 | | -8.3 | |
The non-parallel gradient (e.g. in the case of a reduction or an increase of the discount rate) is primarily attributable to the compounded interest effect which has corresponding effects if maturities of 16 years are assumed.
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The maturity profile shows which cash flows are likely to be associated with the pension obligations:
| Dec. 31, 2016 | | Dec. 31, 2015 | |
| € million | | € million | |
|
| |
| |
| Expected benefit payments during the year1) | | |
| 2017 | 5.9 | | 5.9 | |
| 2018 | 6.0 | | 6.0 | |
| 2019 | 6.0 | | 6.1 | |
| 2020 | 6.1 | | 6.0 | |
| 2021 | 6.1 | | 6.1 | |
| 2022 to 2026 | 30.7 | | 30.8 | |
| Weighted average duration | 16 years | | 16 years | |
| Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Rundown of a former equity holding | 6.1 | | 6.2 | | -0.1 | |
| Promotion of agriculture | 12.5 | | 11.6 | | 0.9 | |
| Miscellaneous provisions | 6.6 | | 4.0 | | 2.6 | |
|
| |
| |
| |
| Total | 25.2 | | 21.8 | | 3.4 | |
|
| |
| |
| |
The provisions for the rundown of a former participation relate to Rentenbank’s contractual obligation to cover the pension benefit payments of Deutsche Bauernsiedlung – Deutsche Gesellschaft für Landentwicklung (DGL) GmbH, Frankfurt am Main, which is currently in liquidation. Rentenbank, together with the other shareholders of DGL, has undertaken to contribute pro rata contributions to secure the solvency of DGL until its expected liquidation in approximately 44 years.
Provisions for the promotion of agriculture relate to amounts not yet disbursed from the Promotional Fund and the Research on Agricultural Innovation program.
Miscellaneous provisions primarily included provisions for potential payments for service anniversaries and litigation costs.
Of other provisions, EUR 18.1 million (2015: EUR 14.4 million) have a remaining term of less than twelve months.
| (51) | Subordinated liabilities |
| Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Medium-term notes | 548.1 | | 542.4 | | 5.7 | |
| Loan agreements | 126.4 | | 120.2 | | 6.2 | |
| Promissory notes | 66.2 | | 66.8 | | -0.6 | |
|
| |
| |
| |
| Total | 740.7 | | 729.4 | | 11.3 | |
|
| |
| |
| |
| Of which due after more than 12 months | 703.5 | | 725.1 | | -21.6 | |
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| Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
Cash collateral from collateral management
(payable on demand) | 2,622.5 | | 2,755.5 | | -133.0 | |
| Discounted promotional contribution | 20.4 | | 14.4 | | 6.0 | |
| Deferred income | 2.2 | | 3.1 | | -0.9 | |
| Accruals | 3.1 | | 4.9 | | -1.8 | |
| Other liabilities | 2.2 | | 2.9 | | -0.7 | |
|
| |
| |
| |
| Total | 2,650.4 | | 2,780.8 | | -130.4 | |
Rentenbank received cash collateral from collateral agreements. For each counterparty, the amount of cash collateral is determined on the basis of positive fair values, taking into account the contractual allowance and minimum transfer amounts.
Discounted promotional contribution relates to the interest rate reductions and lump-sum administrative expenses for committed special promotional loans that have not yet been disbursed.
Deferred income includes the discounted prepayments of interest rate reductions. These interest rate reductions lower interest cost and are granted by the German federal states within the framework of investment promotion programs. The reduced interest rates are passed on to the agricultural sector in the form of Rentenbank’s special promotional loans.
Accruals mainly include estimated outstanding invoices as well as obligations related to supplementary grants to employees.
Other liabilities primarily include liabilities to the tax authorities amounting to EUR 1.1 million (2015: EUR 1.1 million).
| | | Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| | | € million | | € million | | € million | |
| | |
| |
| |
| |
| Subscribed capital | 135.0 | | 135.0 | | 0.0 | |
| Retained earnings | | | |
| | Principal reserve | 1,052.7 | | 986.9 | | 65.8 | |
| | Guarantee reserve | 1.1 | | 22.7 | | -21.6 | |
| | Other retained earnings | 2,410.4 | | 2,465.3 | | -54.9 | |
| | |
| |
| |
| |
| Total retained earnings | 3,464.2 | | 3,474.9 | | -10.7 | |
| Revaluation reserve | | | |
| Unrealized gains/losses from available-for-sale instruments | 118.2 | | 106.8 | | 11.4 | |
| Actuarial gains/losses from pension obligations | -52.7 | | -45.1 | | -7.6 | |
| Revaluation reserve, total | 65.5 | | 61.7 | | 3.8 | |
| Distributable profit | 14.8 | | 14.3 | | 0.5 | |
|
| |
| |
| |
| Total | 3,679.5 | | 3,685.9 | | -6.4 | |
In accordance with Rentenbank’s Governing Law, the principal reserve and the guarantee reserve are transferred from Rentenbank’s annual financial statements to the consolidated financial statements. The reconciliation to the distributable profit is made through withdrawals from other retained earnings.
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| Notes to financial instruments |
| (54) | Reconciliation of carrying amounts to categories |
In the following tables, the financial instruments are classified by measurement category.
| Dec. 31, 2016 | Loans and receivables € million | | Available for sale € million | | Held to maturity € million | | Held for trading € million | | Designated as at fair value € million | | Total € million | |
|
| |
| |
| |
| |
| |
| |
| Balances with central banks | 6.5 | | | | | | | | | | 6.5 | |
| Loans and advances to banks | 51,158.0 | | | | | | | | 6,353.0 | | 57,511.0 | |
| Loans and advances to customers | 7,496.8 | | | | | | | | | | 7,496.8 | |
| Fair value changes of hedged items in a portfolio hedge | 1,258.6 | | | | | | | | | | 1,258.6 | |
| Positive fair values of derivative financial instruments | | | | | | | 6,549.5 | | | | 6,549.5 | |
| Financial investments | | | 10,699.0 | | 3,278.3 | | | | 5,277.3 | | 19,254.6 | |
| Other assets | 2,918.3 | | | | | | | | | | 2,918.3 | |
|
| |
| |
| |
| |
| |
| |
| Total assets | 62,838.2 | | 10,699.0 | | 3,278.3 | | 6,549.5 | | 11,630.3 | | 94,995.3 | |
| | | | | Other liabilities € million | | Held for trading € million | | Designated as at fair value € million | | Total € million | |
| | | | |
| |
| |
| |
| |
| Liabilities to banks | | | | | 1,935.7 | | | | 512.8 | | 2,448.5 | |
| Liabilities to customers | | | | | 2,340.9 | | | | 1,848.1 | | 4,189.0 | |
| Securitized liabilities | | | | | 21,500.1 | | | | 52,331.7 | | 73,831.8 | |
| Negative fair values of derivative financial instruments | | | | | | | 7,333.1 | | | | 7,333.1 | |
| Subordinated liabilities | | | | | 66.3 | | | | 674.4 | | 740.7 | |
| Other liabilities | | | | | 2,622.5 | | | | | | 2,622.5 | |
| | | | |
| |
| |
| |
| |
| Total liabilities | | | | | 28,465.5 | | 7,333.1 | | 55,367.0 | | 91,165.6 | |
| Dec. 31, 2016 | Loans and receivables € million | | Available for sale € million | | Held to maturity € million | | Held for trading € million | | Designated as at fair value € million | | Total € million | |
|
| |
| |
| |
| |
| |
| |
| Balances with central banks | 21.1 | | | | | | | | | | 21.1 | |
| Loans and advances to banks | 48,552.4 | | | | | | | | 6,904.8 | | 55,457.2 | |
| Loans and advances to customers | 6,378.3 | | | | | | | | 2.6 | | 6,380.9 | |
| Fair value changes of hedged items in a portfolio hedge | 1,298.8 | | | | | | | | | | 1,298.8 | |
| Positive fair values of derivative financial instruments | | | | | | | 7,238.9 | | | | 7,238.9 | |
| Financial investments | | | 11,681.0 | | 3,260.5 | | | | 4,970.7 | | 19,912.2 | |
| Other assets | 2,930.4 | | | | | | | | | | 2,930.4 | |
|
| |
| |
| |
| |
| |
| |
| Total assets | 59,181.0 | | 11,681.0 | | 3,260.5 | | 7,238.9 | | 11,878.1 | | 93,239.5 | |
| |
| |
| |
| |
| |
| |
| |
| | | | | Other liabilities € million | | Held for trading € million | | Designated as at fair value € million | | Total € million | |
| | | | |
| |
| |
| |
| |
| Liabilities to banks | | | | | 1,826.5 | | | | 1,002.8 | | 2,829.3 | |
| Liabilities to customers | | | | | 2,975.6 | | | | 1,432.7 | | 4,408.3 | |
| Securitized liabilities | | | | | 21,298.3 | | | | 50,246.6 | | 71,544.9 | |
| Negative fair values of derivative financial instruments | | | | | 0.0 | | 7,152.9 | | | | 7,152.9 | |
| Subordinated liabilities | | | | | 66.8 | | | | 662.6 | | 729.4 | |
| Other liabilities | | | | | 2,755.5 | | | | | | 2,755.5 | |
| | | | |
| |
| |
| |
| |
| Total liabilities | | | | | 28,922.7 | | 7,152.9 | | 53,344.7 | | 89,420.3 | |
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| (55) | Financial instruments designated as at fair value |
| Loans and advances | | Financial assets | | Liabilities | | |
| |
| |
| |
| |
| 2016 € million | | 2015 € million | | 2016 € million | | 2015 € million | | 2016 € million | | 2015 € million | |
|
| |
| |
| |
| |
| |
| |
| Maximum exposure to credit risk Dec. 31 | 6,353.0 | | 6,907.4 | | 5,277.3 | | 4,970.7 | | — | | — | |
| Fair value changes attributable to changes in credit risk | | |
| – during the period | 0.0 | | 6.7 | | -0.1 | | -0.2 | | |
| – accumulated | 0.4 | | 3.4 | | -0.1 | | -1.2 | | |
Fair value changes attributable to changes in credit risk are determined as the amount of the fair value changes that is not attributable to changes in market risk. This means that the amount is determined on the basis of measurement effects resulting from changes in the credit rating of business partners or businesses or in the bank’s own credit rating.
In the year under review and previous years, the measurement of liabilities only included market-related changes. The credit rating of Rentenbank, and hence that of its liabilities, did not change in 2016 or in previous years.
| Liabilities | |
|
| |
| Dec. 31, 2016 | | Dec. 31, 2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Carrying amount | 55,367.0 | | 52,590.1 | | 2,776.9 | |
| Repayment at maturity | 55,157.1 | | 52,268.9 | | 2,888.2 | |
| Difference | -209.9 | | -321.2 | | 111.3 | |
| Of which capitalization of interest due in the future | -880.8 | | -737.6 | | -143.2 | |
The difference between the carrying amount and the contractual repayment at maturity results from measurement at fair value and, particularly in the case of zero bonds, from the capitalization of interest due in the future.
| (56) | Net gains or losses by measurement category |
| Income Statement | | Other comprehensive income | |
|
| |
| |
| Net gains/losses from fair value and hedge accounting | | Result from available-for-sale instruments | |
| |
| |
| |
| 2016 | | 2015 | | 2016 | | 2015 | |
| € million | | € million | | € million | | € million | |
|
| |
| |
| |
| |
| Held for trading | -1,283.0 | | -183.0 | | 0.0 | | 0.0 | |
| Designated as at fair value | 827.9 | | 647.9 | | 0.0 | | 0.0 | |
| Loans and receivables | 213.3 | | -382.1 | | 0.0 | | 0.0 | |
| Available for sale | -63.7 | | -179.0 | | 11.4 | | -56.4 | |
| Held to maturity | 0.0 | | 0.0 | | 0.0 | | -0.1 | |
| Other liabilities | 70.5 | | 301.1 | | 0.0 | | 0.0 | |
|
| |
| |
| |
| |
| Total | -235.0 | | 204.9 | | 11.4 | | -56.5 | |
| |
| |
| |
| |
| |
| Reconciliation to Note 30 |
Amortized amounts from ineffective hedging relationships are included in fair value measurement as
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part of net gains/losses from fair value and hedge accounting. The amortized amounts relate to hedged items of the loans and receivables and other liabilities categories. A reconciliation of the item ‘fair value measurement’ included in net gains/losses from fair value and hedge accounting to the categories shown here is only possible in aggregate amounts.
Net gains/losses on foreign currency translation of EUR 26.2 million (2015: EUR 5.7 million), set out in Note 30, comprise hedges of EUR -44.6 million (2015: EUR -0.2 million) classified as held for trading and hedged items designated as at fair value of EUR 70.8 million (2015: EUR 5.9 million).
| (57) | Disclosures on the fair value of financial instruments measured at fair value |
The following table provides an overview of the balance sheet classes of the financial instruments measured at fair value, presented by valuation method:
| Dec. 31, 2016 | Fair value € million | | Quoted prices in active markets (Level 1) € million | | Significant observable inputs (Level 2) € million | | Significant unobservable inputs (Level 3) € million | |
|
| |
| |
| |
| |
| Loans and advances to banks | 6,353.0 | | 0.0 | | 4,705.3 | | 1,647.7 | |
| Promissory notes and registered debt securities | 1,015.7 | | 0.0 | | 1,015.7 | | 0.0 | |
| Special promotional loans | 1,548.0 | | 0.0 | | 0.0 | | 1,548.0 | |
| Other | 3,789.3 | | 0.0 | | 3,689.6 | | 99.7 | |
| Loans and advances to customers | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Positive fair values of derivative financial instruments | 6,549.5 | | 0.0 | | 6,549.5 | | 0.0 | |
| Financial investments | 15,857.5 | | 7,236.0 | | 8,348.6 | | 272.9 | |
|
| |
| |
| |
| |
| Total assets | 28,760.0 | | 7,236.0 | | 19,603.4 | | 1,920.6 | |
|
| |
| |
| |
| |
| Liabilities to banks | 512.8 | | 0.0 | | 512.8 | | 0.0 | |
| Liabilities to customers | 1,848.1 | | 0.0 | | 1,435.4 | | 412.7 | |
| Securitized liabilities | 52,331.7 | | 28,821.7 | | 23,069.1 | | 440.9 | |
| Medium-term notes | 30,344.4 | | 12,794.7 | | 17,108.8 | | 440.9 | |
| Global bonds | 16,027.0 | | 16,027.0 | | 0.0 | | 0.0 | |
| Euro commercial paper | 5,901.3 | | 0.0 | | 5,901.3 | | 0.0 | |
| Other | 59.0 | | 0.0 | | 59.0 | | 0.0 | |
| Negative fair values of derivative financial instruments | 7,333.1 | | 0.0 | | 7,333.1 | | 0.0 | |
| Subordinated liabilities | 674.4 | | 0.0 | | 0.0 | | 674.4 | |
|
| |
| |
| |
| |
| Total liabilities | 62,700.1 | | 28,821.7 | | 32,350.4 | | 1,528.0 | |
| | | | | | | | | |
Financial investments do not include participations in two banks and several companies at a total carrying amount of EUR 118.8 million (2015: EUR 118.8 million). They are measured at cost as their fair value cannot be reliably determined. Since the participations are not traded in an active market, no quoted prices are available. A model-based measurement is not possible either as the future cash flows cannot be reliably estimated. There is no intention to dispose of these participations.
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| Dec. 31, 2015 | Fair value
€ million | | Quoted prices in active markets
(Level 1)
€ million | | Significant observable inputs
(Level 2)
€ million | | Significant unobservable inputs
(Level 3)
€ million | |
|
| |
| |
| |
| |
| Loans and advances to banks | 6,904.8 | | 0.0 | | 4,135.9 | | 2,768.9 | |
| Promissory notes and registered debt securities | 1,508.1 | | 0.0 | | 1,508.1 | | 0.0 | |
| Special promotional loans | 2,669.9 | | 0.0 | | 0.0 | | 2,669.9 | |
| Other | 2,726.8 | | 0.0 | | 2,627.8 | | 99.0 | |
| Loans and advances to customers | 2.6 | | 0.0 | | 0.0 | | 2.6 | |
| Positive fair values of derivative financial instruments | 7,238.9 | | 0.0 | | 7,238.9 | | 0.0 | |
| Financial investments | 16,532.9 | | 9,024.7 | | 7,446.9 | | 61.3 | |
|
| |
| |
| |
| |
| Total assets | 30,679.2 | | 9,024.7 | | 18,821.7 | | 2,832.8 | |
|
| |
| |
| |
| |
| Liabilities to banks | 1,002.8 | | 0.0 | | 1,002.8 | | 0.0 | |
| Liabilities to customers | 1,432.7 | | 0.0 | | 203.0 | | 1,229.7 | |
| Securitized liabilities | 50,246.6 | | 24,078.1 | | 26,106.7 | | 61.8 | |
| Medium-term notes | 30,479.5 | | 11,043.5 | | 19,374.2 | | 61.8 | |
| Global bonds | 16,192.5 | | 13,034.6 | | 3,157.9 | | 0.0 | |
| Euro commercial paper | 3,514.4 | | 0.0 | | 3,514.4 | | 0.0 | |
| Other | 60.2 | | 0.0 | | 60.2 | | 0.0 | |
| Negative fair values of derivative financial instruments | 7,152.9 | | 0.0 | | 7,152.9 | | 0.0 | |
| Subordinated liabilities | 662.6 | | 0.0 | | 0.0 | | 662.6 | |
|
| |
| |
| |
| |
| Total liabilities | 60,497.6 | | 24,078.1 | | 34,465.4 | | 1,954.1 | |
|
| |
| |
| |
| |
Since the last reporting date, the following transfers occurred between Levels 1 and 2 of the fair value hierarchy:
| Dec. 31, 2016 € million | | Dec. 31, 2015 € million | |
|
| |
| |
| Transfers from Level 1 to Level 2 | | |
| Financial investments | 1,292.8 | | 1,781.5 | |
| Securitized liabilities | 53.7 | | 4,260.6 | |
| Medium-term notes | 53.7 | | 4,260.6 | |
| Global bonds | 0.0 | | 0.0 | |
| Transfers from Level 2 to Level 1 | | |
| Financial investments | 1,295.7 | | 2,393.9 | |
| Securitized liabilities | 4,665.9 | | 2,651.1 | |
| Medium-term notes | 1,445.3 | | 1,491.0 | |
| Global bonds | 3,220.6 | | 1,160.1 | |
The transfers were made due to the availability or the absence of quoted prices in active markets.
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The following table shows the amounts and results of the financial instruments measured at fair value which were determined using valuation techniques and include significant unobservable inputs (Level 3). The changes are presented by class:
| Loans and advances to banks | | Loans and advances to customers
| | Financial Investment | |
|
| |
| |
| |
| 2016 | Special promotional loans
€ million | | Other
€ million | | € million | | € million | |
|
| |
| |
| |
| |
Fair value
as of Jan. 1 | 2,669.9 | | 99.0 | | 2.6 | | 61.3 | |
| Transfers to Level 3 | 0.0 | | 0.0 | | 0.0 | | 121.7 | |
| Transfers from Level 3 | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Gains and losses recognized | | |
| in net gains/losses on fair value and hedge accounting (income statement) | 23.9 | | 0.7 | | 2.2 | | 4.5 | |
| in the result from available-for-sale instruments (other comprehensive income) | 0.0 | | 0.0 | | 0.0 | | 0.5 | |
| Additions from purchases | 0.0 | | 0.0 | | 0.0 | | 84.5 | |
| Disposals from sales | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Settlements | 1,146.4 | | 0.0 | | 4.8 | | 0.0 | |
| Change in accrued interest | 0.6 | | 0.0 | | 0.0 | | 0.4 | |
|
| |
| |
| |
| |
Fair value
as of Dec. 31 | 1,548.0 | | 99.7 | | 0.0 | | 272.9 | |
| Unrealized gains and losses recognized in the income statement relating to assets held as of Dec. 31 | 14.0 | | 0.9 | | 0.0 | | 4.5 | |
| 2016 | Liabilities to customers
€ million | | Securitized
liabilities
Medium term notes
€ million | | Subordinated liabilities
€ million | |
|
| |
| |
| |
| Fair value as of Jan. 1 | 1,229.7 | | 61.8 | | 662.6 | |
| Transfers to Level 3 | 40.4 | | 339.2 | | 0.0 | |
| Transfers from Level 3 | 1,010.0 | | 0.0 | | 0.0 | |
| Gains and losses recognized | | |
| in net gains/losses from fair value and hedge accounting (income statement) | -13.0 | | -39.7 | | -12.2 | |
| in the result from available-for-sale instruments (other comprehensive income) | 0.0 | | 0.0 | | 0.0 | |
| New issues | 139.6 | | 0.0 | | 0.0 | |
| Settlements | 0.0 | | 0.0 | | 0.0 | |
| Change in accrued interest | 0.0 | | 0.2 | | -0.4 | |
|
| |
| |
| |
| Fair value as of Dec. 31 | 412.7 | | 440.9 | | 674.4 | |
| Unrealized gains and losses recognized in the income statement relating to liabilities held as of Dec. 31 | -13.0 | | -39.7 | | -12.3 | |
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| Loans and advances to banks | | Loans and advances to customers | | Financial investments | | |
|
| |
| |
| | |
| 2015 | Special promotional loans
€ million | | Other
€ million | | € million | | € million | | € million | | € million | |
|
| |
| |
| |
| |
| |
| |
| Fair value as of Jan. 1 | 3,420.9 | | 99.0 | | | | 0.4 | | | | 44.0 | |
| Transfers to Level 3 | 0.0 | | 0.0 | | | | 0.0 | | | | 55.2 | |
| Transfers from Level 3 | 0.0 | | 0.0 | | | | 0.0 | | | | 35.9 | |
| Gains and losses recognized | | | | | | | | | |
in net gains/losses from fair value and hedge accounting
(income statement) | 8.4 | | 0.0 | | | | 2.4 | | | | -0.6 | |
in the result from available-for-sale instruments
(other comprehensive income) | 0.0 | | 0.0 | | | | 0.0 | | | | -1.4 | |
| Additions from purchases | 0.0 | | 0.0 | | | | 0.0 | | | | 0.0 | |
| Disposals from sales | 0.0 | | 0.0 | | | | 0.0 | | | | 0.0 | |
| Settlements | 758.8 | | 0.0 | | | | 0.2 | | | | 0.0 | |
| Change in accrued interest | -0.6 | | 0.0 | | | | 0.0 | | | | 0.0 | |
|
| |
| |
| |
| |
| |
| |
| Fair value as of Dec. 31 | 2,669.9 | | 99.0 | | | | 2.6 | | | | 61.3 | |
| Unrealized gains and losses recognized in the income statement relating to assets held as of Dec. 31 | 4.5 | | 0.0 | | | | 2.4 | | | | -0.6 | |
| 2015 | Liabilities to customers
€ million | | Securitized
liabilities
Medium term notes
€ million | | Subordinated liabilities
€ million | |
|
| |
| |
| |
| Fair value as of Jan. 1 | 1,305.1 | | 0.0 | | 623.0 | |
| Transfers to Level 3 | 0.0 | | 0.0 | | 0.0 | |
| Transfers from Level 3 | 0.0 | | 0.0 | | 0.0 | |
| Gains and losses recognized | | |
| in net gains/losses from fair value and hedge accounting (income statement) | -0.9 | | 4.5 | | -39.7 | |
| in the result from available-for-sale instruments (other comprehensive income) | 0.0 | | 0.0 | | 0.0 | |
| New issues | 14.0 | | 65.8 | | 0.0 | |
| Settlements | 89.9 | | 0.0 | | 0.0 | |
| Change in accrued interest | -0.4 | | 0.5 | | -0.1 | |
|
| |
| |
| |
| Fair value as of Dec. 31 | 1,229.7 | | 61.8 | | 662.6 | |
| Unrealized gains and losses recognized in the income statement relating to liabilities held as of Dec. 31 | -2.6 | | 4.5 | | -39.7 | |
Transfers are always recognized at the beginning of the reporting period, irrespective of the actual time of the event that triggered the transfer.
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The following is a summary of the unobservable inputs used in the valuation of the Level 3 instruments. Unless otherwise stated, the results are recognized through profit or loss in net gains/losses from fair value and hedge accounting:
Dec. 31, 2016 |
Fair value
€ million
| |
Valuation technique
| |
Significant
unobservable inputs
| | Range
(weighted average)
in bps | | Seenario +40bps
€ million | |
|
| |
| |
| |
| |
| |
| Loans and advances to banks | 1,647.7 | | Discounted cash flow | | Credit spread for loans | | -5 to 59 (8.2) | | -10.8 | |
| Special promotional loans | 1548.0 | | Discounted cash flow | | Credit spread for loans | | -5 to 7 (4.9) | | -10.6 | |
| Other | 99.7 | | Discounted cash flow | | Credit spread for loans | | 59 to 59 (59) | | -0.2 | |
| Financial assets | 8.5 | | Discounted cash flow | | Credit spread for bonds with indemnity agreements | | 14 to 14 (14) | | 0.0 | |
Of which net gains/losses from fair value and hedge accounting
(income statement) | 8.5 | | Discounted cash flow | | Credit spread for loans | | 14 to 14 (14) | | 0.0 | |
| Financial investments | 264.4 | | Bloomberg | | significant portion of unobservable inputs in relation to the Bloomberg price | | | | -6.7 | |
| Of which result from available-for-sale instruments (other comprehensive income) | 264.4 | | Bloomberg | | significant portion of unobservable inputs in relation to the Bloomberg price | | | | -6.7 | |
| Liabilities to customers | 412.7 | | Discounted cash flow | | Credit spread for own issues in EUR for terms to maturity of > 20 years | | -13 to -12 (-12.9) | | 59.5 | |
| | | Discounted cash flow | | Credit spread for own issues in JPY | | 15 to 15 (15) | | 0.4 | |
| Securitized liabilities | 440.9 | | Discounted cash flow | | Credit spread for own issues | | -32 to 30 (19.4) | | 1.2 | |
| Medium-term notes | 440.9 | | Discounted cash flow | | Credit spread for own issues in BRL | | 30 to 30 (30) | | 1.2 | |
| | | Discounted cash flow | | Credit spread for own issues in JPY | | -32 to 22 (-10.6) | | 0.0 | |
| Subordinated liabilities | 674.4 | | Discounted cash flow | | Credit spread for subordinated issues | | -19 to 34 (5.1) | | 25.5 | |
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Dec. 31, 2015 |
Fair value
€ million
| |
Valuation technique
| |
Significant
unobservable inputs
| | Range
(weighted average)
in bps | | Seenario +40bps
€ million | |
|
| |
| |
| |
| |
| |
| Loans and advances to banks | 2,768.9 | | Discounted cash flow | | Credit spread for loans | | -10 to 68 (5.1) | | -20.3 | |
| | Special promotional loans | 2,669.9 | | Discounted cash flow | | Credit spread for loans | | -10 to 68 (5.8) | | -19.7 | |
| | Other | 99.0 | | Discounted cash flow | | Credit spread for loans | | 64 to 64 (64) | | -0.6 | |
| Loans and advances to customers | 2.6 | | Discounted cash flow | | Credit spread for loans | | 1290 to 1290 (1290) | | 0.0 | |
| Financial assets | 8.4 | | Discounted cash flow | | Credit spread for bonds with indemnity agreements | | -12 to -12 (-12) | | 0.0 | |
| Of which net gains/losses from fair value and hedge accounting (income statement) | 8.4 | | Discounted cash flow | | Credit spread for loans | | | | 0.0 | |
| Financial assets | 52.9 | | Bloomberg | | significant portion of unobservable inputs in relation to the Bloomberg price | | | | -0.7 | |
| | Of which result from available-for-sale instruments (other comprehensive income) | 52.9 | | | | | | | | -0.7 | |
| | Liabilities to customers | 1,229.7 | | Discounted cash flow | | Credit spread for own issues in EUR for terms to maturity of > 9 years | | -24 to 3 (-18.3) | | 100.6 | |
| | | | | Discounted cash flow | | Credit spread for own issues in NZD | | 64 to 64 (64) | | 0.3 | |
| Securitized liabilities | 61.8 | | Discounted cash flow | | Credit spread for own issues in BRL | | 32 to 32 (32) | | 1.0 | |
| | Medium-term notes | 61.8 | | Discounted cash flow | | Credit spread for own issues in BRL | | 32 to 32 (32) | | 1.0 | |
| Subordinated liabilities | 662.6 | | Discounted cash flow | | Credit spread for subordinated issues | | -7 to 41 (5) | | 26.0 | |
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| (58) | Disclosure of the fair value of financial instruments measured at amortized cost |
For financial instruments not carried at fair value in the balance sheet, the carrying amount is compared with the fair value.
| Dec. 31, 2016 | | Dec. 31, 2015 | | |
|
| |
| | |
| Fair value
€ million | | Carrying amount
€ million | | Difference
€ million | | Fair value
€ million | | Carrying amount
€ million | | Difference
€ million | |
|
| |
| |
| |
| |
| |
| |
| Cash and balances with central banks | 6.5 | | 6.5 | | 0.0 | | 21.1 | | 21.1 | | 0.0 | |
| Loans and advances to banks | 51,762.8 | | 51,158.0 | | 604.8 | | 48,900.2 | | 48,552.4 | | 347.8 | |
| Loans and advances to customers | 7,724.5 | | 7,496.8 | | 227.7 | | 6,553.4 | | 6,378.3 | | 175.1 | |
| Fair value changes of hedged items in a portfolio hedge | 1,258.6 | | 1,258.6 | | 0.0 | | 1,298.8 | | 1,298.8 | | 0.0 | |
| Financial investments | 3,466.2 | | 3,278.3 | | 187.9 | | 3,445.3 | | 3,260.5 | | 184.8 | |
| Other assets | 2,918.3 | | 2,918.3 | | 0.0 | | 2,930.4 | | 2,930.4 | | 0.0 | |
|
| |
| |
| |
| |
| |
| |
| Total assets | 67,136.9 | | 66,116.5 | | 1,020.4 | | 63,149.2 | | 62,441.5 | | 707.7 | |
| |
| |
| |
| |
| |
| |
| |
| Liabilities to banks | 1,962.7 | | 1,935.7 | | 27.0 | | 1,856.5 | | 1,826.5 | | 30.0 | |
| Liabilities to customers | 2,394.0 | | 2,340.9 | | 53.1 | | 3,047.0 | | 2,975.6 | | 71.4 | |
| Securitized liabilities | 21,674.4 | | 21,500.1 | | 174.3 | | 21,428.3 | | 21,298.3 | | 130.0 | |
| Subordinated liabilities | 66.7 | | 66.3 | | 0.4 | | 67.2 | | 66.8 | | 0.4 | |
| Other liabilities | 2,622.5 | | 2,622.5 | | 0.0 | | 2,755.5 | | 2,755.5 | | 0.0 | |
|
| |
| |
| |
| |
| |
| |
| Total liabilities | 28,720.3 | | 28,465.5 | | 254.8 | | 29,154.5 | | 28,922.7 | | 231.8 | |
| |
| |
| |
| |
| |
| |
| |
Positive differences for assets and negative differences for liabilities represent unrealized gains, while negative differences for assets and positive differences for liabilities represent unrealized losses.
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The fair values disclosed are assigned to the following hierarchy levels:
| Dec. 31, 2016 | | |
| Fair value
€ million | | Quoted prices on active markets
(Level 1)
€ million | | Significant observable inputs
(Level 2)
€ million | | Significant unobservable inputs
(Level 3)
€ million | |
|
| |
| |
| |
| |
| Loans and advances to banks | 51,762.8 | | 0.0 | | 11,495.7 | | 40,267.1 | |
| Promissory notes and registered debt securities | 11,525.4 | | 0.0 | | 11,485.9 | | 39.5 | |
| Special promotional loans | 40,227.6 | | 0.0 | | 0.0 | | 40,227.6 | |
| Other | 9.8 | | 0.0 | | 9.8 | | 0.0 | |
| Loans and advances to customers | 7,724.5 | | 0.0 | | 7,528.2 | | 196.3 | |
| Fair value changes of hedged items in a portfolio hedge | 1,258.6 | | 0.0 | | 1,258.6 | | 0.0 | |
| Financial investments | 3,466.2 | | 1,226.4 | | 2,082.3 | | 157.5 | |
| Investment property | 28.7 | | 0.0 | | 0.0 | | 28.7 | |
|
| |
| |
| |
| |
| Total assets | 64,240.8 | | 1,226.4 | | 22,364.8 | | 40,649.6 | |
| |
| |
| |
| |
| |
| Liabilities to banks | 1,962.7 | | 0.0 | | 1,962.7 | | 0.0 | |
| Liabilities to customers | 2,394.0 | | 0.0 | | 2,353.8 | | 40.2 | |
| Securitized liabilities | 21,674.4 | | 18,491.1 | | 3,183.3 | | 0.0 | |
| Medium-term notes | 21,674.0 | | 18,491.1 | | 3,182.9 | | 0.0 | |
| Global bonds | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Euro commercial paper | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Other | 0.4 | | 0.0 | | 0.4 | | 0.0 | |
| Subordinated liabilities | 66.7 | | 0.0 | | 0.0 | | 66.7 | |
|
| |
| |
| |
| |
| Total liabilities | 26,097.8 | | 18,491.1 | | 7,499.8 | | 106.9 | |
| |
| |
| |
| |
| |
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| Dec. 31, 2015 | | |
| Fair value
€ million | | Quoted prices on active markets
(Level 1)
€ million | | Significant observable inputs
(Level 2)
€ million | | Significant unobservable inputs
(Level 3)
€ million | |
|
| |
| |
| |
| |
| Loans and advances to banks | 48,900.2 | | 0.0 | | 11,509.0 | | 37,391.2 | |
| Promissory notes and registered debt securities | 11,749.4 | | 0.0 | | 11,506.6 | | 242.8 | |
| Special promotional loans | 37,148.4 | | 0.0 | | 0.0 | | 37,148.4 | |
| Other | 2.4 | | 0.0 | | 2.4 | | 0.0 | |
| Loans and advances to customers | 6,553.4 | | 0.0 | | 3,598.8 | | 2,954.6 | |
| Fair value changes of hedged items in a portfolio hedge | 1,298.8 | | 0.0 | | 1,298.8 | | 0.0 | |
| Financial investments | 3,445.3 | | 1,193.4 | | 2,203.1 | | 48.8 | |
| Investment property | 20.3 | | 0.0 | | 0.0 | | 20.3 | |
|
| |
| |
| |
| |
| Total assets | 60,218.0 | | 1,193.4 | | 18,609.7 | | 40,414.9 | |
| | | | | | | | | |
| Liabilities to banks | 1,856.5 | | 0.0 | | 1,702.9 | | 153.6 | |
| Liabilities to customers | 3,047.0 | | 0.0 | | 2,196.3 | | 850.7 | |
| Securitized liabilities | 21,428.3 | | 12,411.8 | | 8,983.3 | | 33.2 | |
| Medium-term notes | 21,428.0 | | 12,411.8 | | 8,983.0 | | 33.2 | |
| Global bonds | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Euro commercial paper | 0.0 | | 0.0 | | 0.0 | | 0.0 | |
| Other | 0.3 | | 0.0 | | 0.3 | | 0.0 | |
| Subordinated liabilities | 67.2 | | 0.0 | | 0.0 | | 67.2 | |
|
| |
| |
| |
| |
| Total liabilities | 26,399.0 | | 12,411.8 | | 12,882.5 | | 1,104.7 | |
| |
| |
| |
| |
| |
| Notional amounts | | Fair values
positive | | Fair values
negative | |
|
| |
| |
| |
| Dec. 31,
2016
€ million | | Dec. 31,
2015
€ million | | Dec. 31,
2016
€ million | | Dec. 31,
2015
€ million | | Dec. 31,
2016
€ million | | Dec. 31,
2015
€ million | |
|
| |
| |
| |
| |
| |
| |
| Interest rate risks | 104,715.9 | | 103,207.9 | | 1,604.1 | | 1,918.7 | | 5,452.8 | | 5,026.4 | |
| Currency risks | 56,860.1 | | 53,674.1 | | 4,945.4 | | 5,313.6 | | 1,880.3 | | 2,126.5 | |
| Share price risk and other price risks | 0.0 | | 30.0 | | 0.0 | | 6.6 | | 0.0 | | 0.0 | |
|
| |
| |
| |
| |
| |
| |
| Total | 161,576.0 | | 156,912.0 | | 6,549.5 | | 7,238.9 | | 7,333.1 | | 7,152.9 | |
| |
| |
| |
| |
| |
| |
| |
Breakdown by counterparty:
| Notional amounts | | Fair values
positive | | Fair values
negative | | |
|
| |
| |
| | |
| Dec. 31,
2016
€ million | | Dec. 31,
2015
€ million | | Dec. 31,
2016
€ million | | Dec. 31,
2015
€ million | | Dec. 31,
2016
€ million | | Dec. 31,
2015
€ million | |
|
| |
| |
| |
| |
| |
| |
| Banks in OECD countries | 150,889.2 | | 139,143.8 | | 6,278.2 | | 6,470.5 | | 6,692.2 | | 6,295.5 | |
| Non-banks in OECD countries | 10,226.3 | | 16,894.8 | | 271.3 | | 767.8 | | 612.5 | | 796.5 | |
| Public-sector entities in OECD countries | 460.5 | | 873.4 | | 0.0 | | 0.6 | | 28.4 | | 60.9 | |
|
| |
| |
| |
| |
| |
| |
| Total | 161,576.0 | | 156,912.0 | | 6,549.5 | | 7,238.9 | | 7,333.1 | | 7,152.9 | |
| |
| |
| |
| |
| |
| |
| |
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The investment of capital in the Capital Investment segment is decided by the Board of Managing Directors. Anticipated changes in interest rates as well as the maturity profile are of major significance in this context.
In accordance with IAS 1.135, disclosures on regulatory own funds are to be made in the consolidated financial statements.
The Group’s regulatory own funds are required to be determined on the basis of applicable EU law, i.e. in accordance with the Capital Requirements Regulation (CRR – the regulation on the implementation of the capital adequacy requirements under Basel III). This is due to the adoption of the Capital Requirements Directive IV (CRD IV) which transposed the capital requirement framework into national law. The Group’s regulatory own funds were determined on the basis of the IFRS consolidated financial statements using the scope of consolidation as applied in the financial statements. This scope of consolidation is equivalent to the regulatory scope of consolidation.
Eligible own funds comprise Tier 1 and Tier 2 capital. The following table shows the IFRS amounts of the eligible own funds as of December 31, 2016:
| Dec. 31, 2016
€ million | | Dec. 31, 2015
€ million | |
|
| |
| |
| Subscribed capital pursuant to Art. 26(1) point (a) CRR | 135.0 | | 135.0 | |
| Retained earnings pursuant to Art. 26(1) point (c) CRR | 3,475.1 | | 3,046.2 | |
Deductions from Common Equity Tier 1
(Difference portfolio valuation allowance:
as of reporting date compared to the previous year) | 0.0 | | -1.6 | |
Revaluation reserve pursuant to Art. 26(1) point (d) CRR
in conjunction with Art. 468 CRR (transitional provisions) | 37.0 | | 44.9 | |
Measurement effects from own credit risk from liabilities
prudential filters, own credit pursuant to Art. 33(1) point b) CRR | 222.4 | | 285.8 | |
Measurement effects from own credit risk from derivative liabilities
prudential filters, own credit pursuant to Art. 33(1) point (b) CRR | -0.1 | | -1.5 | |
Additional value adjustments pursuant to Art. 34 CRR
(prudent valuation) | -353.0 | | -312.0 | |
| Intangible assets pursuant to Art. 37 CRR | -17.2 | | -17.8 | |
|
| |
| |
| Tier 1 capital | 3,499.2 | | 3,179.0 | |
|
| |
| |
| Subordinated liabilities pursuant to Art. 62 point (a) CRR | 44.1 | | 46.1 | |
| Subordinated liabilities pursuant to Art. 484 CRR | 339.7 | | 413.4 | |
| Credit risk adjustment pursuant to Art. 110 (1) CRR | 0.0 | | 16.3 | |
|
| |
| |
| Tier 2 capital | 383.8 | | 475.8 | |
|
| |
| |
| Eligible own funds | 3,883.0 | | 3,654.8 | |
|
| |
| |
Under the credit-risk standardized approach, business partner ratings are used and a CVA charge is covered by own funds. In accordance with the regulatory requirements, the latter takes into account a deterioration in the credit quality of derivative counterparties. This leads to a corresponding increase in risk-weighted assets.
As in the prior year, Rentenbank met the regulatory minimum capital requirements at all times in the reporting year. The following key figures were calculated for the Group in accordance with the CRR as of the reporting date:
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| Dec. 31, 2016
% | | Dec. 31, 2015
% | |
|
| |
| |
| Common Equity Tier 1 capital ratio pursuant to CRR | 23.2 | | 20.2 | |
| Tier 1 capital ratio pursuant to CRR | 23.2 | | 20.2 | |
| Total capital ratio pursuant to CRR | 25.7 | | 23.2 | |
| (62) | Country-by-country reporting |
The requirements set out in Article 89 of Directive 2013/36/EU (CRD IV) were transposed into German law by means of Section 26a (1) sentence 2 et seq. of the German Banking Act (Kreditwesengesetz – KWG).
According to this section, CRR institutions are required to disclose the following information on a consolidated basis, specified by EU member state or by third country in which they have establishments or their registered office:
| – | Name(s), nature of activities and geographical location |
| – | Number of employees on a full-time equivalent basis |
| – | Profit or loss before tax |
| – | Public subsidies received |
In addition, CRR institutions are required to disclose their return on assets pursuant to Section 26a (1) sentence 4 KWG.
Name and nature of activities
Landwirtschaftliche Rentenbank, a credit institution, and the fully consolidated subsidiaries as financial institutions, all with their registered offices in Frankfurt am Main, Germany, do not have branch offices. Therefore, all the information presented in the annual financial statements in accordance with Section 26a (1) sentence 2 KWG relates solely to Germany.
Turnover is defined as the total of the following income statement items (in accordance with IFRS):
| – | Net fee and commission income |
| – | Other operating income/expenses |
| – | Net gains/losses on financial investments |
| – | Net gains/losses from fair value and hedge accounting |
The turnover determined using this method amounted to EUR 93.2 million in the fiscal year 2016 (2015: EUR 529.2 million).
Since the combined revenues of the two subsidiaries LR Beteiligungsgesellschaft mbH, Frankfurt am Main, (LRB) and DSV Silo- und Verwaltungsgesellschaft mbH, Frankfurt am Main, (DSV) account for less than 1% of the Group’s operating profit before consolidation, their revenues are not presented separately due to immateriality.
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The number of employees is stated on an average full-time equivalent basis pursuant to Section 267 (5) HGB.
Rentenbank employed 278 (2015: 268) employees on average in 2016, of which 221 (2015: 218) were full-time employees. The two subsidiaries LRB and DSV have no employees of their own.
Profit before tax and tax on profit or loss
Profit before tax for the fiscal year 2016 amounted to EUR 5.3 million (2015: EUR 445.7 million), tax on profit or loss amounted to EUR -1.2 million (2015: EUR -2.6 million).
The Federal Republic of Germany has an institutional liability (Anstaltslast) and has issued a guarantee for the liabilities of Rentenbank (refinancing guarantee). Rentenbank has not received public subsidies.
In accordance with Section 26a (1) sentence 4 KWG, the return on assets is calculated as the ratio of the Group’s net income after tax under IFRS and the Group’s total assets under IFRS. It was 0.00% as of December 31, 2016 (2015: 0.48%).
| (63) | Assets pledged and received as collateral |
The Group uses derivatives exclusively to hedge existing and foreseeable market risks. They are entered into only with counterparties from EU/OECD countries. Rentenbank has concluded master netting agreements with these counterparties and entered into collateral agreements based on these netting agreements. These agreements provide for cash deposits denominated exclusively in euros to secure the positive fair values from derivatives in excess of the contractual allowance amounts and minimum transfer amounts. In return, Rentenbank undertakes to provide cash deposits denominated in euros in the case of negative fair values if these exceed the corresponding allowance and minimum transfer amounts. The EONIA rate is applied daily to the collateral provided and received. Interest payments are made on a monthly basis.
Positive and negative fair values of derivative financial instruments are not offset pursuant to IAS 32.42, but reported on a gross basis.
| Positive fair values | | Negative fair values | |
|
| |
| |
| Dec. 31,
2016 | | Dec. 31,
2015 | | Dec. 31,
2016 | | Dec. 31,
2015 | |
| € million | | € million | | € million | | € million | |
|
| |
| |
| |
| |
| Gross carrying amount | 6,549.5 | | 7,238.9 | | 7,333.1 | | 7,152.9 | |
| Cash collateral from collateral management | 2,622.5 | | 2,755.5 | | 2,918.3 | | 2,930.4 | |
The following assets are registered as collateral in the cover register for covered bonds in the amount of EUR 22.7 million (2015: EUR 463.1 million):
| Dec. 31,
2016 | | Dec. 31,
2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Loans and advances to banks | 96.1 | | 924.1 | | -828.0 | |
| Loans and advances to customers | 0.0 | | 0.0 | | 0.0 | |
| |
| |
| |
| |
In order to ensure solvency, the freely available refinancing potential amounted to EUR 20,207 million in nominal terms (2015: EUR 20,010 million) as of the balance sheet date.
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As of December 31, 2016, receivables from reverse repo transactions in connection with General Collateral Pooling amounted to EUR 2,265 million (2015: EUR 1,502 million) due from Eurex Clearing AG. In this context, Rentenbank received collateral from the basket of securities with a market value of EUR 2,385 million (2015: EUR 1,611 million) and a nominal amount of
EUR 2,207 million (2015: EUR 1,508 million). Rentenbank deposited securities with a collateral value of EUR 700 million (2015: EUR 600 million) and a notional amount of EUR 688 million (2015: EUR 587 million) as collateral at Eurex Clearing AG.
In addition, Rentenbank provided securities from its own portfolio as collateral with a collateral value of EUR 16 million (2015: EUR 16 million) and a notional amount of EUR 13 million (2015: EUR 13 million).
| (64) | Contingent liabilities and other commitments |
| Dec. 31,
2016 | | Dec. 31,
2015 | | Change in | |
| € million | | € million | | € million | |
|
| |
| |
| |
| Contingent liabilities | | |
| Liabilities from guarantees and indemnity agreements | 1.0 | | 1.3 | | -0.3 | |
| Other commitments | | |
| Irrevocable loan commitments | 990.0 | | 841.7 | | 148.3 | |
|
| |
| |
| |
| Total | 991.0 | | 843.0 | | 148.0 | |
| |
| |
| |
| |
Contingent liabilities only consist of deficiency guarantees for loans subject to interest rate reduction. Rentenbank has counter-guarantees granted by the Federal Government that fully collateralize the deficiency guarantees. Guarantees are not expected to be called upon.
Other commitments include irrevocable loan commitments from the special promotional business. These commitments will be drawn down largely in 2017.
| (65) | List of participations |
The following table provides a full list of all the participations of the Rentenbank Group pursuant to Section 313 (2) HGB.
| Name of company | Share of
capital
in % | | Equity in
EUR
million | | Result in
EUR
million | |
|
|
|
|
|
|
|
| |
| I. | Companies included in the consolidated financial statements | | | | | | |
|
|
|
|
|
|
|
| |
| | Fully-consolidated subsidiaries | | | | | | |
| | | LR-Beteiligungsgesellschaft mbH, Frankfurt am Main | 100.0 | | 121.9 | | -0.5 | |
| | | DSV Silo- und Verwaltungsgesellschaft mbH,
Frankfurt am Main | 100.0 | | 13.4 | | 2.2 | |
| II. | Companies not included in the consolidated financial statements | | | | | | |
|
|
|
|
|
|
|
| |
| | Subsidiaries | | | | | | |
| | | Getreide-Import-Gesellschaft mbH, Frankfurt am Main1) | 100.0 | | 7.7 | | 0.0 | |
| | Associates | | |
| | | Deutsche Bauernsiedlung – Deutsche Gesellschaft für | | |
| | | Landentwicklung (DGL) GmbH, Frankfurt am Main2) | 25.1 | | 7.0 | | -0.2 | |
| | Other equity holdings | | |
| | | LAND-DATA Beteiligungs GmbH, Hanover2) | 10.9 | | 1.7 | | 0.4 | |
| | | LAND-DATA GmbH, Hanover2) | 10.9 | | 4.4 | | 0.2 | |
| | | Landgesellschaft Mecklenburg-Vorpommern mbH, Leezen2) | 9.8 | | 45.6 | | 3.2 | |
| | | Niedersächsische Landgesellschaft mbH, Hanover2) | 6.3 | | 140.4 | | 26.3 | |
| | | Landgesellschaft Sachsen-Anhalt mbH, Magdeburg2) | 5.5 | | 61.6 | | 9.3 | |
| | | Landgesellschaft Schleswig-Holstein mbH, Kiel2) | 3.2 | | 69.1 | | 9.8 | |
| | | DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main2) | 2.9 | | 8,008.0 | | 224.0 | |
| 1) A profit and loss transfer agreement is in place with the company |
| 2) Data as of December 31, 2015 |
The Group structure provides for limitations between the subsidiaries LRB, DSV, and GIG in terms of funding and transfer of assets. Approval by Rentenbank (shareholder) is required in individual cases.
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Additional disclosures on the consolidated companies and associates
The participations held in Getreide-Import-Gesellschaft mbH, Frankfurt am Main, and Deutsche Bauernsiedlung – Deutsche Gesellschaft für Landentwicklung (DGL) GmbH, Frankfurt am Main, were not included in the consolidated financial statements due to immateriality. The remaining companies in which Rentenbank holds interests are neither controlled by Rentenbank nor can Rentenbank exercise significant influence over them. Therefore, the interests held in these companies are reported as financial investments.
The currently available financial information pursuant to HGB of the associate Deutsche Bauernsiedlung – Deutsche Gesellschaft für Landentwicklung (DGL) GmbH, Frankfurt am Main, can be summarized as follows:
| Dec. 31,
2016 | | Dec. 31,
2015 | |
| € thousand | | € thousand | |
|
| |
| |
| Assets | 19,513.1 | | 19,907.5 | |
| Liabilities | 12,532.5 | | 12,696.8 | |
| Net income/loss | -0.2 | | -0.2 | |
| (66) | Related party disclosures |
In accordance with IAS 24, transactions between related parties and the Rentenbank Group must be disclosed. Related parties are the members of the Board of Managing Directors and of the Board of Supervisory Directors, including dependents. Furthermore, the Group’s related parties include the Federal Ministry of Food and Agriculture, the subsidiary not included in the consolidated financial statements (Getreide-Import-Gesellschaft mbH, Frankfurt am Main), as well as the associate not accounted for using the equity method (Deutsche Bauernsiedlung – Deutsche Gesellschaft für Landentwicklung GmbH, Frankfurt am Main).
The following transactions were carried out with the related parties:
| Board of Managing Directors | | Subsidiaries | | Associates | |
|
| |
| |
| |
| Dec. 31, 2016 | | Dec. 31, 2015 | | Dec. 31, 2016 | | Dec. 31, 2015 | | Dec. 31, 2016 | | Dec. 31, 2015 | |
| € thousand | | € thousand | | € thousand | | € thousand | | € thousand | | € thousand | |
|
| |
| |
| |
| |
| |
| |
| Deposits | 423.3 | | 630.8 | | 8,785.7 | | 8,882.4 | | 496.8 | | 565.4 | |
The above deposits are unsecured and bear floating-rate interest. The deposits by the Board of Managing Directors concern deposits held in current accounts and investment accounts and are subject to the generally applicable terms and conditions for Rentenbank employees. Current account deposits are payable on demand, deposits on investment accounts are payable on a semi-annual basis. Loan and securities transactions were not entered into.
On the basis of the management service agreement between GIG and the Group, the Group received income of EUR 99.3 thousand (2015: EUR 87.0 thousand) for the fiscal year 2016. The Group received EUR 1.7 thousand (2015: EUR 1.5 thousand) for internal audit services in connection with current audit activities at GIG. The Group had liabilities from obligations related to pension plan deficits in the amount of EUR 121.0 thousand (2015: EUR 97.7 thousand) towards GIG. Due to a profit and loss transfer agreement, the Group absorbed the net loss of GIG in the amount of EUR 106.7 thousand (2015: EUR 75.5 thousand).
Provisions of EUR 6.1 million (2015: EUR 6.2 million) relate to the contractual obligation of the Group to cover pension benefit payments of Deutsche Bauernsiedlung – Deutsche Gesellschaft für Landentwicklung (DGL) GmbH, Frankfurt am Main, which is currently in liquidation.
On the basis of a service agreement with DGL, the Group received income in the amount of EUR 24.6 thousand (2015: EUR 24.6 thousand).
The Group did not enter into any transactions with the members of the Board of Supervisory Directors.
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Rentenbank is subject to the legal supervision of the German Federal Ministry of Food and Agriculture (the supervisory authority), which makes its decisions in concert with the German Federal Ministry of Finance. The supervisory authority ensures that the operations of Rentenbank adhere to public interest in the promotion of agriculture and rural areas, and that the bank’s activities are in compliance with laws and the bank’s statutes.
As in the previous year, no significant transactions were carried out in 2016 with the supervisory authority or with companies that are controlled by the supervisory authority or over which the supervisory authority exercises significant influence.
The following remuneration was determined for the individual members of the Board of Managing Directors in the fiscal year 2016
| Fixed remuneration | | Variable remuneration | | Other remuneration | | Total remuneration | |
| |
| |
| |
|
2016 | | 2015 | | 2016 | | 2015 | | 2016 | | 2015 | | 2016 | | 2015 |
€ thousand | | € thousand | | € thousand | | € thousand | | € thousand | | € thousand | | € thousand | | € thousand |
|
| |
| |
| |
| |
| |
| |
| |
| |
| Hans Bernhardt | 700.0 | | 530.0 | | 120.0 | | 235.0 | | 41.2 | | 41.1 | | 861.2 | | 806.1 | |
| Dr. Horst Reinhardt | 700.0 | | 530.0 | | 120.0 | | 235.0 | | 27.0 | | 26.6 | | 847.0 | | 791.6 | |
| Imke Ettori** | 300.0 | | 400.0 | | 0.0 | | 100.0 | | 273.9 | | 11.8 | | 573.9 | | 511.8 | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| Total | 1,700.0 | | 1,460.0 | | 240.0 | | 570.0 | | 342.1 | | 79.5 | | 2,282.1 | | 2,109.5 | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| * As a result of the change in the remuneration system (effective as from the fiscal year 2016), the figures for Mr. Bernhardt and Dr. Reinhardt each include a fixed one-off payment totaling EUR 170.0 thousand |
| ** Member until September 30, 2016 |
Remuneration is classified exclusively as current benefits since they are paid within twelve months after the end of the fiscal year. A portion of 40% of the variable remuneration for the fiscal year 2015 was spread out over a period of three years and will be paid from 2017 to 2019, provided that the relevant conditions are met.
The pension obligations due to the members of the Board of Managing Directors amounted to EUR 10,575.7 thousand as of December 31, 2016 (2015: EUR 10,052.7 thousand). The portion of the additions to pension provisions for the members of the Board of Managing Directors classified as personnel expenses amounted to EUR 739.4 thousand in the fiscal year 2016 (2015: EUR 745.9 thousand).
Pension and other obligations to the former members of the Board of Managing Directors and former managing directors as well as their surviving dependents totaled EUR 19,282.6 thousand (2015: EUR 19,508.2 thousand) as of December 31, 2016. Benefits and other remuneration paid in the reporting period amounted to EUR 1,334.9 thousand (2015: EUR 1,311.8 thousand).
In accordance with the remuneration regulations, the Chairman of the Board of Supervisory Directors receives a fixed remuneration of EUR 30.0 thousand (2015: EUR 30.0 thousand), his Deputy Chairman EUR 20.0 thousand (2015: EUR 20.0 thousand) and all other members of the Board of Supervisory Directors receive basic annual remuneration of EUR 10.0 thousand each (2015: EUR 10.0 thousand). In addition, the members of the Board of Supervisory Directors who are members of a committee receive remuneration of EUR 2.0 thousand (2015: EUR 2.0 thousand) and members who chair a committee EUR 4.0 thousand (2015: EUR 4.0 thousand).
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The total remuneration of the Board of Supervisory Directors in the year under review amounted to EUR 282.5 thousand (2015: EUR 292.5 thousand), including VAT.
| Membership | | Remuneration | |
| |
|
2016
| |
2015
| | 2016
€ thousand | | 2015
€ thousand |
| |
| |
| |
|
| Joachim Rukwied | Jan. 1 – Dec. 31 | | Jan. 1 – Dec. 31 | | 42.0 | | 42.0 | |
| Christian Schmidt1) | Jan. 1 – Dec. 31 | | Jan. 1 – Dec. 31 | | 22.0 | | 22.0 | |
| Georg Fahrenschon | Jan. 1 – June 30 | | Jan. 1 – Dec. 31 | | 7.0 | | 14.0 | |
| Udo Folgart | Jan. 1 – Dec. 31 | | Jan. 1 – Dec. 31 | | 14.0 | | 14.0 | |
| Dr. Robert Kloos | Jan. 1 – Dec. 31 | | Jan. 1 – Dec. 31 | | 14.0 | | 14.0 | |
| Bernhard Krüsken | Jan. 1 – Dec. 31 | | Jan. 1 – Dec. 31 | | 15.5 | | 14.0 | |
| Michael Reuther | Jan. 1 – Dec. 31 | | Jan. 1 – Dec. 31 | | 14.0 | | 14.0 | |
| Dr. Caroline Toffel | Jan. 1 – Dec. 31 | | Jan. 1 – Dec. 31 | | 14.0 | | 12.3 | |
| Werner Hilse | Jan. 1 – Dec. 31 | | Jan. 1 – Dec. 31 | | 12.0 | | 12.0 | |
| Manfred Nüssel | Jan. 1 – Dec. 31 | | Jan. 1 – Dec. 31 | | 12.0 | | 12.0 | |
| Harald Schaum | Jan. 1 – Dec. 31 | | Jan. 1 – Dec. 31 | | 12.0 | | 12.0 | |
| Brigitte Scherb | Jan. 1 – Dec. 31 | | Jan. 1 – Dec. 31 | | 12.0 | | 12.0 | |
| Konrad Weiterer | Jan. 1 – Aug. 24 | | Jan. 1 – Dec. 31 | | 6.7 | | 10.0 | |
| Dr. Marcus Pleyer2) | Jan. 1 – Dec. 31 | | — | | 14.5 | | — | |
| Werner Schwarz | Jan. 1 – Dec. 31 | | — | | 10.0 | | — | |
| Dr. Rolf Bösinger | Jan. 1 – Dec. 31 | | — | | 10.0 | | — | |
| Birgit Keller | Jan. 1 – Dec. 31 | | — | | 10.0 | | — | |
| Wolfgang Reimer | Jan. 1 – May 2 | | — | | 3.3 | | — | |
| Peter Hauk | May 12 – Dec. 31 | | — | | 6.3 | | — | |
| Dr. Klaus Stein | — | | Jan. 1 – Nov. 30 | | — | | 16.2 | |
| Norbert Schindler | — | | Jan. 1 – Dec. 31 | | — | | 12.0 | |
| Helmut Brunner | — | | Jan. 1 – Dec. 31 | | — | | 10.0 | |
| Prof. Matthias Stauch | — | | Jan. 1 – Dec. 31 | | — | | 10.0 | |
| Jörg Vogelsänger | — | | Jan. 1 – Dec. 31 | | — | | 10.0 | |
| |
| |
| |
| |
| |
| Total remuneration | | | | | 251.3 | | 262.5 | |
| | | | | |
| |
| |
| 1) | Direct donations to the foundation “Neue Synagoge Berlin – Centrum Judaicum”, “Arbeitsgemeinschaft der Evangelischen Jugend in Deutschland e.V.” and “Förderverein BlechSchatz / Verein zur Förderung der Posaunenchorarbeit in Bayern e.V.” |
| 2) | Member since December 21, 2015; no remuneration in 2015 |
| |
| Additional disclosures pursuant to the German Commercial Code (HGB) |
| (67) | Average number of employees |
| Men | | Women | | Total | | |
|
| |
| |
| | |
| 2016 | | 2015 | | 2016 | | 2015 | | 2016 | | 2015 | |
|
| |
| |
| |
| |
| |
| |
| Full-time employees | 141 | | 135 | | 80 | | 83 | | 221 | | 218 | |
| Part-time employees | 9 | | 5 | | 48 | | 45 | | 57 | | 50 | |
|
| |
| |
| |
| |
| |
| |
| Total | 150 | | 140 | | 128 | | 128 | | 278 | | 268 | |
| 2016 | | 2015 | |
| € thousand | | € thousand | |
|
| |
| |
| Audit services* | 304.4 | | 286.4 | |
| Other certification services | 82.9 | | 65.4 | |
| Tax consulting services | 0.0 | | 20.5 | |
| Other services | 393.6 | | 352.2 | |
| * Of the fees for audit services in 2016, EUR 23.0 thousand relates to the previous year; of the fees for audit services in 2015, EUR 18.4 thousand related to 2014 |
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The Declaration of Conformity with the German Public Corporate Governance Code has been submitted and has been published on Rentenbank’s website.
Frankfurt am Main, March 15, 2017
LANDWIRTSCHAFTLICHE RENTENBANK
The Board of Managing Directors
| /s/ Dr. Horst Reinhardt | /s/ Hans Bernhardt |
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| Responsibility Statement by the Board of Managing Directors |
To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the net assets, financial position, and results of operations of the Group, and the Group’s combined management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group.
Frankfurt am Main, March 15, 2017
LANDWIRTSCHAFTLICHE RENTENBANK
The Board of Managing Directors
| /s/ Dr. Horst Reinhardt | /s/ Hans Bernhardt |
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This is an English translation of the German text, which is the sole authoritative version.
We have audited the consolidated financial statements prepared by Landwirtschaftliche Rentenbank, Frankfurt/Main, comprising the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement, and the notes to the consolidated financial statements, together with the combined management report for the business year from January 1 to December 31, 2016. The preparation of the consolidated financial statements and the combined management report in accordance with IFRSs, as adopted by the EU, and the additional requirements of German commercial law pursuant to § 315a Abs. [paragraph] 1 HGB [Handelsgesetzbuch “German Commercial Code”] are the responsibility of the parent company‘s management. Our responsibility is to express an opinion on the consolidated financial statements and on the combined management report based on our audit.
We conducted our audit of the consolidated financial statements in accordance with § 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the combined management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the combined management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and the combined management report. We believe that our audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRSs, as adopted by the EU, the additional requirements of German commercial law pursuant to § 315a Abs. 1 HGB and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The combined management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group’s position and suitably presents the opportunities and risks of future development.
Frankfurt/Main, March 15, 2017
KPMG AG
Wirtschaftsprüfungsgesellschaft
| /s/ Bernhard | /s/ Liebermann | |
| Wirtschaftsprüfer | Wirtschaftsprüfer | |
| [German Public Auditor] | [German Public Auditor] | |
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Report of the Board of Supervisory Directors |
The Board of Supervisory Directors and its committees performed the duties delegated to them in accordance with Rentenbank’s Governing Law, its statutes and corporate governance principles, and advised and supervised the Board of Managing Directors in its orderly conduct of business throughout the fiscal year.
The annual financial statements as well as the combined management report were prepared by the Board of Managing Directors in accordance with the provisions of the German Commercial Code (Handelsgesetzbuch, HGB) as of December 31, 2016 and were audited by the auditors KPMG Wirtschaftsprüfungsgesellschaft, Berlin, who issued an unqualified audit opinion. The voluntary consolidated financial statements as well as the combined management report as of December 31, 2016 were prepared by the Board of Managing Directors in accordance with International Financial Reporting Standards (IFRS) and the additional requirements applicable under Section 315a (1) of the German Commercial Code (HGB). KPMG Wirtschaftsprüfungsgesellschaft, Berlin, audited the voluntary consolidated financial statements as well as the combined management report and issued an unqualified audit opinion. The findings of the audit were noted with approval by the Board of Supervisory Directors.
The Board of Supervisory Directors reviewed the annual financial statements and the voluntary consolidated financial statements, including the combined management report, as well as the annual report 2016 of Landwirtschaftliche Rentenbank. The Board of Supervisory Directors adopts the bank’s annual financial statements including the combined management report for the fiscal year 2016 and approves the voluntary consolidated financial statements and the combined management report for the fiscal year 2016.
In accordance with the regulation that the guarantee reserve (Deckungsrücklage) may not exceed 5 % of the amount of the outstanding covered bonds pursuant to Section 2 (3) of Rentenbank’s Governing Law, the Board of Supervisory Directors resolved to remove EUR 21,595,000 from the guarantee reserve and to increase the principal reserve (Hauptrücklage) by the same amount.
Of the net income of EUR 59,000,000 reported in the income statement, EUR 44,250,000 is allocated to the principal reserve pursuant to Section 2 (2) of Rentenbank’s Governing Law.
With respect to the remaining distributable profit of EUR 14,750,000, the Board of Supervisory Directors resolved to provide EUR 7,375,000 for the Special Purpose Fund of the German Federal Government and EUR7,375,000 for the Promotional Fund.
The Board of Supervisory Directors has satisfied itself that the Board of Managing Directors and the Board of Supervisory Directors have complied with the German Public Corporate Governance Code as amended on June 30, 2009. The Board of Supervisory Directors will continuously monitor compliance with and the implementation of the Code. The Board of Supervisory Directors approves the Corporate Governance Report, including the Declaration of Conformity.
Berlin, April 6, 2017
THE BOARD OF SUPERVISORY DIRECTORS OF
LANDWIRTSCHAFTLICHE RENTENBANK
/s/ Joachim Rukwied
(Chairman)
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UNCONSOLIDATED FINANCIAL STATEMENTS AND AUDITORS |
The unconsolidated financial statements of Rentenbank have been prepared in accordance with the German Commercial Code (HGB) and the more specific requirements of the Regulation on the Accounting of Credit Institutions and Financial Services Institutions (Verordnung über die Rechnungslegung der Kreditinstitute und Finanzdienstleistungsinstitute – the “Credit Institution Accounting Regulation”), as well as various additional practices, laws and regulations of the Federal Republic of Germany (collectively “German GAAP”). German GAAP emphasizes the principle of prudence (Vorsichtsprinzip) in the presentation of the financial statements to protect the interests of creditors.
Pursuant to Section 9 of Rentenbank’s Statutes, the annual unconsolidated financial statements of Rentenbank are to be examined by a Wirtschaftsprüfer (certified public accountant) who is appointed by the Board of Supervisory Directors with the consent of the Supervising Authority. The public accountant’s long-form audit report (Prüfungsbericht) serves as the basis for the audit of the General Accounting Office (Bundesrechnungshof).
Rentenbank’s external auditors are KPMG AG Wirtschaftsprüfungsgesellschaft, Frankfurt am Main.
The annual audit of the unconsolidated financial statements is conducted in accordance with German GAAS. In the case of an institution directly under the federal government’s supervision, such as Rentenbank, the scope of the audit is extended to meet the requirements of the Budgeting and Accounting Act (Haushaltsgrundsätzegesetz). Such Act requires that the audit and the resulting report be designed in such a way that enables the Board of Supervisory Directors, the Supervisory Authority, and the General Accounting Office to form their own opinion and take action as and when required. One of the specific aspects to be covered by the extended audit and the audit report is the proper conduct of Rentenbank’s business by its management.
In accordance with § 340(h) of the German Commercial Code (HGB), foreign currency amounts were converted and valued on the balance sheet date. Where foreign currency was set up to hedge interest and interest currency swap transactions, they are valued as a single unit.
The unconsolidated financial statements were drawn up uniformly in accordance with the accounting and valuation methods authorized for Rentenbank.
The audit report of KPMG for the year ended December 31, 2016, dated March 15, 2017, refers to a combined management report (zusammengefasster Lagebericht). The examination of, and the audit report upon, this combined management report are required under German GAAS. This examination was not made in accordance with U.S. Generally Accepted Auditing Standards (“U.S. GAAS”) or U.S. attestation standards. Therefore, KPMG does not provide any opinion on the aforementioned examination or on the financial statements included in this annual report in accordance with U.S. GAAS or U.S. attestation standards.
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SUMMARY OF MATERIAL DIFFERENCES
BETWEEN GERMAN GAAP AND U.S. GAAP |
The unconsolidated financial statements of Rentenbank have been prepared in accordance with German GAAP. As a result, Rentenbank’s unconsolidated financial statements included in this annual report may differ substantially from financial statements prepared in accordance with accounting principles generally accepted and financial reporting practices followed in the United States (“U.S. GAAP”). Rentenbank is not required to prepare or present financial statements in accordance with accounting and reporting practices and principles followed in the United States.
The following is a summary of material differences between German GAAP and U.S. GAAP as of the dates of Rentenbank’s unconsolidated financial statements included in this annual report. It should not be taken as an exhaustive list of all differences. No attempt has been made to identify all disclosures, presentation or classification differences that would affect the manner in which transactions or events are presented in the financial statements and the consolidated financial statements of Rentenbank, respectively, or notes thereto.
Under German GAAP, securities are classified as securities in the trading portfolio, “liquidity reserve” securities or fixed assets. Fixed assets are valued based on the “modified lower of cost or market principle” according to which the historic cost (the original purchase price) is subject to exceptional depreciation only if a permanent impairment in value is expected. Liquidity reserve securities are current assets and recorded at the lower of cost or market. Trading portfolio securities are recorded at fair value under consideration of a deduction to account for risk. All recognized changes in valuation are recorded in current income or expense, as applicable.
Under U.S. GAAP, investments in marketable equity securities and debt securities are classified into the categories trading, available for sale or held to maturity (for debt securities only). According to Accounting Standards Codification (“ASC”) 320 “Investments – Debt and Equity Securities”, securities held to maturity are carried at amortized cost and are subject to other-than-temporary impairment tests. Trading and available-for-sale securities are recorded at fair value. Adjustments to the fair value of available-for-sale securities are included in other comprehensive income, a separate component of equity, while adjustments to the fair value of trading securities are recognized in profit or loss.
| Derivative Instruments and Hedge Accounting |
Under German GAAP, derivative instruments and embedded derivatives may be included in a financial institution’s trading book or investment book. Trading derivatives are treated as current assets and recorded at fair value under consideration of a deduction to account for risk. Hedge accounting is permitted as micro-hedge, portfolio-hedge or macro-hedge. Derivative financial instruments used for hedging purposes are generally accounted for as off-balance-sheet transactions and, in the case of Rentenbank, are disclosed in notes to the financial statements. Unrealized gains and losses of both the derivative financial instrument and hedged items are generally not recorded on the balance sheet or in the income statement. The related income and expense of a derivative financial instrument, such as interest income related to interest rate swaps, is reported on a basis consistent with the underlying hedged position pro rata temporis, often resembling synthetic instrument accounting.
Under U.S. GAAP pursuant to ASC 815, Derivatives and Hedging, derivative instruments and embedded derivatives are recorded on the balance sheet at fair value as either assets or liabilities. Subject to certain specific qualifying conditions in ASC 815, a derivative instrument may be designated either as a hedge of changes in the fair value of a recognized asset or liability, an unrecognized firm commitment, or an identified portion of such an asset, liability or firm commitment (fair value hedge), or as a hedge of the exposure to variability in cash flows of a recognized asset or liability or a probable forecast transaction (cash flow hedge). A derivative instrument qualifying as a fair value hedge is measured at fair value with changes in fair value recognized in profit or loss. The hedged item is remeasured to fair value in respect of the hedged risk. For a derivative instrument qualifying as a cash flow hedge, fair value gains or losses associated with the risk being hedged are recorded in other comprehensive income and reclassified to profit or loss when the hedged item affects profit or loss.
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| Provision for Loan Losses |
German GAAP requires that, in establishing and maintaining the allowance for loan losses, entities consider all evident risks relating to their lending operations, primarily counterparty credit risk. Specific provisions account for anticipated losses reduced by the expected net realizable value of any collateral provided. Additionally, Rentenbank maintains a general reserve based on expected losses.
Under U.S. GAAP, guidance relating to the impairment of loans is included in ASC 450 “Contingencies” and ASC 310 “Receivables”. An impairment is recognized if the present value of estimated future cash flows discounted at the loan’s effective interest rate is less than the carrying amount of the loan. U.S. GAAP requires recognition of a loss when (a) information available prior to issuance of the financial statements indicates that it is probable that an asset has been impaired at the date of the financial statements and (b) the amount of the loss can be reasonably estimated, even though the particular loans that are not collectible may not be identifiable.
| Certain Provisions and Reserves |
German GAAP permits provisions for general banking risks by setting up certain “hidden” reserves. In accordance with Section 340(f) of the German Commercial Code banks can set up reserves based on the valuation of loans and advances to banks and customers as well as securities held as part of the liquidity reserve by recording these assets at a lower amount than generally required. Hidden reserves are restricted to 4% of the value of the assets. Income and expenditure relating to movements in the hidden reserves may be netted with the income or expenditure relating to lending operations. In addition, in accordance with Section 340(g) of the German Commercial Code, a general provision for general risks related to the specific business model is also permitted and disclosed on the face of the balance sheet.
Under U.S. GAAP, loan loss provisions are only recorded when certain criteria are met. In accordance with ASC 450 “Contingencies” a provision is only recognized when (a) information available prior to issuance of the financial statements indicates that it is probable that an asset has been impaired at the date of the financial statements and (b) the amount of the loss can be reasonably estimated.
| Reacquired Own Debt Securities |
Under German GAAP, own debt securities that are re-acquired with the intention of resale are recorded as assets at acquisition cost, and subsequently valued at the lower of cost or market. Gains or losses on resale of such securities are recorded in the profit and loss account.
Under U.S. GAAP, repurchased own debt securities result in a reduction of outstanding liabilities on the balance sheet, irrespective of whether the securities are intended for resale or not. The difference between the cost of re-acquisition and the carrying amount of outstanding debt is recorded in current income.
Under German GAAP, property and equipment is reported at acquisition or manufacturing cost, as applicable, and depreciated over its estimated economic useful life. In practice, depreciation is carried out on the basis of the depreciation tables issued by the tax authorities. Based on the modified lower of cost or market principle, any expected permanent impairment of property and equipment results in additional depreciation. Additional depreciation is reversed when the reason for the impairment no longer exists.
U.S. GAAP requires that property and equipment be carried at cost less scheduled depreciation in accordance with the estimated economic useful life of the asset. U.S. GAAP requires that assets be reviewed for impairment. Therefore, the carrying amount of the asset is compared with the sum of the undiscounted cash flows. If the carrying amount of the asset exceeds the sum of the undiscounted cash flows, the carrying amount of the asset is compared to the fair value and an impairment loss is recognized to the extent fair value exceeds the carrying amount of the asset. U.S. GAAP does not permit a reversal of impairment losses.
Under German GAAP, Pension provisions are measured based on generally accepted actuarial principles, using the projected unit credit (PUC) method. The provision amount determined under the PUC method is defined as the actuarial present value of the pension obligations which has been earned by the
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employees as of the relevant date due to their periods of service in the past, based on the pension benefit formula and the vesting provisions. These provisions are discounted pursuant to Section 253 paragraph 2 of the German Commercial Code and the related decree on the Discounting of Provisions (Rückstellungsabzinsungsverordnung). From 2016 the discount rates used for pension obligations are the average market interest rates for the past four fiscal years; up to 2015 the average market interest rates for the past seven fiscal years were used.
Under U.S. GAAP, a pension asset or liability representing the excess or deficit of plan assets over benefit obligations is recognized in the balance sheet for defined benefit plans. The pension benefit obligation is generally calculated using the projected unit credit method, including assumptions for future salary increases.
| Assets and Liabilities Held in Trust |
Under German GAAP, assets and equal liabilities held in trust are recorded on the balance sheet. Under U.S. GAAP, these items would generally not be recorded on the balance sheet.
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Modifications have been made in the following translation of the financial statements in comparison to the German originals. The figures in the following financial statements have been rounded from the exact amounts into millions of euro. In the balance sheet in Item 4 under Assets and Item 10 under Liabilities additional subtotals and further break downs have been included which are not to be found in the German originals.
UNCONSOLIDATED FINANCIAL STATEMENTS
as of December 31, 2016
Unconsolidated Balance Sheet |
| | | | As of
December 31,
2016
€ million | | As of
December 31,
2015
€ million | |
| | | |
| |
| |
| Assets | | |
| 1. | Cash and balances with central banks | | |
| | a) | Cash on hand | 0.2 | | 0.1 | |
| | b) | Balances with central banks | 6.5 | | 21.1 | |
| | | |
| |
| |
| | | | 6.7 | | 21.2 | |
| | | of which: | | |
| | | with Deutsche Bundesbank | | |
| | | €6.5 m (2015: €21.1 m) | | |
| 2. | Loans and advances to banks | | |
| | a) | Payable on demand | 874.8 | | 2.4 | |
| | b) | Other loans and receivables | 56,919.0 | | 55,680.0 | |
| | | |
| |
| |
| | | | 57,793.8 | | 55,682.4 | |
| 3. | Loans and advances to customers | | |
| | | of which: | | |
| | | Secured by mortgages | | |
| | | €—m (2015: €—m) | | |
| | | Municipal loans | | |
| | | €6,003.4 m (2015: €5,205.2 m) | 6,048.2 | | 5,304.4 | |
| 4. | Bonds and other fixed-income securities | | |
| | a) | Bonds | | |
| | | aa) Public-sector issuers | 1,299.0 | | 1,131.7 | |
| | | of which: | | |
| | | Securities eligible as collateral with | | |
| | | Deutsche Bundesbank €1,175.4 m (2015: €1,014.3 m) | | |
| | | ab) Other issuers | 16,240.7 | | 16,889.9 | |
| | | |
| |
| |
| | | | 17,539.7 | | 18,021.6 | |
| | | of which: | | |
| | | Securities eligible as collateral with | | |
| | | Deutsche Bundesbank €13,064.8 m (2015: €14,326.5 m) | | |
| | b) | Own debt securities | 224.9 | | 280.5 | |
| | | |
| |
| |
| | | Nominal amount €300.3 m (2015: €361.5 m) | 17,764.6 | | 18,302.1 | |
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Unconsolidated Balance Sheet (continued) |
| | | As of
December 31,
2016
€ million | | As of
December 31,
2015
€ million | |
| |
| |
| |
| 5. | Shares and other variable-yield securities | 0.1 | | 0.1 | |
| 6. | Participations | | |
| | of which: | | |
| | in banks €321.9 m (2015: €321.9 m) | | |
| | in financial services institutions €—m (2015: €—m) | 326.2 | | 326.2 | |
| 7. | Investments in affiliated companies | | |
| | of which: | | |
| | in banks €—m (2015: €—m) | | |
| | in financial services institutions €—m (2015: €—m) | 49.6 | | 49.6 | |
| 8. | Assets held in trust | | |
| | of which: | | |
| | Loans held in trust €113.0 m (2015: €113.4 m) | 113.0 | | 113.4 | |
| 9. | Intangible assets | | |
| | a) Purchased concessions, industrial property rights and similar rights | 11.4 | | 12.6 | |
| 10. | Property and equipment | 14.8 | | 15.7 | |
| 11. | Other assets | 2,918.6 | | 2,955.1 | |
| 12. | Prepaid expenses | | |
| | a) From issuing and lending business | 945.8 | | 881.7 | |
| | b) Other | 259.1 | | 191.2 | |
| | | 1,204.9 | | 1,072.9 | |
| | |
| |
| |
| Total assets | 86,251.9 | | 83,855.7 | |
| | |
| |
| |
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Unconsolidated Balance Sheet (continued) |
| | | | | As of
December 31,
2016
€ million | | As of
December 31,
2015
€ million | |
| | | | |
| |
| |
| Liabilities and equity | | |
| 1. | Liabilities to banks | | |
| | a) | Payable on demand | 6.4 | | 0,1 | |
| | b) | With agreed term or notice period | 3,047.2 | | 3,461.6 | |
| | | | |
| |
| |
| | | | | 3,053.6 | | 3,461.7 | |
| 2. | Liabilities to customers | | |
| | a) | Other liabilities | | |
| | | aa) | Payable on demand | 190.6 | | 208.0 | |
| | | ab) | With agreed term or notice period | 3,576.0 | | 3,755.3 | |
| | | | |
| |
| |
| | | | | 3,766.6 | | 3,963.3 | |
| 3. | Securitized liabilities | | |
| | a) | Debt securities issued | 69,982.0 | | 67,304.9 | |
| 4. | Liabilities held in trust | | |
| | of which: | | |
| | Loans held in trust €113.0 m (2015: €113.4 m) | 113.0 | | 113.4 | |
| 5. | Other liabilities | 2,628.3 | | 2,762.7 | |
| 6. | Deferred items | | |
| | a) | From issuing and lending business | 258.3 | | 190.5 | |
| | b) | Other | 1,056.3 | | 922.9 | |
| | | | |
| |
| |
| | | | | 1,314.6 | | 1,113.4 | |
| 7. | Provisions | | |
| | a) | Provisions for pensions and similar obligations | 105.6 | | 108.4 | |
| | b) | Other provisions | 362.6 | | 349.5 | |
| | | | |
| |
| |
| | | | | 468.2 | | 457.9 | |
| 8. | Subordinated liabilities | 615.1 | | 608.4 | |
| 9. | Fund for general banking risks | 3,106.9 | | 2,911.2 | |
| 10. | Equity | | |
| | a) | Subscribed capital | 135.0 | | 135.0 | |
| | b) | Retained earnings | | |
| | | ba) | Principal reserve pursuant to Section 2 (2) of Rentenbank’s Governing Law | 986.9 | | 921.0 | |
| | | | Transfers from guarantee reserve | 21.6 | | 23.1 | |
| | | | Transfers from net income | 44.2 | | 42.7 | |
| | | | |
| |
| |
| | | | | 1,052.7 | | 986.8 | |
| | | bb) | Guarantee reserve pursuant to Section 2 (3) of Rentenbank’s Governing Law | 22.7 | | 45.8 | |
| | | | Releases pursuant to Section 2 (3) of Rentenbank’s Governing Law | 21.6 | | 23.1 | |
| | | | |
| |
| |
| | | | | 1.1 | | 22.7 | |
| | | | |
| |
| |
| | c) | Distributable profit | 14.8 | | 14.3 | |
| | | | |
| |
| |
| | | | | 1,203.6 | | 1,158.8 | |
| | | | |
| |
| |
| Total liabilities and equity | 86,251.9 | | 83,855.7 | |
| | | | |
| |
| |
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Unconsolidated Balance Sheet (continued) |
| | | | As of
December 31,
2016
€ million | | As of
December 31,
2015
€ million | |
| | | |
| |
| |
| 1. | Contingent liabilities | | |
| | a) | Liabilities from guarantees and indemnity agreements | 1.0 | | 1.3 | |
| | | |
| |
| |
| 2. | Other commitments | | |
| | a) | Irrevocable loan commitments | 990.0 | | 866.5 | |
| | | |
| |
| |
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Unconsolidated Income Statement
for the period from January 1 to December 31, 2016 |
| | | | | For the year
ended December 31, 2016
€ million | | For the year
ended December 31, 2015
€ million | |
| | | |
| | | |
| | | | |
| |
| |
| Expenses | | |
| 1. | Interest expenses | 3,329.2 | | 3,495.0 | |
| 2. | Fee and commission expenses | 2.3 | | 2.4 | |
| 3. | Administrative expenses | | |
| | a) | Personnel expenses | | |
| | | aa) | Wages and salaries | 24.7 | | 24.1 | |
| | | ab) | Social security contributions and expenses | | |
| | | | for pensions and other employee benefits | 3.7 | | 4.7 | |
| | | | of which: | | |
| | | | For pensions €0.4 m (2015: €1.6 m) | | |
| | | | |
| |
| |
| | | | | 28.4 | | 28.8 | |
| | b) | Other administrative expenses | 25.7 | | 24.9 | |
| | | | |
| |
| |
| | | | | 54.1 | | 53.7 | |
| 4. | Depreciation, amortization and write-downs of intangible assets and property and equipment | 7.0 | | 6.1 | |
| 5. | Other operating expenses | 9.1 | | 20.8 | |
| 6. | Additions to the fund for general banking risks | 195.7 | | 279.2 | |
| 7. | Write-downs of and allowances on loans and advances and certain securities as well as additions to loan loss provisions | 0.4 | | 0.0 | |
| 8. | Taxes on income | 1.0 | | 0.0 | |
| 9. | Other taxes not included in item 5 | 0.1 | | 0.1 | |
| 10. | Net income | 59.0 | | 57.0 | |
| | | | |
| |
| |
| Total expenses | 3,657.9 | | 3,914.3 | |
| | | | |
| |
| |
| 1. | Net income | 59.0 | | 57.0 | |
| 2. | Withdrawals from retained earnings from guarantee reserve pursuant to Section 2 (3) of Rentenbank’s Governing Law | 21.6 | | 23.1 | |
| 3. | Allocations to retained earnings to principal reserve pursuant to Section 2 (2) of Rentenbank’s Governing Law | | |
| | | from guarantee reserve | 21.6 | | 23.1 | |
| | | from net income for the year | 44.2 | | 42.7 | |
| | | |
| |
| |
| 4. | Distributable profit | 14.8 | | 14.3 | |
| | | | |
| |
| |
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| Unconsolidated Income Statement (continued) |
| | | | For the year
ended December 31, 2016
€ million | | For the year
ended December 31, 2015
€ million | |
| | | |
| |
| |
| Income | | |
| 1. | Interest income from | | |
| | a) | Lending and money market transactions | 3,171.9 | | 3,250.9 | |
| | b) | Fixed-income securities and debt register claims | 469.0 | | 555.5 | |
| | | |
| |
| |
| | | | 3,640.9 | | 3,806.4 | |
| 2. | Current income from | | |
| | a) | Shares and other variable-yield securities | 0.0 | | 0.0 | |
| | b) | Participations | 6.9 | | 50.3 | |
| | | |
| |
| |
| | | | 6.9 | | 50.3 | |
| | | | | |
| 3. | Fee and commission income | 0.2 | | 0.2 | |
| 4. | Income from reversals of write-downs of loans and advances and certain securities and from reversals of loan loss provisions | 0.0 | | 1.3 | |
| 5. | Income from reversals of write-downs of participations, investments in affiliated companies and securities held as fixed assets | 0.7 | | 51.6 | |
| 6. | Other operating income | 9.2 | | 4.5 | |
| | | |
| |
| |
| Total income | 3,657.9 | | 3,914.3 | |
| | | |
| |
| |
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NOTES TO THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR 2016 |
The annual financial statements of Landwirtschaftliche Rentenbank, with its registered office in Frankfurt am Main and registered with the district court (Amtsgericht) in Frankfurt am Main under commercial register number HRA 30636 (hereinafter referred to as Rentenbank), have been prepared in accordance with the provisions of the German Commercial Code (Handelsgesetzbuch, HGB) and the German Regulation on the Accounting of Banks and Financial Services Institutions (Verordnung über die Rechnungslegung der Kreditinstitute und Finanzdienstleistungsinstitute, RechKredV). The structure of the balance sheet and the income statement is based on the templates set out in RechKredV.
Assets are measured pursuant to the provisions of Sections 252 et seq. HGB, taking into account the supplementary provisions for credit institutions set out in Sections 340 et seq. HGB. Loans and advances are recognized at the nominal amount pursuant to Section 340e (2) HGB. Premiums and discounts from loans and advances as well as one-time payments from swaps (upfront payments) are reported as either prepaid expenses or deferred income. In accordance with Section 11 RechKredV, pro rata interest is reported in the corresponding balance sheet item within loans and advances.
Any identifiable risks are taken into account through the recognition of specific valuation allowances or provisions. Latent (credit) risks are taken into account through the fund for general banking risks reported in the balance sheet as well as by recognizing general valuation allowances and contingency reserves pursuant to Section 340f HGB. Rentenbank uses an expected loss approach based on internal ratings for determining general valuation allowances.
Fixed-income securities held as fixed assets are carried at amortized cost less any permanent impairment. Shares as well as bonds and other fixed-income securities, to the extent allocated to the liquidity reserve, are measured using the strict lower-of-cost-or-market rule (Section 253 (4) HGB). Rentenbank does not have a trading book pursuant to Section 1 (35) of the German Banking Act (Kreditwesengesetz, KWG) in conjunction with Article 4 (1) No. 86 of Regulation (EU) No. 575/2013.
Participations and investments in affiliated companies are carried at cost less any write-downs. Reversals of write-downs are recognized if the conditions giving rise to the impairment no longer apply.
Assets held in trust are reported pursuant to Section 6 RechKredV and, owing to their relation to liabilities held in trust, are recognized at the nominal amount.
In accordance with German commercial law, property and equipment as well as intangible assets are recorded at cost less any depreciation and amortization over their expected useful life.
Other assets are recognized at the nominal amount; write-downs are made as required.
Prepaid expenses are reported pursuant to Section 250 (1) HGB and are amortized pro rata temporis over the relevant term.
Liabilities are recognized at the settlement amount pursuant to Section 253 (1) sentence 2 HGB. Premiums and discounts from liabilities as well as one-time payments from swaps (upfront payments) are reported as either prepaid expenses or deferred income. Zero bonds are measured at their issue price plus pro rata interest based on the issue yield. In accordance with Section 11 RechKredV, pro rata interest is reported in the corresponding balance sheet item within liabilities.
Liabilities held in trust are reported pursuant to Section 6 RechKredV and, owing to their relation to assets held in trust, are recognized at the settlement amount.
Deferred income is reported pursuant to Section 250 (2) HGB and is amortized pro rata temporis over the relevant term.
Provisions are recognized as liabilities at their expected settlement amount applying the principles of prudent business judgment and taking into account future price and cost increases. Provisions with a remaining term of more than one year are discounted to the balance sheet date. In 2015 or prior to the amendment to Section 253 HGB through the German Act on the Implementation of the Mortgage Credit Directive and for the
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Amendment of Commercial Law Provisions (Gesetz zur Umsetzung der Wohnimmobilienkreditrichtlinie und zur Änderung handelsrechtlicher Vorschriften) of March 11, 2016, provisions for pension obligations were discounted at the average interest rate for the past seven years. From 2016, the discount rates used are the average market interest rates for the past ten fiscal years, as determined and published monthly by the Deutsche Bundesbank in accordance with the German Regulation on the Discounting of Provisions (Rückstellungsabzinsungsverordnung), which correspond to the remaining term of the provisions. In accordance with Section 253 (2) sentence 2 HGB, provisions for pension obligations are discounted at the average market interest rate applicable to an assumed remaining term of 15 years. The discounting of provisions for pension obligations applying the average market interest rate for the past ten years instead of the past seven fiscal years in accordance with their remaining term resulted in a difference of EUR 11 million. In accordance with Section 253 (6) sentence 2 HGB, profits may only be distributed if the distributable reserves remaining after distribution, adding profit carried forward and deducting loss carried forward, at least equal the difference determined pursuant to Section 253 (6) sentence 1 HGB.
Pension provisions are measured in accordance with actuarial principles, using the projected unit credit (PUC) method. Under the PUC method, the provision amount is defined as the actuarial present value of the pension obligations, earned by the employees in the past periods of service prior to the relevant date in accordance with the pension benefit formula and vesting provisions. The 2005 G mortality tables, developed by Prof. Dr. Klaus Heubeck and fully adjusted in 2011, were used as the biometric calculation parameters.
The following parameters were used as the basis for the calculation as of December 31, 2016:
| 2016 | | 2015 | |
|
| |
| |
| Discount rate pursuant to Section 253 (2) sentence 2 HGB | 4.01 % p.a. | | 3.89 % p.a. | |
| Career trend | 1.00 % p.a. | | 1.00 % p.a. | |
| Expected rate of salary increases | 2.25 % p.a. | | 2.25 % p.a. | |
Expected rate of pension increases
(range of adjustments) | 1.0-2.25 % p.a. | | 1.0-2.25 % p.a. | |
| Employee turnover | average 2.00 % p.a. | | average 2.00 % p.a. | |
| Development of contribution ceiling | 2.50 % p.a. | | 2.50 % p.a. | |
| *) | In 2015, provisions for pension obligations were discounted at the average interest rate for the past seven fiscal years. |
Provisions for special promotional loans cover the promotional contribution for the whole term or until the repricing date. The provisions recorded prior to the BilMoG adjustment for the promotional contribution related to the special promotional loans are maintained with reference to the option available under Article 67 (1) sentence 2 of the Introductory Act to the Commercial Code (Einführungsgesetz zum Handelsgesetzbuch, EGHGB).
A periodic (income statement) approach was used for the calculation of the amount required to be recognized as a provision within the context of the loss-free valuation of the banking book. The banking book comprises all interest-bearing transactions of the bank and is managed on a uniform basis. For calculation purposes, future gains or losses in the banking book were determined by income contributed by closed and open interest rate positions.
These future cash flows were discounted as of the reporting date using generally recognized money market and capital market rates which correspond to the respective period. Risk costs were calculated on the basis of future expected losses and the pro rata share of administrative expenses for portfolio management was determined on the basis of internal analyses.
There was no need for provisions as of December 31, 2016 on the basis of this calculation.
Hedging relationships according to Section 254 HGB are only established to hedge currency risks. Rentenbank uses FX swaps and cross-currency swaps to hedge these risks.
Currency translation and the presentation of the transactions in the balance sheet without currency hedging are made pursuant to Section 340h in conjunction with Section 256a HGB and Section 252 (1) No. 4 HGB. In accordance with Section 277 (5) sentence 2 HGB, gains from currency translation are reported in other operating income, while losses from currency translation are recognized in other operating expenses.
Rentenbank is exempt from corporation tax in accordance with Section 5 (1) No. 2 of the German Corporation Tax Act (Körperschaftsteuergesetz, KStG) and trade tax in accordance with Section 3 No. 2 of the
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German Trade Tax Act (Gewerbesteuergesetz, GewStG). Accordingly, deferred taxes pursuant to Section 274 HGB do not have to be recognized in the annual financial statements of Rentenbank.
Rentenbank voluntarily prepares consolidated financial statements in accordance with IFRS, as adopted by the EU. These consolidated financial statements include LR Beteiligungsgesellschaft mbH, Frankfurt am Main, and DSV Silo- und Verwaltungsgesellschaft mbH, Frankfurt am Main, pursuant to Section 315a HGB.
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| Notes to the balance sheet |
The following notes and information are presented in the order in which the individual items are presented in the balance sheet. Differences between the amounts shown below and those reported in the balance sheet result from the exclusion of pro rata interest.
| Assets | | | | Dec. 31, 2016
€ million | | Dec. 31, 2015
€ million | |
| | | |
| |
| |
| Item 2: | Loans and advances to banks | | | | | |
| This item includes: | | | | | |
| • | Loans and advances to participations | | 4,102 | | — | |
| Sub-item “b) Other loans and receivables”,
breakdown by residual maturity: | | | | | |
| • | up to 3 months | | 3,988 | | 2,249 | |
| • | more than 3 months to 1 year | | 6,190 | | 7,443 | |
| • | more than 1 year to 5 years | | 23,052 | | 23,687 | |
| • | more than 5 years | | 22,845 | | 21,446 | |
| Total amount (all maturities) | | 56,075 | | 54,825 | |
| | | |
| |
| |
| Item 3: | Loans and advances to customers | | | | | |
| This item includes: | | | | | |
| • | Loans and advances to participations | | — | | 0 | |
| Breakdown by residual maturity: | | | | | |
| • | up to 3 months | | 15 | | 69 | |
| • | more than 3 months to 1 year | | 294 | | 291 | |
| • | more than 1 year to 5 years | | 1,329 | | 1,251 | |
| • | more than 5 years | | 4,234 | | 3,514 | |
| Total amount (all maturities) | | 5,872 | | 5,125 | |
| There are no loans and advances to customers with an indefinite term as set out in Section 9 (3) No.1 RechKredV. | | | | | |
| Item 4: | Bonds and other fixed-income securities | | | | | |
| All of these securities are marketable and classified as follows: | | | | | |
| • | Listed securities | | 17,195 | | 17,682 | |
| • | Unlisted securities | | 313 | | 329 | |
| | | | |
| |
| |
Securities held as fixed assets were recorded at a carrying amount of EUR 17 508 million (2015: EUR 18 011 million). They are not measured using the strict lower-of-cost-or-market rule pursuant to HGB. As Rentenbank intends to hold these securities for the foreseeable future, no write-downs to fair value are recognized if the impairment is considered temporary. In particular, write-downs are not recognized if the impairment is only temporary with respect to future financial performance and if the securities are expected to be fully repaid when due. The carrying amount of securities reported at amounts exceeding their fair value totaled EUR 745 million. The fair value of these securities was EUR 732 million, determined on the basis of market prices. Accordingly, the unrecognized write-downs amounted to EUR 13 million (2015: EUR 16 million). As in the previous year, there was no permanent impairment to be taken into account for the securities held as fixed assets.
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| Assets | | | | Dec. 31, 2016
€ million | | Dec. 31, 2015
€ million | |
| | | |
| |
| |
| Item 4: | Bonds and other fixed-income securities maturing in the year following the balance sheet date can be broken down as follows: | | | | | |
| • | from public sector issuers | | 205 | | 15 | |
| • | from other issuers | | 3,007 | | 3,358 | |
| Item 5: | As in the previous year, all of the shares and other variable-yield securities held are marketable and listed. | | | | | |
| Items 6 and 7: | As in the previous year, the balance sheet items “Participations” and “Investments in affiliated companies” do not include marketable securities. | | | | | |
| Item 8: | Assets held in trust | | | | | |
| This item includes: | | | | | |
| • | The Special Purpose Fund of the German Federal Government held at Rentenbank | | 113 | | 113 | |
| • | Loans and advances to banks | | 0 | | 0 | |
| Item 9: | Intangible assets | | | | | |
| This item includes: | | |
| • | Purchased software and licenses | | 11 | | 13 | |
| Item 10: | Property and equipment | | | | | |
| This item includes: | | | | | |
| • | Owner-occupied land and buildings, apartments | | 0 | | 0 | |
| • | Land and buildings used by third parties | | 14 | | 15 | |
| • | Operating and office equipment | | 1 | | 1 | |
| Item 11: | Other assets | | | | | |
| This item includes: | | | | | |
| Cash collateral provided for derivatives | | 2,918 | | 2,930 | |
| Item 12: | Prepaid expenses | | | | | |
| This item includes: | | | | | |
| • | Differences pursuant to Section 340e (2) HGB | | 700 | | 633 | |
| • | Differences pursuant to Section 250 (3) HGB | | 246 | | 249 | |
| • | Upfront payments from derivative transactions | | 257 | | 190 | |
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| Statement of changes in fixed assets |
| Statement of changes in fixed assets |
| € million | Intangible assets | | Property and equipment | | Financial investments | |
|
| |
| |
| |
| Software and licenses | | Land and buildings | | OOE* | | Securities | | Participations | | Investments in
affiliated companies | |
|
| |
| |
| |
| |
| |
| |
| Historical cost | | |
| Cost | | |
| at January 1, 2016 | 27 | | 20 | | 14 | | 18,316 | | 326 | | 50 | |
| Additions | 4 | | 0 | | 1 | | 3,201 | | — | | — | |
| Disposals | 1 | | 0 | | 2 | | 3,740 | | — | | — | |
| Reclassifications | — | | — | | — | | — | | — | | — | |
| Cost | | |
| at December 31, 2016 | 30 | | 20 | | 13 | | 17,777 | | 326 | | 50 | |
| Depreciation, amortization, write-downs | | |
| Accumulated AfA** at January 1, 2016 | 14 | | 5 | | 13 | | 13 | | 0 | | — | |
| Accumulated AfA from disposals | 0 | | 0 | | 2 | | — | | — | | — | |
| AfA 2016 | 5 | | 1 | | 1 | | — | | — | | — | |
| Accumulated AfA | | |
| at December 31, 2016 | 19 | | 6 | | 12 | | 13 | | 0 | | — | |
| Reversals of write-downs | — | | — | | — | | 1 | | — | | — | |
| Carrying amount | | |
| Carrying amount | | |
| at December 31, 2016 | 11 | | 14 | | 1 | | 17,765 | | 326 | | 50 | |
| Carrying amount | | |
| in 2015 | 13 | | 15 | | 1 | | 18,302 | | 326 | | 50 | |
| *) | Operating and office equipment |
| **) | Depreciation for wear and tear (Abschreibung für Abnutzung, AfA) |
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| Liabilities | | Dec. 31, 2016
€ million | | Dec. 31, 2015
€ million | |
| | | |
| |
| |
| Item 1: | Liabilities to banks | | |
| Sub-item “b) With agreed term or notice period”, breakdown by residual maturity: | | |
| • | up to 3 months | | 230 | | 322 | |
| • | more than 3 months to 1 year | | 315 | | 325 | |
| • | more than 1 year to 5 years | | 1,065 | | 880 | |
| • | more than 5 years | | 680 | | 1,190 | |
| Total amount (all maturities) | | 2,290 | | 2,717 | |
| Of which covered by assets in accordance with Section 13 (2) of Rentenbank’s Governing Law | | — | | 77 | |
| Item 2: | Liabilities to customers | | |
| This item includes: | | |
| • | Liabilities to participations | | 1 | | 1 | |
| • | Liabilities to affiliated companies | | 134 | | 134 | |
| Sub-item “ab) With agreed term or notice period”, breakdown by residual maturity: | | |
| • | up to 3 months | | 53 | | 143 | |
| • | more than 3 months to 1 year | | 33 | | 293 | |
| • | more than 1 year to 5 years | | 816 | | 1,421 | |
| • | more than 5 years | | 2,580 | | 1,763 | |
| Total amount (all maturities) | | 3,482 | | 3,620 | |
| Of which covered by assets in accordance with Section 13 (2) of Rentenbank’s Governing Law | | 22 | | 377 | |
| Item 3: | Securitized liabilities | | |
| a) Debt securities issued | | |
| Breakdown by residual maturity: | | |
| • | up to 1 year | | 16,157 | | 15,195 | |
| • | more than 1 year to 5 years | | 33,576 | | 36,149 | |
| • | more than 5 years | | 19,752 | | 15,407 | |
| Total amount (all maturities) | | 69,485 | | 66,751 | |
| Of which covered by assets in accordance with Section 13 (2) of Rentenbank’s Governing Law | | 0 | | 0 | |
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| Liabilities | | Dec. 31, 2016
€ million | | Dec. 31, 2015
€ million | |
| | | |
| |
| |
| Item 4: | Liabilities held in trust | | | | | |
| This item includes: | | | | | |
| • | Liabilities from the Special Purpose Fund of the German Federal Government held at Rentenbank | | 113 | | 113 | |
| • | Liabilities to customers | | 0 | | 0 | |
| Item 5: | Other liabilities | | | | | |
| This item includes: | | | | | |
| • | Cash collateral received for derivatives | | 2,623 | | 2,756 | |
| Breakdown by residual maturity: | | | | | |
| • | up to 3 months | | 2,623 | | 2,756 | |
| Item 6: | Deferred income | | | | | |
| This item includes: | | | | | |
| • | Differences pursuant to Section 340e (2) HGB | | 4 | | 3 | |
| • | Differences pursuant to Section 250 (2) HGB | | 254 | | 187 | |
| • | Upfront payments from derivative transactions | | 1,031 | | 899 | |
| Item 8: | Subordinated liabilities | | | | | |
| Breakdown by residual maturity: | | | | | |
| • | up to 1 year | | 33 | | — | |
| • | more than 1 year to 5 years | | 303 | | 134 | |
| • | more than 5 years | | 279 | | 474 | |
| Total amount (all maturities) | | 615 | | 608 | |
The subordinated liabilities are issued in the form of promissory notes, loan agreements, and bearer securities issued as global certificates. The net interest expense for subordinated liabilities of EUR 615 million (2015: EUR 608 million) after collateralization totaled EUR 1 million (2015: EUR 1 million).
The conditions of issue of the promissory notes fulfill the requirements of Article 63 CRR (Capital Requirements Regulation). Subordinated liabilities in the form of bearer securities issued as global certificates and in the form of loan agreements do not meet the requirements set out in points (k) and (l) of Article 63 CRR.
| Disclosures pursuant to Section 35 (3) No. 2 RechKredV in relation to funds raised in an amount exceeding 10 % each of the total amount of subordinated liabilities: |
| 1. | Bond of JPY 25 billion (nominal); carrying amount: EUR 158 million; terminated with effect from April 21, 2017;
maturity: April 21, 2036; interest rate before collateralization: 2.8 % |
| 2. | Bond of JPY 10 billion (nominal); carrying amount: EUR 62 million;
maturity: October 28, 2019; interest rate before collateralization: 2.0 % |
| 3. | Bond of EUR 100 million (nominal); carrying amount: EUR 100 million;
maturity: August 18, 2021; interest rate before collateralization: 1.003 % |
| 4. | Bond of EUR 100 million (nominal); carrying amount: EUR 100 million;
maturity: August 18, 2021; interest rate before collateralization: 1.033 % |
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| Off-balance sheet disclosures | | Dec. 31, 2016
€ million | | Dec. 31, 2015
€ million | |
| | | |
| |
| |
| Item 1: | Contingent liabilities | | | | | |
| • | Deficiency guarantees | | 1 | | 1 | |
| • | Guarantee of provision of collateral | | 0 | | 0 | |
| | Rentenbank entered into deficiency guarantees with respect to capital market loans granted at a reduced rate of interest. We do not expect these guarantees to be called upon. There are counter-guarantees granted by the Federal Government for capital market loans extended at a reduced rate of interest. | | | | | |
| Item 2: | Other commitments | | | | | |
| The increase in irrevocable loan commitments by EUR 123 million to a total of EUR 990 million (December 31, 2015: EUR 867 million) is attributable to a larger number of outstanding irrevocable commitments in the special promotional business. Drawdowns on these commitments will be made primarily in 2017. | | | | | |
| Foreign currencies | | | | | |
| The amounts of assets and liabilities denominated in foreign currency were as follows: | | | | | |
| • | Assets | | 4,808 | | 4,393 | |
| • | Liabilities | | 52,650 | | 50,054 | |
| Cover calculation | | | | | |
| The outstanding liabilities requiring cover include only registered bonds. | | 22 | | 454 | |
| The following assets are designated to cover debt securities issued: | | | | | |
| • | Loans and advances to banks | | 97 | | 920 | |
| Notes to the income statement |
Interest expenses are reported including negative interest of EUR 7.3 million from money market liabilities and collateral received (i.e. reducing expenses by this amount). Interest income from collateral provided as well as from lending and money market transactions is reported net of negative interest of EUR 19.6 million (i.e. reducing income by this amount). For reasons of materiality, the items in the income statement are not further broken down.
Interest expenses for the provisions for the promotional contribution related to the special promotional loans amounted to EUR 82.9 million in 2016 (2015: EUR 77.2 million). Interest income includes the pro rata temporis utilization of the corresponding provisions of EUR 83.6 million (2015: EUR 82.1 million). Interest expenses include effects of EUR 12.3 million resulting from the unwinding of the discount on these provisions (2015: EUR 14.3 million).
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Disclosures on the most important items pursuant to
Section 35 (1) No. 4 RechKredV | 2016
€ million | | 2015
€ million | |
|
| |
| |
| Item 5: | Other operating expenses | | | | |
| | This item includes the following significant expense items: | | | | |
| | • | Grants for the Research on Agricultural Innovation program | 3 | | 3 | |
| | • | Interest expense from the valuation of pension provisions | 2 | | 13 | |
| | • | Additions to provision for pending litigation | 2 | | 1 | |
| | • | Capital contribution to Rehwinkel Foundation | 0 | | 2 | |
| Item 6: | | Other operating income | | | | |
| | | This item includes the following significant income items: | | | | |
| | • | Income from the early repurchase of the bank’s own issue | 5 | | — | |
| | • | Rental income from bank-owned housing | 2 | | 2 | |
| | • | Other refunds | 1 | | 1 | |
| | • | Other income from the reversal of provisions | 0 | | 1 | |
In 2015, income of EUR 3 million from the repurchase of the bank’s own issue was reported in the income statement within income from reversals of write-downs of loans and advances and certain securities and from reversals of loan loss provisions.
Other operating expenses include currency translation losses of EUR 33.1 thousand (2015: EUR 2.4 thousand). Other operating income includes currency translation gains of EUR 8.6 thousand (2015: EUR 10.9 thousand). These currency translation gains and losses result exclusively from the currency translation of balances on current accounts in foreign countries.
Expenses and income do not include any significant amounts relating to prior years.
| Derivative financial instruments |
Derivatives are only used as hedging instruments for existing or expected market risks. The volume of the transactions is capped by counterparty-specific and product-specific limits and is continuously monitored within the framework of our risk management.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The valuation models are based on observable market parameters. The fair value of contracts without option features is determined on the basis of the discounted expected future cash flows (discounted cash flow (DCF) method). The discounting of derivatives is based on the OIS (Overnight Interest Rate Swap) curve as well as on basis swap spreads and cross-currency (CCY) basis swap spreads. They are distinguished by maturity and currency, and obtained from external market data providers. Measurement of contracts with option features (option-based contracts) is based on standard option pricing models. Apart from the interest rate curves and spreads mentioned above, volatilities and correlations between observable market data are also taken into account in the calculation.
| Derivative transactions – presentation of volumes – |
The following table shows the derivatives which are not accounted for at fair value in accordance with Section 285 No. 19 HGB (netting and collateral agreements have not been taken into account):
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| Derivative transactions in € million to hedge: |
| | | Nominal amounts | | Fair values Positive | | Fair values Negative | |
| | |
| |
| |
| |
| | | Dec. 31, 2016 | | Dec. 31, 2015 | | Dec. 31, 2016 | | Dec. 31, 2016 | |
| | |
| |
| |
| |
| |
| Interest rate risks | | |
| Interest rate swaps | 103,758 | | 102,250 | | 1,604 | | 5,448 | |
| • | Of which termination and conversion rights embedded in swaps | 1,149 | | 672 | | 43 | | 5 | |
| Swaptions | | |
| • | Sales | 958 | | 958 | | — | | 5 | |
| Total exposure to interest rate risks | 104,716 | | 103,208 | | 1,604 | | 5,453 | |
| Derivative transactions in € million to hedge: |
| | | Notional amounts | | Fair values positive | | Fair values negative | |
| | |
| |
| |
| |
| |
| | | Dec. 31, 2016 | | Dec. 31, 2015 | | Dec. 31, 2016 | | Dec. 31, 2016 | |
| | |
| |
| |
| |
| |
| Currency risks | | | | | | | | |
| Cross-currency swaps | 50,964 | | 50,133 | | 4,734 | | 1,874 | |
| • | Of which currency options embedded in swaps | 49 | | 46 | | 10 | | — | |
| FX swaps | 5,896 | | 3,541 | | 212 | | 6 | |
| Total exposure to currency risks | 56,860 | | 53,674 | | 4,946 | | 1,880 | |
| Share price risk and other price risks | | | | | | | | |
| Share index swaps | — | | 30 | | — | | — | |
| • | Of which share options embedded in swaps | — | | 30 | | — | | — | |
| Total exposure to share price risk and other price risks | — | | 30 | | — | | — | |
| Interest rate, currency, share price and other price risks | 161,576 | | 156,912 | | 6,550 | | 7,333 | |
| Derivative transactions – breakdown by maturity – |
| | | | Interest rate risks | | Currency risks | | Share price risk and
other price risks | |
| | | |
| |
| |
| |
Notional amounts
€ million | | Dec. 31, 2016 | | Dec. 31, 2015 | | Dec. 31, 2016 | | Dec. 31, 2015 | | Dec. 31, 2016 | | Dec. 31, 2015 | |
| |
| |
| |
| |
| |
| |
| |
| Residual maturity | | |
| • | up to 3 months | | 4,908 | | 4,981 | | 8,637 | | 7,671 | | — | | — | |
| • | more than 3 months to 1 year | | 10,802 | | 11,318 | | 7,313 | | 5,450 | | — | | 30 | |
| • | more than 1 year to 5 years | | 51,132 | | 51,041 | | 24,692 | | 25,827 | | — | | — | |
| • | more than 5 years | | 37,874 | | 35,868 | | 16,218 | | 14,726 | | — | | — | |
| | | |
| |
| |
| |
| |
| |
| |
| Total | 104,716 | | 103,208 | | 56,860 | | 53,674 | | — | | 30 | |
| Derivative transactions – breakdown by counterparty - |
| € million | Notional amounts | | Fair values positive | | Fair values negative | |
| |
| |
| |
Dec. 31, 2016 | | Dec. 31, 2015 | | Dec. 31, 2016 | | Dec. 31, 2016 | |
|
| |
| |
| |
| |
| Banks in OECD countries | 150,889 | | 139,144 | | 6,278 | | 6,692 | |
| Other counterparties in OECD countries | 10,687 | | 17,768 | | 272 | | 641 | |
| Total | 161,576 | | 156,912 | | 6,550 | | 7,333 | |
Forward transactions outstanding at the balance sheet date, particularly those denominated in foreign currency, are entered into by the bank to hedge fluctuations in market prices.
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| Information on hedging relationships pursuant to Section 285 No. 23 HGB |
Rentenbank uses currency swaps and cross-currency swaps to hedge currency risks. Currency hedges are presented in the balance sheet using valuation units pursuant to Section 254 HGB. In these hedging relationships, the cash flows of the hedged item are fully reflected in the hedging instrument, i.e. the derivative (perfect hedge). The bank utilizes the freeze method for offsetting value changes between the hedged item and the hedging instrument.
To measure the effectiveness of hedging relationships, the bank uses the critical terms match/short cut method which compares the cash flows of the hedged item with those of the hedging instrument. Exchange rate fluctuations of the corresponding hedged items and hedging derivatives offset each other over the remaining period to their respective maturity dates. The following table provides an overview of the hedged items designated in hedging relationships as of the balance sheet date:
| Carrying amount in
EUR million | | |
|
| | |
| Balance sheet item | 2016 | | 2015 | | Hedged risk | |
|
| |
| |
| |
| Bonds and other fixed-income securities | 4,176 | | 3,690 | | Currency | |
| Liabilities to customers | 136 | | 136 | | Currency | |
| Securitized liabilities | 48,473 | | 45,893 | | Currency | |
| Subordinated liabilities | 332 | | 328 | | Currency | |
| Remuneration of the Board of Managing Directors and the Board of Supervisory Directors |
In the fiscal year 2016, the total remuneration paid to the members of the Board of Managing Directors of Rentenbank in accordance with Section 285 No. 9b HGB amounted to EUR 2 282 thousand (2015: EUR 2 109 thousand). The following remuneration was determined for the individual members of the Board of Managing Directors in the fiscal year 2016:
| Amounts in EUR thousand | Fixed Remuneration* | | Variable remuneration** | | Other remuneration | | Total | |
|
| |
| |
| |
| |
| Hans Bernhardt | 700 | | 120 | | 41 | | 861 | |
| Dr. Horst Reinhardt | 700 | | 120 | | 27 | | 847 | |
| Imke Ettori | | |
| (until September 30, 2016) | 300 | | 0 | | 274 | | 574 | |
| *) | As a result of the change in the remuneration system (effective as of the 2016 fiscal year), the figures Mr. Bernhardt and Dr. Reinhardt each include a fixed one-off payment totaling EUR 170,000 each. |
| **) | A portion of 40% of the variable remuneration for the fiscal year 2015 was spread out over a period of three years and will be paid from 2017 to 2019, provided that the relevant conditions are met. |
As of December 31, 2016, provisions for pension obligations to the former members of the Board of Managing Directors and their surviving dependents totaled EUR 15,017 thousand (2015: EUR 15,855 thousand). Current benefit payments amounted to EUR 1,253 thousand (2015: EUR 1,235 thousand). As in the previous year, there were no loans granted to the members of the Board of Managing Directors or the members of the Board of Supervisory Directors in the fiscal year 2016.
In accordance with the remuneration regulations, the Chairman of the Board of Supervisory Directors receives a fixed remuneration of EUR 30 thousand, his Deputy Chairman EUR 20 thousand, and all other members of the Board of Supervisory Directors EUR 10 thousand each. In addition, the members of the Supervisory Board who are members of a committee receive remuneration of EUR 2 thousand and members who chair a committee EUR 4 thousand. The total remuneration of the Board of Supervisory Directors in the year under review amounted to EUR 283 thousand (2015: EUR 293 thousand, including VAT). The following table shows the individual remuneration (excluding VAT):
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| Membership | | Remuneration | |
|
| |
| |
| 2016 | | 2015 | | 2016 | | 2015 | |
|
| |
| |
| |
| |
| | | | | EUR thousand | | EUR thousand | |
| Joachim Rukwied | 01.01. – 31.12. | | 01.01. – 31.12. | | 42.0 | | 42.0 | |
| Christian Schmidt1 | 01.01. – 31.12. | | 01.01. – 31.12. | | 22.0 | | 22.0 | |
| Georg Fahrenschon | 01.01. – 30.06. | | 01.01. – 31.12. | | 7.0 | | 14.0 | |
| Udo Folgart | 01.01. – 31.12. | | 01.01. – 31.12. | | 14.0 | | 14.0 | |
| Dr. Robert Kloos | 01.01. – 31.12. | | 01.01. – 31.12. | | 14.0 | | 14.0 | |
| Bernhard Krüsken | 01.01. – 31.12. | | 01.01. – 31.12. | | 15.5 | | 14.0 | |
| Michael Reuther | 01.01. – 31.12. | | 01.01. – 31.12. | | 14.0 | | 14.0 | |
| Dr. Caroline Toffel | 01.01. – 31.12. | | 01.01. – 31.12. | | 14.0 | | 12.3 | |
| Werner Hilse | 01.01. – 31.12. | | 01.01. – 31.12. | | 12.0 | | 12.0 | |
| Manfred Nüssel | 01.01. – 31.12. | | 01.01. – 31.12. | | 12.0 | | 12.0 | |
| Harald Schaum | 01.01. – 31.12. | | 01.01. – 31.12. | | 12.0 | | 12.0 | |
| Brigitte Scherb | 01.01. – 31.12. | | 01.01. – 31.12. | | 12.0 | | 12.0 | |
| Konrad Weiterer | 01.01. – 24.08. | | 01.01. – 31.12. | | 6.7 | | 10.0 | |
| Dr. Marcus Pleyer | 01.01. – 31.12. | | 21.12. – 31.12. | | 14.5 | | — | |
| Werner Schwarz | 01.01. – 31.12. | | — | | 10.0 | | — | |
| Dr. Rolf Bösinger | 01.01. – 31.12. | | — | | 10.0 | | — | |
| Birgit Keller | 01.01. – 31.12. | | — | | 10.0 | | — | |
| Wolfgang Reimer | 01.01. – 02.05. | | — | | 3.3 | | — | |
| Peter Hauk | 12.05. – 31.12. | | — | | 6.3 | | — | |
| Dr. Klaus Stein | — | | 01.01. – 30.11. | | — | | 16.2 | |
| Norbert Schindler | — | | 01.01. – 31.12. | | — | | 12.0 | |
| Helmut Brunner | — | | 01.01. – 31.12. | | — | | 10.0 | |
| Prof. Mathias Stauch | — | | 01.01. – 31.12. | | — | | 10.0 | |
| Jörg Vogelsänger | — | | 01.01. – 31.12. | | — | | 10.0 | |
| Total remuneration | | | | | 251.3 | | 262.5 | |
| 1) | Direct donations to the foundation “Neue Synagoge Berlin – Centrum Judaicum”, “AG der Evangelischen Jugend in Deutschland e.V.” and “Förderverein BlechSchatz/Verein zur Förderung der Posaunenchorarbeit in Bayern e.V.” |
| |
| Average number of employees pursuant to Section 267 (5) HGB |
| 2016 | | 2015 | | |
|
| |
| | |
| Employees | Male | | Female | | Total | | Male | | Female | | Total | |
|
| |
| |
| |
| |
| |
| |
| Full-time employees | 141 | | 80 | | 221 | | 135 | | 83 | | 218 | |
| Part-time employees | 9 | | 48 | | 57 | | 5 | | 45 | | 50 | |
|
| |
| |
| |
| |
| |
| |
| Total | 150 | | 128 | | 278 | | 140 | | 128 | | 268 | |
| Participations pursuant to Section 285 No. 11 and Section 340a (4) No. 2 HGB |
In accordance with Section 286 (3) sentence 1 No. 1 HGB, we did not provide a list of participations pursuant to Section 285 No. 11 HGB due to their minor significance for the assessment of the bank’s financial position and results of operations.
Pursuant to Section 340a (4) No. 2 HGB, the participations in large corporations, where the participation exceeds 5 % of the voting rights, are shown below:
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| • | Niedersächsische Landgesellschaft mbH, Hanover |
As long as Rentenbank holds 100 % of the shares in LR Beteiligungsgesellschaft mbH, Rentenbank has undertaken to provide financial resources to LR Beteiligungsgesellschaft mbH in the form of a letter of comfort, enabling LR Beteiligungsgesellshaft mbH to meet ist obligations when due.
Disclosures on the auditors’ fees are included in the notes to the consolidated financial statements.
| Events after the reporting date pursuant to Section 285 No. 33 HGB |
There were no significant events occurring after the end of the fiscal year that would affect the bank’s income statement or balance sheet.
| Proposal for the appropriation of profit pursuant to Section 285 No. 34 HGB |
The preparation of the annual financial statements for the fiscal year 2016 with respect to profit appropriation is subject to the approval of the Supervisory Board. The proposal for the 2016 appropriation of net income and profit presents the following resolutions:
| • | Of the net income of EUR 59 000 000 reported in the income statement,
EUR 44 250 000 is allocated to the principal reserve (Hauptrücklage) pursuant to Section 2 (2) of Rentenbank’s Governing Law. |
| • | With respect to the remaining distributable profit of EUR 14 750 000, EUR 7 375 000 is provided for the Special Purpose Fund of the German Federal Government and EUR 7 375 000 for the Promotional Fund. |
| • | In addition, in accordance with the regulation that the guarantee reserve (Deckungsrücklage) may not exceed 5 % of the amount of the outstanding covered bonds pursuant to Section 2 (3) of Rentenbank’s Governing Law, EUR 21 595 000 is removed from the guarantee reserve and the principal reserve is increased by the same amount. |
The Declaration of Conformity with the German Public Corporate Governance Code by the Board of Managing Directors and the Board of Supervisory Directors is available on Rentenbank’s website. The annual financial statements, the voluntary consolidated financial statements and the annual report are available on Rentenbank’s website as well as in the electronic Federal Gazette (Bundesanzeiger). They may also be obtained at the registered office of Rentenbank.
In accordance with Section 340a (4) No. 1 HGB, mandates held by statutory representatives or other employees of Rentenbank in supervisory bodies to be formed by law of large corporations (Section 267 (3) HGB) are shown below:
| Dr. Horst Reinhardt | | VR-LEASING AG, Eschborn
(Member of the Supervisory Board) |
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| Members of the Board of Managing Directors and the Board of Supervisory Directors |
| Board of Managing Directors | Dr. Horst Reinhardt (Speaker),
Dipl.-Volkswirt, MBA
Hans Bernhardt, Dipl.-Kaufmann
Imke Ettori, Dipl.-Kauffrau
(until September 30, 2016) | |
| Board of Supervisory Directors |
Chairman:
Joachim Rukwied
President of the German Farmers’
Association (DBV), Berlin | Deputy Chairman:
Christian Schmidt, Member of the German Bundestag,
Federal Minister of Food and Agriculture, Berlin | |
| Representatives of the German Farmers’ Association (DBV): |
Udo Folgart
Honorary President of the Farmers’ Association
of Brandenburg Teltow/Ruhlsdorf | Brigitte Scherb
President of the German Rural Women’s Association, Berlin | |
| | | |
Werner Hilse
President of the Farmers’ Association
of Lower Saxony, Hanover | Werner Schwarz
President of the Farmers’ Association of Schleswig-Holstein, Rendsburg | |
| | | |
Bernhard Krüsken
Secretary-General of the German
Farmers’ Association, Berlin | | |
| Representative of the German Raiffeisen Association: |
Manfred Nüssel
President of the German Raiffeisen
Association, Berlin | | |
| Representative of the Food Industry: |
Dr. Werner Hildenbrand
Deputy Chairman of the Federation of
German Food and Drink Industries, Berlin
(since February 2, 2017) | Konrad Weiterer
President of the Federal Association of German Agribusiness (BVA), Berlin
(until August 24, 2016) | |
| State Ministers of Agriculture: |
Hamburg:
Dr. Rolf Bösinger
State Council for Economy, Transport and Innovation, Hamburg | Thuringia:
Birgit Keller
Minister of Infrastructure and Agriculture, Erfurt | |
| | | |
Baden-Württemberg:
Peter Hauk
Minister of Rural Affairs and
Consumer Protection, Stuttgart
(since May 12, 2016) | Wolfgang Reimer
Director-General of the Ministry of Rural Affairs and Consumer Protection, Stuttgart
(January 1, 2016 – May 2, 2016) | |
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| Representative of the Trade Unions: |
Harald Schaum
Deputy Federal Chairman of the Industrial Union Construction, Agriculture, Environment (IG BAU), Frankfurt am Main | | |
| Representative of the Federal Ministry of Food and Agriculture: |
Dr. Hermann Onko Aeikens
State Secretary, Berlin
(since March 20, 2017) | Dr. Robert Kloos
State Secretary, Berlin
(until December 31, 2016) | |
| Representatives of the Federal Ministry of Finance: |
Dr. Marcus Pleyer
Head of Directorate, Berlin | | |
| Representatives of banks or other lending experts: |
Dr. Birgit Roos
Chairwoman of the Board of Managing Directors of Sparkasse Krefeld, Krefeld
(since April 6, 2017) | Michael Reuther
Member of the Board of Managing Directors of Commerzbank AG,
Frankfurt am Main | |
| | | |
Dr. Caroline Toffel
Member of the Board of Managing Directors of Kieler Volksbank eG, Kiel | Georg Fahrenschon
President of the German Savings Banks Association (DSGV), Berlin
(until June 30, 2016) | |
Frankfurt am Main, March 15, 2017
LANDWIRTSCHAFTLICHE RENTENBANK
The Board of Managing Directors
| /s/ Dr. Horst Reinhardt | /s/ Hans Bernhardt | |
153
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To the best of our knowledge, and in accordance with the applicable reporting principles, the financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the bank, and the management report of the bank includes a fair review of the development and performance of the business and the position of the bank, together with a description of the principal opportunities and risks associated with the expected development of the bank.
Frankfurt am Main, March 15, 2017
LANDWIRTSCHAFTLICHE RENTENBANK
The Board of Managing Directors
| /s/ Dr. Horst Reinhardt | /s/ Hans Bernhardt | |
154
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This is an English translation of the German text, which is the sole authoritative version.
We have audited the annual financial statements, comprising the balance sheet, the income statement and the notes to the financial statements, together with the bookkeeping system, and the combined management report of Landwirtschaftliche Rentenbank, Frankfurt/Main, for the business year from January 1 to December 31, 2016. The maintenance of the books and records and the preparation of the annual financial statements and the combined management report in accordance with German commercial law and supplementary provisions of the Governing Law of Landwirtschaftliche Rentenbank [Gesetz über die Landwirtschaftliche Rentenbank] are the responsibility of the Company’s management. Our responsibility is to express an opinion on the annual financial statements, together with the bookkeeping system, and the combined management report based on our audit.
We conducted our audit of the annual financial statements in accordance with § 317 HGB [Handelsgesetzbuch “German Commercial Code”] and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the annual financial statements in accordance with [German] principles of proper accounting and in the combined management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Company and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the books and records, the annual financial statements and the management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the annual financial statements and management report. We believe that our audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the annual financial statements comply with the legal requirements and supplementary provisions of the Governing Law of Landwirtschaftliche Rentenbank [Gesetz über die Landwirtschaftliche Rentenbank] and give a true and fair view of the net assets, financial position and results of operations of Landwirtschaftliche Rentenbank, Frankfurt/Main, in accordance with [German] principles of proper accounting. The combined management report is consistent with the annual financial statements and as a whole provides a suitable view of the bank’s position and suitably presents the opportunities and risks of future development.
Frankfurt/ Main, March 15, 2017
KPMG AG
Wirtschaftsprüfungsgesellschaft
/s/ Bernhard
Wirtschaftsprüfer | | /s/ Liebermann
Wirtschaftsprüfer |
155
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Report of the Board of Supervisory Directors |
The Board of Supervisory Directors and its committees performed the duties delegated to them in accordance with Rentenbank’s Governing Law, its statutes and corporate governance principles, and advised and supervised the Board of Managing Directors in its orderly conduct of business throughout the fiscal year.
The annual financial statements as well as the combined management report were prepared by the Board of Managing Directors in accordance with the provisions of the German Commercial Code (Handelsgesetzbuch, HGB) as of December 31, 2016 and were audited by the auditors KPMG AG, Berlin, who issued an unqualified audit opinion. The consolidated financial statements as well as the combined management report as of December 31, 2016 were prepared by the Board of Managing Directors in accordance with International Financial Reporting Standards (IFRS) and the additional requirements applicable under Section 315a (1) of the German Commercial Code (HGB) and were audited by the auditors KPMG AG, Berlin, who issued an unqualified audit opinion. The findings of the audit were noted with approval by the Board of Supervisory Directors. The Board of Supervisory Directors reviewed the annual financial statements and the consolidated financial statements, including the combined management report, as well as the annual report of Landwirtschaftliche Rentenbank. The Board of Supervisory Directors adopts the bank’s annual financial statements including the combined management report for the fiscal year 2015 and approves the consolidated financial statements and the combined management report for the fiscal year 2016.
In accordance with the regulation that the guarantee reserve (Deckungsrücklage) may not exceed 5 % of the amount of the outstanding covered bonds pursuant to Section 2 (3) of Rentenbank’s Governing Law, the Board of Supervisory Directors resolved to remove EUR 21,595,000 from the guarantee reserve and to increase the principal reserve (Hauptrücklage) by the same amount.
Of the net income of EUR 59,000,000 reported in the income statement, EUR 44,250,000 is allocated to the principal reserve pursuant to Section 2 (2) of Rentenbank’s Governing Law.
With respect to the remaining distributable profit of EUR 14,750,000, the Board of Supervisory Directors resolved to provide EUR 7,375,000 for the Special Purpose Fund of the German Federal Government and EUR 7,375,000 for the Promotional Fund.
The Board of Supervisory Directors has satisfied itself that the Board of Managing Directors and the Board of Supervisory Directors have complied with the German Public Corporate Governance Code as amended on June 30, 2009. The Board of Supervisory Directors will continuously monitor compliance with and the implementation of the Code. The Board of Supervisory Directors approves the Corporate Governance Report, including the Declaration of Conformity.
Berlin, April 6, 2017
THE BOARD OF SUPERVISORY DIRECTORS OF
LANDWIRTSCHAFTLICHE RENTENBANK
/s/ Joachim Rukwied
(Chairman)
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SUPPLEMENTARY INFORMATION ON CONSOLIDATED FUNDED DEBT(1) |
The following table sets forth information concerning Rentenbank’s outstanding bonds and notes as of December 31, 2016, with an initial maturity of more than one year and issued in the capital markets.
| Currency/ISIN | Coupon
Type/
Number of
Issues | | Interest
Rate per
annum
in %(1) | | Year of
Maturity | | Principal Amount Outstanding
in Currency | | Principal Amount Outstanding
in EUR(2) | |
|
| |
| |
| |
| |
| |
| Euro | | |
| XS0597914273 | fixed | | 3.13 | | 2018 | | 1,300,000,000.00 | | 1,300,000,000.00 | |
| XS0670798171 | fixed | | 2.88 | | 2021 | | 1,250,000,000.00 | | 1,250,000,000.00 | |
| XS1069776232 | fixed | | 1.25 | | 2022 | | 1,250,000,000.00 | | 1,250,000,000.00 | |
| XS1324535514 | fixed | | 0.25 | | 2022 | | 1,250,000,000.00 | | 1,250,000,000.00 | |
| XS1016363308 | floating | | — | | 2021 | | 1,200,000,000.00 | | 1,200,000,000.00 | |
| XS1379610675 | fixed | | 0.38 | | 2026 | | 1,160,000,000.00 | | 1,160,000,000.00 | |
| XS0994797529 | fixed | | 1.38 | | 2020 | | 1,125,000,000.00 | | 1,125,000,000.00 | |
| XS0875263724 | floating | | — | | 2020 | | 1,100,000,000.00 | | 1,100,000,000.00 | |
| XS1192872866 | fixed | | 0.63 | | 2030 | | 1,100,000,000.00 | | 1,100,000,000.00 | |
| XS0332675502 | fixed | | 4.38 | | 2017 | | 1,000,000,000.00 | | 1,000,000,000.00 | |
| XS0730678801 | floating | | — | | 2019 | | 1,000,000,000.00 | | 1,000,000,000.00 | |
| XS0780331004 | fixed | | 1.88 | | 2020 | | 1,000,000,000.00 | | 1,000,000,000.00 | |
| XS1347758663 | fixed | | 0.38 | | 2024 | | 1,000,000,000.00 | | 1,000,000,000.00 | |
| XS0538385294 | floating | | — | | 2017 | | 850,000,000.00 | | 850,000,000.00 | |
| XS0795453769 | fixed | | 1.63 | | 2019 | | 800,000,000.00 | | 800,000,000.00 | |
| XS0641055230 | floating | | — | | 2018 | | 750,000,000.00 | | 750,000,000.00 | |
| XS0652914366 | fixed | | 2.00 | | 2019 | | 750,000,000.00 | | 750,000,000.00 | |
| XF0029600933 | Zero | | 0.00 | | 2031 | | 500,000,000.00 | | 500,000,000.00 | |
| XS1511781897 | fixed | | 0.63 | | 2036 | | 500,000,000.00 | | 500,000,000.00 | |
| XF0029500422 | fixed | | 0.40 | | 2023 | | 400,000,000.00 | | 400,000,000.00 | |
| XF0029500406 | floating | | — | | 2021 | | 300,000,000.00 | | 300,000,000.00 | |
| XS0806470349 | floating | | — | | 2019 | | 300,000,000.00 | | 300,000,000.00 | |
| XS0498104313 | floating | | — | | 2017 | | 250,000,000.00 | | 250,000,000.00 | |
| XS0765435697 | floating | | — | | 2020 | | 250,000,000.00 | | 250,000,000.00 | |
| XF0029600941 | Zero | | 0.00 | | 2041 | | 228,000,000.00 | | 228,000,000.00 | |
| XF0029500398 | floating | | — | | 2017 | | 200,000,000.00 | | 200,000,000.00 | |
| XF0029500414 | fixed | | 0.33 | | 2021 | | 200,000,000.00 | | 200,000,000.00 | |
| XS1260094021 | fixed | | 0.14 | | 2020 | | 200,000,000.00 | | 200,000,000.00 | |
| XS1342915326 | fixed | | 0.22 | | 2023 | | 200,000,000.00 | | 200,000,000.00 | |
| XS1370924844 | fixed | | 0.30 | | 2023 | | 200,000,000.00 | | 200,000,000.00 | |
| XF0029600966 | Zero | | 0.00 | | 2041 | | 160,000,000.00 | | 160,000,000.00 | |
| XS1282903548 | fixed | | 0.13 | | 2021 | | 150,000,000.00 | | 150,000,000.00 | |
| XF0029600529 | Zero | | 0.00 | | 2029 | | 140,390,880.41 | | 140,390,880.41 | |
| XF0029600776 | fixed | | 4.29 | | 2021 | | 140,000,000.00 | | 140,000,000.00 | |
| XF0029212580 | fixed | | 4.12 | | 2019 | | 125,000,000.00 | | 125,000,000.00 | |
| XF0029600768 | fixed | | 4.21 | | 2020 | | 120,000,000.00 | | 120,000,000.00 | |
| XF0029212564 | fixed | | 3.91 | | 2017 | | 102,000,000.00 | | 102,000,000.00 | |
| XF0029212697 | fixed | | 3.95 | | 2019 | | 100,000,000.00 | | 100,000,000.00 | |
| XF0029601006 | fixed | | 2.02 | | 2024 | | 100,000,000.00 | | 100,000,000.00 | |
| XF0029212572 | fixed | | 4.02 | | 2018 | | 100,000,000.00 | | 100,000,000.00 | |
| XF0029600792 | fixed | | 4.02 | | 2019 | | 100,000,000.00 | | 100,000,000.00 | |
| XS0547228188 | fixed | | 1.20 | | 2017 | | 100,000,000.00 | | 100,000,000.00 | |
| XS0729900059 | floating | | — | | 2019 | | 100,000,000.00 | | 100,000,000.00 | |
| XS1263983873 | fixed | | 0.15 | | 2020 | | 100,000,000.00 | | 100,000,000.00 | |
| XS1290249686 | fixed | | 0.21 | | 2021 | | 100,000,000.00 | | 100,000,000.00 | |
| XS0194344437 | floating | | 0.03 | | 2021 | | 100,000,000.00 | | 100,000,000.00 | |
| XS0195402192 | floating | | 0.06 | | 2021 | | 100,000,000.00 | | 100,000,000.00 | |
| XF0029601170 | Zero | | 0.00 | | 2046 | | 84,887,433.00 | | 84,887,433.00 | |
| XF0029601188 | Zero | | 0.00 | | 2046 | | 84,737,436.10 | | 84,737,436.10 | |
| XF0029600818 | Zero | | 0.00 | | 2026 | | 81,693,092.79 | | 81,693,092.79 | |
| XF0029600479 | Zero | | 0.00 | | 2029 | | 77,799,145.75 | | 77,799,145.75 | |
| XF0029600917 | Zero | | 0.00 | | 2041 | | 75,771,322.69 | | 75,771,322.69 | |
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| Currency/ISIN | Coupon
Type/
Number of
Issues | | Interest
Rate per
annum
in %(1) | | Year of
Maturity | | Principal Amount Outstanding
in Currency | | Principal Amount Outstanding
in EUR(2) | |
|
| |
| |
| |
| |
| |
| XS0722549531 | fixed | | 0.90 | | 2018 | | 70,000,000.00 | | 70,000,000.00 | |
| XF0029601071 | Zero | | 0.00 | | 2036 | | 67,374,829.97 | | 67,374,829.97 | |
| XF0029601097 | Zero | | 0.00 | | 2036 | | 65,995,895.49 | | 65,995,895.49 | |
| XF0029601105 | Zero | | 0.00 | | 2036 | | 65,638,543.30 | | 65,638,543.30 | |
| XF0029600370 | fixed | | 4.00 | | 2027 | | 65,000,000.00 | | 65,000,000.00 | |
| XS0614385218 | fixed | | 1.20 | | 2018 | | 65,000,000.00 | | 65,000,000.00 | |
| XF0029600560 | fixed | | 4.43 | | 2029 | | 62,000,000.00 | | 62,000,000.00 | |
| XS0645748335 | fixed | | 1.20 | | 2018 | | 61,000,000.00 | | 61,000,000.00 | |
| XF0029600156 | fixed | | 4.51 | | 2024 | | 55,700,000.00 | | 55,700,000.00 | |
| XF0029600412 | fixed | | 4.20 | | 2025 | | 55,250,000.00 | | 55,250,000.00 | |
| XF0029600222 | fixed | | 4.00 | | 2023 | | 55,000,000.00 | | 55,000,000.00 | |
| XF0029600438 | fixed | | 4.38 | | 2029 | | 51,000,000.00 | | 51,000,000.00 | |
| XF0029600883 | fixed | | 2.41 | | 2017 | | 50,000,000.00 | | 50,000,000.00 | |
| XF0029600891 | fixed | | 2.47 | | 2017 | | 50,000,000.00 | | 50,000,000.00 | |
| XF0029600974 | fixed | | 2.36 | | 2018 | | 50,000,000.00 | | 50,000,000.00 | |
| XF0029600990 | fixed | | 2.07 | | 2024 | | 50,000,000.00 | | 50,000,000.00 | |
| XF0029601014 | fixed | | 2.00 | | 2025 | | 50,000,000.00 | | 50,000,000.00 | |
| XF0029601022 | fixed | | 2.05 | | 2026 | | 50,000,000.00 | | 50,000,000.00 | |
| XF0029600248 | fixed | | 3.91 | | 2028 | | 50,000,000.00 | | 50,000,000.00 | |
| DE0002942463 | floating | | 4.90 | | 2020 | | 50,000,000.00 | | 50,000,000.00 | |
| XS0435946487 | floating | | 0.13 | | 2019 | | 50,000,000.00 | | 50,000,000.00 | |
| XS0963399257 | fixed | | 1.46 | | 2020 | | 50,000,000.00 | | 50,000,000.00 | |
| XF0029600958 | Zero | | 0.00 | | 2041 | | 49,000,000.00 | | 49,000,000.00 | |
| XF0029600271 | Zero | | 0.00 | | 2028 | | 48,697,956.65 | | 48,697,956.65 | |
| XF0029601030 | fixed | | 1.20 | | 2035 | | 48,000,000.00 | | 48,000,000.00 | |
| XF0029600743 | Zero | | 0.00 | | 2029 | | 47,774,800.48 | | 47,774,800.48 | |
| XF0029600875 | Zero | | 0.00 | | 2027 | | 44,017,659.48 | | 44,017,659.48 | |
| XF0029601154 | Zero | | 0.00 | | 2046 | | 44,000,000.00 | | 44,000,000.00 | |
| XF0029600149 | fixed | | 4.41 | | 2028 | | 43,000,000.00 | | 43,000,000.00 | |
| XF0029601048 | Zero | | 0.00 | | 2035 | | 42,000,000.00 | | 42,000,000.00 | |
| XF0029600297 | fixed | | 4.05 | | 2023 | | 41,500,000.00 | | 41,500,000.00 | |
| XF0029600115 | fixed | | 4.47 | | 2028 | | 40,000,000.00 | | 40,000,000.00 | |
| XF0029600073 | fixed | | 4.53 | | 2024 | | 40,000,000.00 | | 40,000,000.00 | |
| XF0029600545 | fixed | | 4.40 | | 2029 | | 40,000,000.00 | | 40,000,000.00 | |
| XF0029600586 | fixed | | 4.56 | | 2029 | | 40,000,000.00 | | 40,000,000.00 | |
| XS0645748418 | fixed | | 1.20 | | 2017 | | 36,000,000.00 | | 36,000,000.00 | |
| XF0029600404 | fixed | | 4.23 | | 2025 | | 35,000,000.00 | | 35,000,000.00 | |
| XS0753491652 | fixed | | 1.00 | | 2018 | | 35,000,000.00 | | 35,000,000.00 | |
| XS1290114757 | Zero | | 0.00 | | 2035 | | 34,800,000.00 | | 34,800,000.00 | |
| XF0029601162 | Zero | | 0.00 | | 2036 | | 33,538,928.25 | | 33,538,928.25 | |
| XS0082993741 | Zero | | 0.00 | | 2017 | | 65,000,000.00 | | 33,233,972.28 | |
| XS0688421584 | fixed | | 0.90 | | 2018 | | 32,000,000.00 | | 32,000,000.00 | |
| XF0029601113 | Zero | | 0.00 | | 2036 | | 31,893,025.25 | | 31,893,025.25 | |
| XF0029601121 | Zero | | 0.00 | | 2036 | | 31,735,859.00 | | 31,735,859.00 | |
| XF0029600982 | Zero | | 0.00 | | 2041 | | 30,520,641.75 | | 30,520,641.75 | |
| XF0029601139 | Zero | | 0.00 | | 2036 | | 30,504,751.00 | | 30,504,751.00 | |
| XF0029600347 | fixed | | 3.82 | | 2018 | | 30,500,000.00 | | 30,500,000.00 | |
| XF0029600180 | fixed | | 4.38 | | 2023 | | 30,000,000.00 | | 30,000,000.00 | |
| XF0029600255 | fixed | | 4.18 | | 2028 | | 30,000,000.00 | | 30,000,000.00 | |
| XF0029600453 | fixed | | 3.94 | | 2019 | | 30,000,000.00 | | 30,000,000.00 | |
| XF0029600826 | fixed | | 4.50 | | 2029 | | 30,000,000.00 | | 30,000,000.00 | |
| XS0415796258 | floating | | 0.21 | | 2019 | | 30,000,000.00 | | 30,000,000.00 | |
| XS0770149002 | fixed | | 1.00 | | 2018 | | 30,000,000.00 | | 30,000,000.00 | |
| XS0770149697 | fixed | | 1.00 | | 2019 | | 30,000,000.00 | | 30,000,000.00 | |
| XF0029600198 | fixed | | 4.23 | | 2025 | | 26,000,000.00 | | 26,000,000.00 | |
| XF0029600677 | Zero | | 0.00 | | 2029 | | 25,933,048.58 | | 25,933,048.58 | |
| XF0029600172 | fixed | | 4.48 | | 2024 | | 25,000,000.00 | | 25,000,000.00 | |
| XF0029600024 | fixed | | 4.48 | | 2024 | | 25,000,000.00 | | 25,000,000.00 | |
| XF0029600925 | fixed | | 3.91 | | 2026 | | 25,000,000.00 | | 25,000,000.00 | |
| XF0029600602 | fixed | | 4.48 | | 2031 | | 25,000,000.00 | | 25,000,000.00 | |
| XS1058275048 | floating | | — | | 2019 | | 25,000,000.00 | | 25,000,000.00 | |
| XF0029601055 | Zero | | 0.00 | | 2045 | | 24,224,835.50 | | 24,224,835.50 | |
| XF0029601063 | Zero | | 0.00 | | 2045 | | 23,871,898.75 | | 23,871,898.75 | |
| XF0029212317 | fixed | | 4.35 | | 2018 | | 21,000,000.00 | | 21,000,000.00 | |
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| Currency/ISIN | Coupon
Type/
Number of
Issues | | Interest
Rate per
annum
in %(1) | | Year of
Maturity | | Principal Amount Outstanding
in Currency | | Principal Amount Outstanding
in EUR(2) | |
|
| |
| |
| |
| |
| |
| XF0029600123 | fixed | | 4.53 | | 2023 | | 20,300,000.00 | | 20,300,000.00 | |
| XF0029212234 | fixed | | 4.89 | | 2017 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029212242 | fixed | | 4.90 | | 2017 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029212192 | fixed | | 4.50 | | 2017 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029600040 | fixed | | 4.51 | | 2028 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029600065 | fixed | | 4.49 | | 2028 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029600214 | fixed | | 4.42 | | 2028 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029600230 | fixed | | 4.42 | | 2028 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029600313 | fixed | | 4.43 | | 2028 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029600057 | fixed | | 4.58 | | 2024 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029600446 | fixed | | 4.20 | | 2024 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029600032 | fixed | | 4.48 | | 2024 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029600511 | fixed | | 4.43 | | 2029 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029600628 | fixed | | 4.09 | | 2021 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029600636 | fixed | | 4.13 | | 2022 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029212648 | fixed | | 4.12 | | 2019 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029212515 | fixed | | 4.00 | | 2019 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029600909 | fixed | | 4.10 | | 2031 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029212531 | fixed | | 4.10 | | 2019 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029600594 | fixed | | 4.48 | | 2031 | | 20,000,000.00 | | 20,000,000.00 | |
| XS1386405150 | fixed | | 0.60 | | 2031 | | 20,000,000.00 | | 20,000,000.00 | |
| XF0029115338 | floating | | — | | 2027 | | 19,290,123.46 | | 19,290,123.46 | |
| XF0029212655 | fixed | | 4.14 | | 2019 | | 19,000,000.00 | | 19,000,000.00 | |
| XF0029600396 | fixed | | 4.23 | | 2025 | | 17,000,000.00 | | 17,000,000.00 | |
| XF0029601089 | Zero | | 0.00 | | 2041 | | 16,000,000.00 | | 16,000,000.00 | |
| XF0029212630 | fixed | | 4.06 | | 2019 | | 15,500,000.00 | | 15,500,000.00 | |
| XF0029212382 | fixed | | 4.12 | | 2018 | | 15,200,000.00 | | 15,200,000.00 | |
| XF0029212291 | fixed | | 4.45 | | 2017 | | 15,000,000.00 | | 15,000,000.00 | |
| XF0029600305 | fixed | | 4.45 | | 2028 | | 15,000,000.00 | | 15,000,000.00 | |
| XF0029601147 | fixed | | 0.31 | | 2031 | | 15,000,000.00 | | 15,000,000.00 | |
| XS1055718875 | fixed | | 1.79 | | 2024 | | 15,000,000.00 | | 15,000,000.00 | |
| XF0029212788 | fixed | | 0.68 | | 2018 | | 13,000,000.00 | | 13,000,000.00 | |
| XF0029600727 | fixed | | 4.01 | | 2019 | | 13,000,000.00 | | 13,000,000.00 | |
| XF0029600263 | fixed | | 4.04 | | 2023 | | 12,000,000.00 | | 12,000,000.00 | |
| XF0029600651 | fixed | | 4.10 | | 2020 | | 11,000,000.00 | | 11,000,000.00 | |
| XS0792039124 | Zero | | 0.00 | | 2018 | | 11,000,000.00 | | 11,000,000.00 | |
| XF0029212176 | fixed | | 4.35 | | 2017 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212184 | fixed | | 4.37 | | 2017 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212218 | fixed | | 4.68 | | 2017 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212226 | fixed | | 4.67 | | 2017 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212267 | fixed | | 4.47 | | 2017 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212275 | fixed | | 4.63 | | 2017 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212283 | fixed | | 4.65 | | 2017 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212309 | fixed | | 4.48 | | 2017 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212325 | fixed | | 4.53 | | 2018 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212333 | fixed | | 4.53 | | 2018 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212341 | fixed | | 4.49 | | 2018 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212200 | fixed | | 4.61 | | 2017 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212440 | fixed | | 4.01 | | 2018 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212150 | fixed | | 4.26 | | 2017 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212259 | fixed | | 4.90 | | 2019 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029600107 | fixed | | 4.55 | | 2023 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029600081 | fixed | | 4.55 | | 2023 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029600321 | fixed | | 4.19 | | 2023 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212432 | fixed | | 4.02 | | 2018 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029600099 | fixed | | 4.55 | | 2024 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212465 | fixed | | 3.78 | | 2019 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029600487 | fixed | | 4.10 | | 2019 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029600644 | fixed | | 4.61 | | 2029 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029600693 | fixed | | 4.54 | | 2030 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029600206 | fixed | | 4.24 | | 2024 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029600719 | fixed | | 4.37 | | 2024 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029600784 | fixed | | 4.08 | | 2020 | | 10,000,000.00 | | 10,000,000.00 | |
| XS0422205152 | floating | | 0.31 | | 2019 | | 10,000,000.00 | | 10,000,000.00 | |
159
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| Currency/ISIN | Coupon
Type/
Number of
Issues | | Interest
Rate per
annum
in %(1) | | Year of
Maturity | | Principal Amount
Outstanding
in Currency | | Principal Amount
Outstanding
in EUR(2) | |
|
| |
| |
| |
| |
| |
| XS1081416031 | fixed | | 0.50 | | 2019 | | 10,000,000.00 | | 10,000,000.00 | |
| XS1151583843 | fixed | | 0.20 | | 2020 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029211962 | fixed | | 4.75 | | 2019 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029211954 | fixed | | 5.00 | | 2024 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029211947 | fixed | | 5.00 | | 2024 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029211970 | fixed | | 5.00 | | 2024 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029211988 | fixed | | 5.00 | | 2024 | | 10,000,000.00 | | 10,000,000.00 | |
| XF0029212366 | fixed | | 4.41 | | 2018 | | 9,600,000.00 | | 9,600,000.00 | |
| XF0029600388 | fixed | | 3.87 | | 2019 | | 8,000,000.00 | | 8,000,000.00 | |
| XF0029212614 | fixed | | 4.04 | | 2019 | | 8,000,000.00 | | 8,000,000.00 | |
| XF0029600354 | fixed | | 3.87 | | 2018 | | 6,000,000.00 | | 6,000,000.00 | |
| XF0029600685 | fixed | | 4.13 | | 2021 | | 6,000,000.00 | | 6,000,000.00 | |
| XF0029212549 | fixed | | 4.04 | | 2019 | | 6,000,000.00 | | 6,000,000.00 | |
| XF0029212390 | fixed | | 4.15 | | 2018 | | 5,500,000.00 | | 5,500,000.00 | |
| XF0029600289 | fixed | | 4.10 | | 2023 | | 5,000,000.00 | | 5,000,000.00 | |
| XF0029212705 | fixed | | 3.71 | | 2018 | | 5,000,000.00 | | 5,000,000.00 | |
| XF0029212168 | fixed | | 4.13 | | 2017 | | 5,000,000.00 | | 5,000,000.00 | |
| XF0029600016 | fixed | | 4.31 | | 2019 | | 5,000,000.00 | | 5,000,000.00 | |
| XF0029600461 | fixed | | 4.32 | | 2028 | | 5,000,000.00 | | 5,000,000.00 | |
| XF0029600552 | fixed | | 3.84 | | 2019 | | 5,000,000.00 | | 5,000,000.00 | |
| XF0029600610 | fixed | | 4.33 | | 2024 | | 5,000,000.00 | | 5,000,000.00 | |
| XF0029600669 | fixed | | 4.43 | | 2024 | | 5,000,000.00 | | 5,000,000.00 | |
| XF0029600750 | fixed | | 4.04 | | 2019 | | 5,000,000.00 | | 5,000,000.00 | |
| XF0029600834 | fixed | | 4.15 | | 2026 | | 5,000,000.00 | | 5,000,000.00 | |
| XF0029600842 | fixed | | 4.00 | | 2019 | | 5,000,000.00 | | 5,000,000.00 | |
| XF0029600800 | fixed | | 3.73 | | 2019 | | 5,000,000.00 | | 5,000,000.00 | |
| XF0029600537 | fixed | | 3.79 | | 2019 | | 5,000,000.00 | | 5,000,000.00 | |
| XF0029600495 | fixed | | 4.33 | | 2025 | | 5,000,000.00 | | 5,000,000.00 | |
| XS0443052088 | fixed | | 3.30 | | 2017 | | 5,000,000.00 | | 5,000,000.00 | |
| XF0029212374 | fixed | | 4.41 | | 2018 | | 3,400,000.00 | | 3,400,000.00 | |
| XF0029212457 | fixed | | 3.90 | | 2018 | | 3,000,000.00 | | 3,000,000.00 | |
| XF0029600164 | fixed | | 4.39 | | 2020 | | 2,750,000.00 | | 2,750,000.00 | |
| XF0029114570 | fixed | | 3.28 | | 2017 | | 2,500,000.00 | | 2,500,000.00 | |
| XF0029212473 | fixed | | 3.61 | | 2017 | | 2,500,000.00 | | 2,500,000.00 | |
| XF0029212416 | fixed | | 3.75 | | 2018 | | 2,000,000.00 | | 2,000,000.00 | |
| XF0029600735 | fixed | | 4.13 | | 2019 | | 2,000,000.00 | | 2,000,000.00 | |
| XF0029212598 | fixed | | 4.16 | | 2024 | | 2,000,000.00 | | 2,000,000.00 | |
| XF0029212358 | fixed | | 4.80 | | 2018 | | 1,000,000.00 | | 1,000,000.00 | |
| XF0029600503 | fixed | | 3.83 | | 2020 | | 1,000,000.00 | | 1,000,000.00 | |
| DE0002942448 | Zero | | 0.00 | | 2049 | | 517,500.00 | | 517,500.00 | |
| XF0029212408 | fixed | | 4.15 | | 2018 | | 500,000.00 | | 500,000.00 | |
| XF0029600131 | fixed | | 4.40 | | 2019 | | 50,000.00 | | 50,000.00 | |
| Euro Total: | 222 | | | | | | | | 27,752,593,579.93 | |
|
| | | | | | | |
| |
| United States Dollar | | |
| XS1218982251 | fixed | | 1.88 | | 2023 | | 2,300,000,000.00 | | 2,181,956,171.14 | |
| US515110BN30 | fixed | | 2.00 | | 2025 | | 2,000,000,000.00 | | 1,897,353,192.30 | |
| US515110BJ28 | fixed | | 1.00 | | 2018 | | 1,750,000,000.00 | | 1,660,184,043.26 | |
| XS1190529989 | fixed | | 1.63 | | 2020 | | 1,750,000,000.00 | | 1,660,184,043.26 | |
| US515110BF06 | fixed | | 1.88 | | 2018 | | 1,500,000,000.00 | | 1,423,014,894.22 | |
| US515110BG88 | fixed | | 0.88 | | 2017 | | 1,500,000,000.00 | | 1,423,014,894.22 | |
| US515110BP87 | fixed | | 2.38 | | 2025 | | 1,500,000,000.00 | | 1,423,014,894.22 | |
| US515110BR44 | fixed | | 1.75 | | 2026 | | 1,500,000,000.00 | | 1,423,014,894.22 | |
| US515110BS27 | fixed | | 2.00 | | 2021 | | 1,500,000,000.00 | | 1,423,014,894.22 | |
| US515110BC74 | fixed | | 2.38 | | 2017 | | 1,250,000,000.00 | | 1,185,845,745.19 | |
| US515110BH61 | fixed | | 1.38 | | 2019 | | 1,250,000,000.00 | | 1,185,845,745.19 | |
| XS1078121057 | floating | | 0.92 | | 2019 | | 1,250,000,000.00 | | 1,185,845,745.19 | |
| US515110BL73 | fixed | | 2.25 | | 2021 | | 1,250,000,000.00 | | 1,185,845,745.19 | |
| US51511CAK45 | floating | | 0.91 | | 2022 | | 1,225,000,000.00 | | 1,162,128,830.28 | |
| XS0999670648 | floating | | 1.05 | | 2018 | | 1,100,000,000.00 | | 1,043,544,255.76 | |
| US515110AV64 | fixed | | 5.13 | | 2017 | | 1,050,000,000.00 | | 996,110,425.96 | |
| US515110BK90 | fixed | | 1.75 | | 2019 | | 1,000,000,000.00 | | 948,676,596.15 | |
| XS1047849093 | fixed | | 2.38 | | 2021 | | 1,000,000,000.00 | | 948,676,596.15 | |
| US51511CAN83 | floating | | 1.19 | | 2021 | | 1,000,000,000.00 | | 948,676,596.15 | |
160
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| Currency/ISIN | Coupon
Type/
Number of
Issues | | Interest
Rate per
annum
in %(1) | | Year of
Maturity | | Principal Amount Outstanding
in Currency | | Principal Amount Outstanding
in EUR(2) | |
|
| |
| |
| |
| |
| |
| US51511CAM01 | floating | | 1.26 | | 2021 | | 850,000,000.00 | | 806,375,106.73 | |
| XS0834953084 | floating | | 1.08 | | 2017 | | 500,000,000.00 | | 474,338,298.07 | |
| XS1028385562 | floating | | 0.88 | | 2017 | | 500,000,000.00 | | 474,338,298.07 | |
| XS1107866979 | fixed | | 1.88 | | 2020 | | 500,000,000.00 | | 474,338,298.07 | |
| XS1487325661 | Zero | | 0.00 | | 2017 | | 500,000,000.00 | | 474,338,298.07 | |
| XS1523120597 | Zero | | 0.00 | | 2017 | | 500,000,000.00 | | 474,338,298.07 | |
| XS1536760892 | Zero | | 0.00 | | 2017 | | 500,000,000.00 | | 474,338,298.07 | |
| XS1502432112 | Zero | | 0.00 | | 2017 | | 400,000,000.00 | | 379,470,638.46 | |
| XS1504066413 | Zero | | 0.00 | | 2017 | | 400,000,000.00 | | 379,470,638.46 | |
| XS1506573770 | Zero | | 0.00 | | 2017 | | 400,000,000.00 | | 379,470,638.46 | |
| XS1514185971 | Zero | | 0.00 | | 2017 | | 400,000,000.00 | | 379,470,638.46 | |
| XS1516024525 | Zero | | 0.00 | | 2017 | | 400,000,000.00 | | 379,470,638.46 | |
| XS1520715829 | Zero | | 0.00 | | 2017 | | 400,000,000.00 | | 379,470,638.46 | |
| XS1500459596 | Zero | | 0.00 | | 2017 | | 200,000,000.00 | | 189,735,319.23 | |
| XS1533820772 | Zero | | 0.00 | | 2017 | | 200,000,000.00 | | 189,735,319.23 | |
| XS1538278422 | Zero | | 0.00 | | 2017 | | 200,000,000.00 | | 189,735,319.23 | |
| XS1531536396 | Zero | | 0.00 | | 2017 | | 185,000,000.00 | | 175,505,170.29 | |
| XS1527461724 | Zero | | 0.00 | | 2017 | | 160,000,000.00 | | 151,788,255.38 | |
| XS1513789278 | Zero | | 0.00 | | 2017 | | 150,000,000.00 | | 142,301,489.42 | |
| XS1410584798 | Zero | | 0.00 | | 2017 | | 125,000,000.00 | | 118,584,574.52 | |
| XS1515114228 | Zero | | 0.00 | | 2017 | | 110,000,000.00 | | 104,354,425.58 | |
| XS1434518012 | fixed | | 1.80 | | 2021 | | 100,000,000.00 | | 94,867,659.61 | |
| XS1507481353 | Zero | | 0.00 | | 2017 | | 100,000,000.00 | | 94,867,659.61 | |
| XS1525871478 | Zero | | 0.00 | | 2017 | | 100,000,000.00 | | 94,867,659.61 | |
| XS1542349698 | Zero | | 0.00 | | 2017 | | 100,000,000.00 | | 94,867,659.61 | |
| XS1542638538 | Zero | | 0.00 | | 2017 | | 100,000,000.00 | | 94,867,659.61 | |
| XS1508393433 | Zero | | 0.00 | | 2017 | | 70,000,000.00 | | 66,407,361.73 | |
| XF0029212762 | fixed | | 3.43 | | 2021 | | 60,000,000.00 | | 56,920,595.77 | |
| XS1494424309 | Zero | | 0.00 | | 2017 | | 50,000,000.00 | | 47,433,829.81 | |
| XS1504934123 | Zero | | 0.00 | | 2017 | | 50,000,000.00 | | 47,433,829.81 | |
| XS1506401998 | Zero | | 0.00 | | 2017 | | 50,000,000.00 | | 47,433,829.81 | |
| XS1371543742 | floating | | 1.64 | | 2025 | | 40,000,000.00 | | 37,947,063.85 | |
| XF0029212770 | fixed | | 3.05 | | 2021 | | 35,000,000.00 | | 33,203,680.87 | |
| XS0140850412 | fixed | | 6.24 | | 2017 | | 30,000,000.00 | | 28,460,297.88 | |
| XS1270831420 | floating | | 1.40 | | 2025 | | 30,000,000.00 | | 28,460,297.88 | |
| XS1508980486 | Zero | | 0.00 | | 2017 | | 25,000,000.00 | | 23,716,914.90 | |
| XS1532536338 | Zero | | 0.00 | | 2017 | | 25,000,000.00 | | 23,716,914.90 | |
| XS1514963773 | Zero | | 0.00 | | 2017 | | 24,000,000.00 | | 22,768,238.31 | |
| XS1495508019 | Zero | | 0.00 | | 2017 | | 20,000,000.00 | | 18,973,531.92 | |
| XS1536768440 | Zero | | 0.00 | | 2017 | | 20,000,000.00 | | 18,973,531.92 | |
| XF0029212747 | fixed | | 3.80 | | 2021 | | 10,000,000.00 | | 9,486,765.96 | |
| XS1514845491 | Zero | | 0.00 | | 2017 | | 10,000,000.00 | | 9,486,765.96 | |
| United States Dollar Total: | 61 | | | | | | | | 33,492,078,550.42 | |
|
| | | | | | | |
| |
| Australian Dollar | | |
| AU3CB0204543 | fixed | | 4.25 | | 2023 | | 1,625,000,000.00 | | 1,113,318,717.46 | |
| AU3CB0146660 | fixed | | 6.50 | | 2017 | | 1,600,000,000.00 | | 1,096,190,737.19 | |
| AU3CB0191278 | fixed | | 5.50 | | 2020 | | 1,450,000,000.00 | | 993,422,855.58 | |
| AU3CB0214211 | fixed | | 4.75 | | 2024 | | 1,300,000,000.00 | | 890,654,973.97 | |
| AU3CB0226728 | fixed | | 2.70 | | 2020 | | 1,225,000,000.00 | | 839,271,033.16 | |
| AU3CB0173730 | fixed | | 6.25 | | 2018 | | 1,000,000,000.00 | | 685,119,210.74 | |
| AU3CB0192276 | fixed | | 5.50 | | 2022 | | 1,000,000,000.00 | | 685,119,210.74 | |
| AU3CB0222362 | fixed | | 4.25 | | 2025 | | 1,000,000,000.00 | | 685,119,210.74 | |
| AU3CB0220598 | fixed | | 4.75 | | 2026 | | 705,000,000.00 | | 483,009,043.57 | |
| AU3CB0227841 | fixed | | 2.70 | | 2022 | | 700,000,000.00 | | 479,583,447.52 | |
| AU0000LWSHA9 | fixed | | 4.00 | | 2019 | | 500,000,000.00 | | 342,559,605.37 | |
| XS0882836785 | floating | | 2.11 | | 2018 | | 400,000,000.00 | | 274,047,684.30 | |
| AU3CB0228716 | fixed | | 2.50 | | 2021 | | 400,000,000.00 | | 274,047,684.30 | |
| XS0355982785 | fixed | | 6.74 | | 2018 | | 350,000,000.00 | | 239,791,723.76 | |
| AU3CB0239796 | fixed | | 2.60 | | 2027 | | 200,000,000.00 | | 137,023,842.15 | |
| XS1545488667 | Zero | | 0.00 | | 2017 | | 200,000,000.00 | | 137,023,842.15 | |
| XS1535782731 | Zero | | 0.00 | | 2017 | | 150,000,000.00 | | 102,767,881.61 | |
| XS0956359383 | fixed | | 4.88 | | 2023 | | 50,000,000.00 | | 34,255,960.54 | |
| XS0737167485 | fixed | | 0.50 | | 2017 | | 35,200,000.00 | | 24,116,196.22 | |
161
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| Currency/ISIN | Coupon
Type/
Number of
Issues | | Interest
Rate per
annum
in %(1) | | Year of
Maturity | | Principal Amount Outstanding
in Currency | | Principal Amount Outstanding
in EUR(2) | |
|
| |
| |
| |
| |
| |
| XS0955269260 | fixed | | 4.45 | | 2020 | | 25,000,000.00 | | 17,127,980.27 | |
| XS0613944353 | fixed | | 6.57 | | 2021 | | 17,000,000.00 | | 11,647,026.58 | |
| Australian Dollar Total: | 21 | | | | | | | | 9,545,217,867.91 | |
|
| | | | | | | |
| |
| British Pound Sterling | | |
| XS0893356120 | fixed | | 1.00 | | 2017 | | 825,000,000.00 | | 963,582,424.26 | |
| XS1262519801 | fixed | | 1.50 | | 2019 | | 500,000,000.00 | | 583,989,348.03 | |
| XS1353633750 | fixed | | 1.38 | | 2020 | | 450,000,000.00 | | 525,590,413.23 | |
| XS1409512693 | fixed | | 1.13 | | 2021 | | 350,000,000.00 | | 408,792,543.62 | |
| XF0029212754 | fixed | | 3.76 | | 2020 | | 10,000,000.00 | | 11,679,786.96 | |
| British Pound Sterling Total: | 5 | | | | | | | | 2,493,634,516.11 | |
|
| | | | | | | |
| |
| New Zealand Dollar | | |
| NZLRBDT009C1 | fixed | | 5.38 | | 2024 | | 850,000,000.00 | | 560,759,994.72 | |
| NZLRBDT008C3 | fixed | | 4.75 | | 2019 | | 800,000,000.00 | | 527,774,112.68 | |
| NZLRBDT010C9 | fixed | | 4.00 | | 2020 | | 600,000,000.00 | | 395,830,584.51 | |
| XS0299261403 | fixed | | 7.00 | | 2017 | | 400,000,000.00 | | 263,887,056.34 | |
| NZLRBDT002C6 | fixed | | 7.49 | | 2017 | | 275,000,000.00 | | 181,422,351.23 | |
| NZLRBDT006C7 | fixed | | 3.88 | | 2017 | | 175,000,000.00 | | 115,450,587.15 | |
| NZLRBDT007C5 | fixed | | 4.38 | | 2020 | | 125,000,000.00 | | 82,464,705.11 | |
| NZLRBDT011C7 | fixed | | 3.00 | | 2021 | | 100,000,000.00 | | 65,971,764.08 | |
| NZLRBDT005C9 | floating | | 2.77 | | 2018 | | 75,000,000.00 | | 49,478,823.06 | |
| XS0289824962 | fixed | | 1.00 | | 2017 | | 55,000,000.00 | | 36,284,470.25 | |
| XF0029212796 | fixed | | 4.11 | | 2023 | | 21,000,000.00 | | 13,854,070.46 | |
| New Zealand Dollar Total: | 11 | | | | | | | | 2,293,178,519.59 | |
|
| | | | | | | |
| |
| Swiss Franc | | |
| CH0111461312 | fixed | | 1.75 | | 2017 | | 250,000,000.00 | | 232,796,349.75 | |
| CH0022312109 | fixed | | 2.13 | | 2017 | | 200,000,000.00 | | 186,237,079.80 | |
| CH0020827561 | fixed | | 2.50 | | 2018 | | 150,000,000.00 | | 139,677,809.85 | |
| XS0434519442 | fixed | | 2.77 | | 2017 | | 100,000,000.00 | | 93,118,539.90 | |
| XS0428134869 | fixed | | 2.44 | | 2017 | | 80,000,000.00 | | 74,494,831.92 | |
| CH0049932863 | fixed | | 2.83 | | 2024 | | 50,000,000.00 | | 46,559,269.95 | |
| XS0418386479 | fixed | | 2.82 | | 2021 | | 50,000,000.00 | | 46,559,269.95 | |
| Swiss Franc Total: | 7 | | | | | | | | 819,443,151.13 | |
|
| | | | | | | |
| |
| Norwegian Kroner | | |
| XS0686448019 | fixed | | 3.50 | | 2018 | | 2,300,000,000.00 | | 253,128,336.07 | |
| XS1508901797 | floating | | 2.34 | | 2019 | | 1,250,000,000.00 | | 137,569,747.86 | |
| NO0010634678 | floating | | 1.41 | | 2017 | | 1,000,000,000.00 | | 110,055,798.29 | |
| XS0942541912 | fixed | | 2.63 | | 2020 | | 1,000,000,000.00 | | 110,055,798.29 | |
| NO0010708399 | floating | | 1.12 | | 2017 | | 850,000,000.00 | | 93,547,428.55 | |
| XS0385848717 | fixed | | 5.33 | | 2018 | | 600,000,000.00 | | 66,033,478.97 | |
| NO0010778251 | floating | | 2.33 | | 2021 | | 600,000,000.00 | | 66,033,478.97 | |
| XS0213329096 | fixed | | 3.91 | | 2020 | | 500,000,000.00 | | 55,027,899.14 | |
| XS0931408420 | fixed | | 2.25 | | 2019 | | 500,000,000.00 | | 55,027,899.14 | |
| NO0010624166 | floating | | 1.24 | | 2018 | | 300,000,000.00 | | 33,016,739.49 | |
| Norwegian Kroner Total: | 10 | | | | | | | | 979,496,604.78 | |
|
| | | | | | | |
| |
| Candian Dollar | | |
| US515110BM56 | fixed | | 1.88 | | 2019 | | 500,000,000.00 | | 352,410,487.74 | |
| XS1089927781 | fixed | | 2.25 | | 2021 | | 100,000,000.00 | | 70,482,097.55 | |
| CA515110AM67 | fixed | | 4.88 | | 2020 | | 85,600,000.00 | | 60,332,675.50 | |
| Candian Dollar Total: | 3 | | | | | | | | 483,225,260.78 | |
|
| | | | | | | |
| |
| Japanese Yen | | |
| XS0251101456 | fixed | | 2.80 | | 2036 | | 25,000,000,000.00 | | 202,593,192.87 | |
| XS0064185035 | floating | | 5.20 | | 2026 | | 10,000,000,000.00 | | 81,037,277.15 | |
| XF0029500323 | fixed | | 2.00 | | 2019 | | 10,000,000,000.00 | | 81,037,277.15 | |
| XF0029500315 | fixed | | 1.71 | | 2019 | | 5,000,000,000.00 | | 40,518,638.57 | |
| XF0029500299 | fixed | | 1.16 | | 2018 | | 5,000,000,000.00 | | 40,518,638.57 | |
| XS0075146208 | fixed | | 5.78 | | 2022 | | 5,000,000,000.00 | | 40,518,638.57 | |
| XS0080533598 | floating | | 5.01 | | 2022 | | 5,000,000,000.00 | | 40,518,638.57 | |
| XS0100119493 | fixed | | 3.20 | | 2019 | | 3,000,000,000.00 | | 24,311,183.14 | |
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| Currency/ISIN | Coupon
Type/
Number of
Issues | | Interest
Rate per
annum
in %(1) | | Year of
Maturity | | Principal Amount
Outstanding
in Currency | | Principal Amount
Outstanding
in EUR(2) | |
|
| |
| |
| |
| |
| |
| XS0065054149 | floating | | 6.10 | | 2025 | | 3,000,000,000.00 | | 24,311,183.14 | |
| XS0094191797 | fixed | | 3.11 | | 2019 | | 3,000,000,000.00 | | 24,311,183.14 | |
| XS0141839141 | fixed | | 2.60 | | 2022 | | 2,500,000,000.00 | | 20,259,319.29 | |
| XS0134907327 | fixed | | 2.50 | | 2021 | | 2,300,000,000.00 | | 18,638,573.74 | |
| XS0094505210 | floating | | 2.96 | | 2019 | | 2,000,000,000.00 | | 16,207,455.43 | |
| XS0120074777 | fixed | | 3.40 | | 2020 | | 2,000,000,000.00 | | 16,207,455.43 | |
| XS0158467554 | floating | | 4.00 | | 2022 | | 2,000,000,000.00 | | 16,207,455.43 | |
| XS0081035189 | floating | | 7.56 | | 2018 | | 2,000,000,000.00 | | 16,207,455.43 | |
| XS0128270757 | fixed | | 2.77 | | 2021 | | 1,000,000,000.00 | | 8,103,727.71 | |
| XS0129607783 | fixed | | 2.60 | | 2021 | | 1,000,000,000.00 | | 8,103,727.71 | |
| XS0145443213 | fixed | | 2.00 | | 2017 | | 1,000,000,000.00 | | 8,103,727.71 | |
| XS0153822522 | fixed | | 1.72 | | 2017 | | 1,000,000,000.00 | | 8,103,727.71 | |
| Japanese Yen Total: | 20 | | | | | | | | 735,818,476.50 | |
|
| | | | | | | |
| |
| Turkish Lira | | |
| XS0750578733 | fixed | | 0.50 | | 2017 | | 600,000,000.00 | | 161,847,216.23 | |
| XS0895805876 | fixed | | 5.63 | | 2018 | | 330,000,000.00 | | 89,015,968.93 | |
| XS0765299226 | fixed | | 0.50 | | 2017 | | 275,000,000.00 | | 74,179,974.10 | |
| XS1069567151 | fixed | | 9.50 | | 2022 | | 165,000,000.00 | | 44,507,984.46 | |
| XS1277644685 | fixed | | 8.20 | | 2020 | | 150,000,000.00 | | 40,461,804.06 | |
| Turkish Lira Total: | 5 | | | | | | | | 410,012,947.78 | |
|
| | | | | | | |
| |
| Swedish Krona | | |
| XS0736077792 | floating | | 0.08 | | 2017 | | 1,000,000,000.00 | | 104,684,637.53 | |
| XS0746427649 | fixed | | 2.50 | | 2017 | | 500,000,000.00 | | 52,342,318.76 | |
| XS1112745507 | floating | | — | | 2019 | | 250,000,000.00 | | 26,171,159.38 | |
| Swedish Krona Total: | 3 | | | | | | | | 183,198,115.68 | |
|
| | | | | | | |
| |
| Brazilian Real | | |
| XS1332716601 | fixed | | 10.00 | | 2020 | | 300,000,000.00 | | 87,450,808.92 | |
| XS0968465335 | fixed | | 8.86 | | 2017 | | 250,000,000.00 | | 72,875,674.10 | |
| XS1029239792 | fixed | | 9.25 | | 2017 | | 208,000,000.00 | | 60,632,560.85 | |
| Brazilian Real Total: | 3 | | | | | | | | 220,959,043.87 | |
|
| | | | | | | |
| |
| South African Rand | | |
| XS0902035848 | fixed | | 6.00 | | 2019 | | 2,100,000,000.00 | | 145,258,352.36 | |
| XS1069178173 | fixed | | 8.25 | | 2022 | | 1,550,000,000.00 | | 107,214,498.17 | |
| XS0762982030 | fixed | | 0.50 | | 2017 | | 400,000,000.00 | | 27,668,257.59 | |
| XS1321568831 | fixed | | 6.50 | | 2020 | | 350,000,000.00 | | 24,209,725.39 | |
| South African Rand Total: | 4 | | | | | | | | 304,350,833.51 | |
|
| | | | | | | |
| |
| (1) | Interest rate of floating rate note means the applicable interest rate as of December 31, 2016. |
| (2) | Conversion into euro at the spot rate using the European Central Bank reference rates on December 31, 2016. |
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THE FEDERAL REPUBLIC OF GERMANY
The following information regarding the Federal Republic is derived from the public official documents cited below. Certain of the information is preliminary.
GENERAL
| Area, Location and Population |
The Federal Republic is situated in central Europe and comprises an area of approximately 357,000 square kilometers (about 138,000 square miles). Its total population is estimated to have reached a new all-time high of approximately 82.8 million at the end of 2016 compared to 82.2 million people at the beginning of 2016. The increase was again due to Germany’s immigration surplus, which more than offset the birth deficit (i.e., the negative difference between births and deaths). Based on provisional results, the Federal Statistical Office estimates that net immigration of foreigners amounted to 750,000 persons in 2016, considerably below the record high of 2015. In 2014, approximately 16.5% of the total population was concentrated in metropolitan areas with more than 500,000 inhabitants; the largest of these areas were (in descending order) Berlin, Hamburg, Munich, Cologne and Frankfurt am Main.
| Sources: Statistisches Bundesamt, Statistisches Jahrbuch 2016, Tables 1.1.2, 2.1.9 (https://www.destatis.de/DE/Publikationen/StatistischesJahrbuch/StatistischesJahrbuch2016.pdf?__blob=publicationFile); Statistisches Bundesamt, Germany’s population expected to have increased to 82.8 million, press release of January 27, 2017 (https://www.destatis.de/EN/PressServices/Press/pr/2017/01/PE17_033_12411.html). |
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The following table shows selected key demographic figures for the Federal Republic for the years stated.
POPULATION
| 2015 | | 2014 | | 2013 | | 2012 | | 2011 (1) | |
|
| |
| |
| |
| |
| |
| (number of persons) | |
| Total population | 82,175,684 | | 81,197,537 | | 80,767,463 | | 80,523,746 | | 80,327,900 | |
| Age distribution | (percent of total population) | |
| Under 20 | 18.3 | | 18.2 | | 18.2 | | 18.3 | | 18.4 | |
| 20-40 | 24.5 | | 24.1 | | 24.0 | | 23.9 | | 23.8 | |
| 40-60 | 29.8 | | 30.3 | | 30.7 | | 30.9 | | 31.1 | |
| 60-80 | 21.6 | | 21.8 | | 21.8 | | 21.6 | | 21.4 | |
| 80 and more | 5.8 | | 5.6 | | 5.4 | | 5.4 | | 5.3 | |
| Growth rate | (percent change on the previous year) | |
| Total population | 1.2 | | 0.5 | | 0.3 | | 0.2 | | — | |
| Under 20 | 2.2 | | 0.5 | | -0.3 | | -0.5 | | — | |
| 20-40 | 2.6 | | 1.1 | | 0.9 | | 0.4 | | — | |
| 40-60 | -0.4 | | -0.6 | | -0.5 | | -0.3 | | — | |
| 60-80 | 0.4 | | 0.7 | | 1.2 | | 1.2 | | — | |
| 80 and more | 4.1 | | 4.1 | | 0.9 | | 1.3 | | — | |
| (1) | Percentage change on previous year not reported for the year 2011 due to a statistical break in the time series: The population is based on data from the 2011 Census since 2011, whereas it was based on former censuses for 2010 and preceding years. |
Sources: Statistisches Bundesamt, Population, Current Population, Population by age groups, Germany, Value (https://www.destatis.de/EN/FactsFigures/SocietyState/Population/CurrentPopulation/Tables_/lrbev01.html?cms_gtp=150344_list%253D1&https=1); Statistisches Bundesamt, Population, Current Population, Population by age groups, Germany, Change on the previous year (https://www.destatis.de/EN/FactsFigures/SocietyState/Population/CurrentPopulation/Tables_/lrbev01.html?cms_gtp=150344_list%253D2&https=1). |
Notwithstanding the population increase in recent years due to net immigration, the German population is poised for a decline due to the gradual aging of its population. These developments are expected to continue and intensify over the next several decades and may result in a downward pressure on Germany’s growth potential in the long term. According to estimates of the Federal Statistical Office, the current high level of immigration is expected to have only limited effects on long-term population trends and cannot reverse the trend towards increased population aging.
| Sources: Statistisches Bundesamt, New projection of Germany’s population by 2060, press release of April 28, 2015 (https://www.destatis.de/EN/PressServices/Press/pr/2015/04/PE15_153_12421.html); Statistisches Bundesamt, Currently high immigration cannot reverse population ageing, press release of January 20, 2016 (https://www.destatis.de/EN/PressServices/Press/pr/2016/01/PE16_021_12421.html). |
The Federal Republic is a federated republic whose constitution is codified in the Grundgesetz of 1949. The capital of the Federal Republic is Berlin. The Federal Republic consists of 16 federal states (Länder). The Länder have legislative sovereignty over matters not expressly reserved to the legislative, executive and judicial bodies of the Federal Republic.
The Grundgesetz provides for a Federal President (Bundespräsident), two Houses of Parliament (the Bundestag and the Bundesrat, which consists of representatives of the 16 Länder governments), a Chancellor (Bundeskanzler) and a Federal Constitutional Court (Bundesverfassungsgericht). The Chancellor heads the Federal Government (Bundesregierung), consisting of the Chancellor and the Federal Ministers. The Bundespräsident acts as head of state.
General elections for the Bundestag are generally held every four years on the basis of an electoral system of proportional representation. The last general election was held on September 22, 2013. The next general election will be held on September 24, 2017.
A political party is not entitled to party representation in the Bundestag unless it receives at least 5% of the votes cast or three direct mandates, awarded to the candidate with the most votes in a given electoral district, in a general election. The Chancellor is elected by and is responsible to the Bundestag.
The political parties currently represented in the Bundestag are the Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU), the Social Democratic Party (SPD), the Left-Wing Party (Die Linke, founded in 2007 by the merger of the Left-Wing Party of Democratic Socialism (Linkspartei.PDS) and the party Labor and Social Justice – The Election Alternative (WASG)) and the Greens (Bündnis 90/Die Grünen).
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Since 1949, the Federal Republic has been governed by eight Chancellors over 18 electoral periods. The most recent general election, held in September 2013, resulted in a coalition between the Christian Democrats (CDU/CSU) and the Social Democratic Party (SPD), led by Chancellor Dr Angela Merkel (CDU). Dr Merkel has been serving as Chancellor since 2005.
| Sources: The federal returning officer, Official final result of the 2013 Bundestag Election, press release of October 9, 2013 (https://www.bundeswahlleiter.de/en/info/presse/mitteilungen/bundestagswahl-2013/2013-10-09-endgueltiges-amtliches-ergebnis-der-bundestagswahl-2013.html);The federal returning officer, Bundestag election 2017 (https://www.bundeswahlleiter.de/en/bundestagswahlen/2017.html); Deutschlands Zukunft gestalten: Koalitionsvertrag zwischen CDU, CSU und SPD (https://www.cdu.de/sites/default/files/media/dokumente/koalitionsvertrag.pdf). |
The following table shows the results of the five most recent general elections for the Bundestag.
ELECTION RESULTS TO THE GERMAN BUNDESTAG
| 2013
Elections | | 2009
Elections | | 2005
Elections | | 2002
Elections | | 1998
Elections | | |
| % of
Votes | | Seats | | % of
Votes | | Seats | | % of
Votes | | Seats | | % of
Votes | | Seats | | % of
Votes | | Seats | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| CDU/CSU | 41.5 | | 311 | | 33.8 | | 239 | | 35.2 | | 226 | | 38.5 | | 248 | | 35.1 | | 245 | |
| SPD | 25.7 | | 193 | | 23.0 | | 146 | | 34.2 | | 222 | | 38.5 | | 251 | | 40.9 | | 298 | |
| Die Linke. (1) | 8.6 | | 64 | | 11.9 | | 76 | | 8.7 | | 54 | | 4.0 | | 2 | | 5.1 | | 36 | |
| Bündnis 90/Die Grünen | 8.4 | | 63 | | 10.7 | | 68 | | 8.1 | | 51 | | 8.6 | | 55 | | 6.7 | | 47 | |
| FDP | 4.8 | | — | | 14.6 | | 93 | | 9.8 | | 61 | | 7.4 | | 47 | | 6.2 | | 43 | |
| Others | 10.9 | | — | | 6.0 | | — | | 3.9 | | — | | 3.0 | | — | | 5.9 | | — | |
| | |
| | | |
| | | |
| | | |
| | | |
| |
| Total | | | 631 | | | | 622 | | | | 614 | | | | 603 | | | | 669 | |
| | |
| | | |
| | | |
| | | |
| | | |
| |
| (1) | Results for the Party of Democratic Socialism (PDS) for all elections prior to 2005. |
| Sources: Statistisches Bundesamt, Statistisches Jahrbuch 2016, Tables 10.1.1 and 10.1.2; Statistisches Bundesamt, Statistisches Jahrbuch 2011, Tables 4.3.1, 4.3.2 and 4.6. |
| International Organizations |
In addition to the European Union (“EU”), the Federal Republic is a member of various major multilateral institutions, including the United Nations, the International Monetary Fund (“IMF”), the International Bank for Reconstruction and Development and the International Development Association, the Council of Europe, the Organization for Economic Cooperation and Development and the North Atlantic Treaty Organization. Furthermore, the Federal Republic is a signatory to the General Agreement on Tariffs and Trade and a member of the World Trade Organization (“WTO”). It is also a shareholder of, among others, the European Investment Bank, the European Bank for Reconstruction and Development, the Asian Infrastructure Investment Bank and the European Atomic Energy Community.
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| The European Union and European Integration |
The Federal Republic was a founding member of the European Coal and Steel Community in 1951, which later developed into the European Union. Today, the Federal Republic is one of 28 member states of the EU, which include Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, the Slovak Republic, Slovenia, Spain, Sweden and the United Kingdom (“UK”) (together, the “Member States”). According to provisional data, the aggregate population of the Member States was approximately 510 million as of January 1, 2016. The EU is still in the process of enlargement. Formal membership negotiations have been opened with Turkey, Montenegro and Serbia. The former Yugoslav Republic of Macedonia and Albania have been granted candidate status. Bosnia and Herzegovina and Kosovo are potential candidates.
| Sources: European Union, The history of the European Union (http://europa.eu/about-eu/eu-history/index_en.htm); European Union, The history of the European Union: 2000-2009 (http://europa.eu/about-eu/eu-history/2000-2009/index_en.htm); European Union, The history of the European Union: 2010-today (http://europa.eu/european-union/about-eu/history/2010-today_en); Statistical Office of the European Communities, Total population (http://epp.eurostat.ec.europa.eu/tgm/table.do? tab=table&language=en&pcode=tps00001&tableSelection=1&footnotes=yes&labeling=labels&plugin=1); European Commission, Enlargement, Countries, Check current status (http://ec.europa.eu/enlargement/countries/check-current-status/index_en.htm). |
The EU’s three main institutions are the Council (representing the governments of the Member States), the Parliament (elected by and representing the citizens of the Member States) and the European Commission (the executive body of the EU). After several years of negotiations about institutional issues among the Member States in an intergovernmental conference, in which the European Commission and the Parliament were also involved, the Treaty of Lisbon entered into force on December 1, 2009. It amends and supplements the existing treaties underlying the EU and aims to provide the EU with the legal framework and tools necessary to meet future challenges and to respond to citizens’ demands. Among other matters, the treaty aims to make the EU more democratic and transparent by strengthening the role of the European Parliament and national parliaments, by offering more opportunities to citizens to provide input for policy proposals, by clearly categorizing competences between Member States and the EU and by explicitly recognizing the possibility for a Member State to withdraw from the EU. To reflect the EU’s enlargement and improve the effectiveness and efficiency of its decision-making, the treaty also streamlined and modernized EU institutions and simplified their working methods and voting rules.
| Sources: European Commission, Europe in 12 lessons by Pascal Fontaine, How does the EU work? (http://bookshop.europa.eu/en/europe-in-12-lessons-pbNA3110652/downloads/NA-31-10-652-EN-C/NA3110652ENC_002.pdf?FileName=NA3110652ENC_002.pdf&SKU=NA3110652ENC_PDF&CatalogueNumber=NA-31-10-652-EN-C); Europa.eu, EU treaties: Treaty of Lisbon (http://europa.eu/european-union/law/treaties_en). |
On June 23, 2016, the citizens of the UK voted to leave the EU. Under the mechanism for a voluntary and unilateral withdrawal of a country from the EU, a Member State wishing to withdraw must notify the European Council of its intention to do so. On March 29, 2017, the UK notified the European Council accordingly. The European Council is then required to provide guidelines for the conclusion of an agreement setting out the arrangements for the Member State’s withdrawal. This agreement is concluded on behalf of the EU by the Council of the EU, acting by qualified majority, having obtained the European Parliament’s consent. The EU treaties cease to apply to the withdrawing Member State from the date of entry into force of the agreement, or within two years of the notification of the withdrawal. The European Council may decide to extend that period.
| Sources: UK Government, Topic, EU referendum (https://www.gov.uk/government/topical-events/eu-referendum); Council of the EU, Consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union, Article 50, page 59-60 (http://data.consilium.europa.eu/doc/document/ST-6655-2008-REV-8/en/pdf); European Commission, Statement by the European Council (Art. 50) on the UK notification, press release, March 29, 2017 (http://www.consilium.europa.eu/en/press/press-releases/2017/03/29-euco-50-statement-uk-notification/). |
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From its inception, the EU has had the fundamental objective, in line with its predecessors, of economic integration of its Member States. Culminating a long process, a single market that provides for the free movement of goods and services, persons and capital among the Member States was established as of January 1, 1993. The integration of the Member States’ economies and the completion of a single market are also promoted by a European competition policy, which aims at creating a level playing field for Member States’ companies, thereby promoting economic efficiency, and by a European consumer policy. In addition, various liberalization and harmonization measures are being implemented, for example in the telecommunication and energy sectors. In the financial sector, the single market has been fostered by providing for the free movement of capital and the freedom to perform banking services throughout the EU under the “single passport,” which enables financial institutions to provide financial services throughout the EU based on a single license obtained in one Member State. The EU promotes economic integration with regional aid, which is designed to focus development efforts on certain disadvantaged regions and sections of population of the EU. Another important policy area for the EU has been agriculture and fisheries.
The regulation laying down the multiannual financial framework (“MFF”) of the EU was formally adopted in December 2013. The MFF determines maximum amounts for commitment appropriations for the period from 2014 until 2020, which cover commitments made to spend funds over one or more years in certain expenditure categories. Additionally, the MFF defines annual maximum amounts for payment appropriations, which cover payments made to honor the legal commitments entered into during the current financial year and/or earlier financial years. The 2017 EU budget, which was adopted by the European Parliament in November 2016 and published in February 2017, amounts to EUR 157.9 billion in commitment appropriations and EUR 134.5 billion in payment appropriations. The entire EU budget represents approximately 1% of the EU gross national income.
| Sources: European Commission, Europe in 12 lessons by Pascal Fontaine (http://bookshop.europa.eu/en/europe-in-12-lessons-pbNA3110652/downloads/NA-31-10-652-EN-C/NA3110652ENC_002.pdf?FileName=NA3110652ENC_002.pdf&SKU=NA3110652ENC_PDF&CatalogueNumber=NA-31-10-652-EN-C); European Banking Authority, Topics, Passporting and supervision of branches (http://www.eba.europa.eu/regulation-and-policy/passporting-and-supervision-of-branches); European Council, Council adopts the multiannual financial framework 2014-2020, Press Release, December 2, 2013 (http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ecofin/139831.pdf); European Commission, Budget, Documents: Annual Budget, 2017 (http://ec.europa.eu/budget/biblio/documents/2017/2017_en.cfm); EUR-Lex, Budget 2017, General budget, Total revenue (http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2017:051:FULL&from=EN). |
The Federal Republic is a signatory to and has ratified the Treaty on European Union of February 1992 (also known as the “Maastricht Treaty”). The Maastricht Treaty was the basis for the establishment of the European Economic and Monetary Union (“EMU”). The EMU led, in turn, to the adoption of irrevocable conversion rates between the euro and the national currencies of the initial participating Member States on December 31, 1998 and the introduction of the euro as the single European currency in the “euro area” on January 1, 1999. On January 1, 2002, banknotes and coins denominated in euro were introduced as legal tender to replace the national currencies in the twelve Member States forming the euro area at that time (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain). Slovenia, Malta, Cyprus, Slovakia, Estonia and Latvia subsequently joined the euro area. The most recent addition was Lithuania, which joined the euro area on January 1, 2015.
The European Central Bank (“ECB”) was established on June 1, 1998, as part of the European System of Central Banks (“ESCB”). According to the Maastricht Treaty, the primary objective of the ESCB is to maintain price stability. Without prejudice to the objective of price stability, the ESCB supports the general economic policies of the EU. See “Monetary and Financial System” for more information on the ECB and ESCB as well as on the European financial system. The Eurosystem, consisting of the ECB and the national central banks of those Member States whose currency is the euro (“Euro Area Member States”), assumed sole responsibility for the monetary policy in the euro area on January 1, 1999.
| Sources: Council of the EU, Consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union (http://data.consilium.europa.eu/doc/document/ST-6655-2008-REV-8/en/pdf); European Central Bank, Economic and Monetary Union (EMU) (http://www.ecb.int/ecb/history/emu/html/index.en.html); European Central Bank, Lithuania joins the euro area, press release of January 1, 2015 (http://www.ecb.europa.eu/press/pr/date/2015/html/pr150101.en.html); European Central Bank, Monthly Bulletin, 10th Anniversary of the ECB (https://www.ecb.europa.eu/pub/pdf/other/10thanniversaryoftheecbmb200806en.pdf). |
The EU economic governance framework aims to detect, prevent and correct problematic economic trends such as excessive government deficits or public debt levels, which can stunt growth and put economies at risk. The framework consists of the following main components.
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Stability and Growth Pact. To strengthen the monitoring and coordination of national fiscal and economic policies, the Member States established the Stability and Growth Pact (“SGP”) in 1997. The preventive arm of the SGP binds Member States to their commitments towards sound fiscal policies and coordination by setting country-specific, medium-term budgetary targets. These budget deficit (or surplus) targets are defined in structural terms by taking into consideration business cycle swings and filtering out the effect of one-off and temporary measures. The corrective arm of the SGP consists of the excessive deficit procedure (“EDP”). The EDP ensures the correction of excessive budget deficits (defined as a deficit in excess of 3% of gross domestic product (“GDP”)) or excessive public debt levels (defined as a debt ratio greater than 60% of GDP without an adequate diminishing trend). Countries that fail to respect the SGP’s preventive or corrective rules may ultimately face sanctions. For Euro Area Member States, these could take the form of warnings and financial sanctions including fines of up to 0.2% of GDP (if they fail to abide by either the preventive or the corrective rules) or 0.5% of GDP (if they repeatedly fail to abide by the corrective rules). In addition, all Member States (except the United Kingdom) could face a suspension of commitments or payments from the EU’s structural and investment funds if they fail to abide by the corrective rules. Every April, Member States are required to lay out their fiscal plans for the next three years based on economic governance rules set forth in the SGP. In addition, to ensure the coordination of fiscal policies among Euro Area Member States, governments are required by European economic governance rules to submit their draft budgetary plans for the following year to the European Commission by October 15 of each year.
| Sources: European Commission, Business, Economy, Euro, Economic and fiscal policy coordination, EU economic governance (http://ec.europa.eu/economy_finance/economic_governance/index_en.htm); European Commission, Business, Economy, Euro, Economic and fiscal policy coordination, EU economic governance, Stability and Growth Pact (http://ec.europa.eu/economy_finance/economic_governance/sgp/index_en.htm); European Commission, Business, Economy, Euro, Economic and fiscal policy coordination, EU economic governance, Stability and Growth Pact, Stability and convergence programmes (http://ec.europa.eu/economy_finance/economic_governance/sgp/convergence/index_en.htm); European Commission, Business, Economy, Euro, Economic and fiscal policy coordination, EU economic governance, Stability and Growth Pact, Annual draft budgetary plans (DBPs) of euro area countries (http://ec.europa.eu/economy_finance/economic_governance/sgp/budgetary_plans/index_en.htm). |
Macroeconomic Imbalance Procedure. Established in 2011, the macroeconomic imbalance procedure (“MIP”) is a surveillance mechanism that aims to identify potential economic risks early on, prevent the emergence of harmful macroeconomic imbalances and correct any existing excessive imbalances. The preventive arm of the procedure relies on an early warning system that uses a scoreboard of indicators and in-depth country reviews. This preventive arm allows the European Commission and the Council to adopt preventive recommendations to the affected Member State at an early stage. In cases of a Member State with excessive macroeconomic imbalances, the corrective arm may open an excessive imbalance procedure, under which the Member State concerned will have to submit a corrective action plan and regular progress reports. The enforcement regime of the MIP consists of financial sanctions against Euro Area Member States, including fines of up to 0.1% of GDP if a Euro Area Member State repeatedly does not comply with its obligations. In the most recent surveillance cycle, 13 Member States, including Germany, were subject to an in-depth review in the context of the MIP. Of these 12 were found to be experiencing macroeconomic imbalances of various natures and magnitudes. According to the Commission’s assessment, Germany is experiencing macroeconomic imbalances, but these are not excessive. See “The Economy–International Economic Relations–Germany’s Current Account Surplus and the Macroeconomic Imbalance Procedure.”
| Sources: European Commission, Business, Economy, Euro, Economic and fiscal policy coordination, EU economic governance, Macroeconomic imbalance procedure (http://ec.europa.eu/economy_finance/economic_governance/macroeconomic_imbalance_procedure/index_en.htm); European Commission, Business, Economy, Euro, Economic and fiscal policy coordination, EU economic governance (http://ec.europa.eu/economy_finance/economic_governance/index_en.htm); European Commission, Business, Economy, Euro, Economic and fiscal policy coordination, EU economic governance, Macroeconomic imbalance procedure, MIP surveillance in 2017 (http://ec.europa.eu/economy_finance/economic_governance/macroeconomic_imbalance_procedure/mip_reports/index_en.htm). |
Treaty on Stability, Coordination and Governance in the EMU. The Treaty on Stability, Coordination and Governance in the EMU (“TSCG”), which was signed in March 2012 and entered into force on January 1, 2013, is intended to promote budgetary discipline in the participating Member States through a fiscal pact. The fiscal pact’s provisions are binding for Euro Area Member States, while the other Member States will only be bound if they adopt the euro, unless they declare their intention to be bound by certain provisions of the treaty at an earlier date. The TSCG was signed by all Member States, except the UK, the Czech Republic and Croatia. The TSCG requires the participating parties to ensure convergence towards the country-specific, medium-term budgetary objectives as defined in the SGP, with a lower limit of a structural deficit of 0.5% of GDP. In the event of a deviation from this requirement, an automatic correction mechanism will be triggered with escape clauses for exceptional circumstances. These budget rules were to be transposed into national law through provisions of “binding force and permanent character, preferably constitutional” one year after the entry into force of the treaty, i.e. by January 1, 2014 at the latest.
| Sources: European Council, Fiscal compact signed: Strengthened fiscal discipline and convergence in the euro area, press release of March 2, 2012 (http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/128454.pdf); Deutsche Bundesbank, Glossary: Treaty on Stability, Coordination and Governance in the EMU (TSCG) (https://www.bundesbank.de/Redaktion/EN/Glossareintraege/T/treaty_on_stability_coordination_and_governance_in_the_emu.html); European Commission, The EU’s economic governance explained, press release of November 26, 2015 (http://europa.eu/rapid/press-release_MEMO-15-6071_en.htm). |
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| Response to the European Sovereign Debt Crisis |
Temporary Financial Stability Mechanism. In May 2010, the European Union and Euro Area Member States established a temporary stability mechanism to safeguard the financial stability amid severe tensions in euro area sovereign debt markets, consisting of the European Financial Stabilisation Mechanism (“EFSM”) and the European Financial Stability Facility (“EFSF”). Through the EFSM, which was replaced by the European Stability Mechanism (“ESM”) in 2013, the European Commission was allowed to borrow up to a total of EUR 60 billion on behalf of the EU under an implicit EU budget guarantee. For more information on the ESM, see “–European Stability Mechanism” below. The EFSF, which was created as a temporary institution and since July 1, 2013 no longer engages in new financing programs, had a lending capacity of EUR 440 billion backed by effective guarantees extended by the Euro Area Member States totaling EUR 724 billion. The Federal Republic has committed guarantees of approximately EUR 211 billion to the EFSF in accordance with its share in the paid-up capital of the ECB, which amounts to approximately 29% of the total effective guarantees. The EFSF will be dissolved and liquidated when all financial assistance provided to Euro Area Member States and all funding instruments issued by the EFSF have been repaid in full. As of March 2017, the EFSF had outstanding loans to Ireland, Portugal and Greece of approximately EUR 175 billion.
Sources: European Commission, Business, Economy, Euro, Economic and fiscal policy coordination, EU financial assistance, Loan programmes
(https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-financial-assistance/loan-programmes_en); European Commission, Business, Economy, Euro, Economic and fiscal policy coordination, EU financial assistance, How is financial assistance given to EU countries?
(http://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-financial-assistance/how-financial-assistance-given-eu-countries_en); European Financial Stability Facility, Publications, Investor Presentation
(https://www.esm.europa.eu/sites/default/files/efsfesmnewinvestorpresentationmarch20171.pdf). |
European Stability Mechanism. Since October 2012, the ESM, which was established as an intergovernmental organization under public international law by the Euro Area Member States, has been assisting in preserving the financial stability of the EMU. As of July 1, 2013, it assumed the tasks fulfilled by the EFSF and the EFSM and is currently the primary support mechanism for Euro Area Member States experiencing or threatened by severe financing problems, if such assistance is deemed essential to safeguard financial stability in the euro area as a whole. The ESM issues bonds or other debt instruments on the financial markets to raise capital to provide assistance to Euro Area Member States. Unlike the EFSF, which is based upon guarantees by Euro Area Member States, the ESM has total subscribed capital of EUR 705 billion provided by Euro Area Member States, which provides it with a lending capacity of EUR 500 billion. EUR 81 billion of the ESM’s subscribed capital is in the form of paid-in capital with the balance of EUR 624 billion being callable capital. The contribution of each Euro Area Member State is based on the paid-in capital for the ECB. On this basis, the Federal Republic’s contribution amounts to approximately 27% of the aggregate contributions to the ESM. The Federal Republic contributes approximately EUR 22 billion of paid-in capital to the ESM.
Financial assistance from the ESM is activated upon a request from a Member State to the chairperson of the ESM’s board of governors and is provided subject to conditions appropriate to the instrument chosen. The initial instruments available to the ESM have been modeled upon those available to the EFSF and include the extension of loans to a Euro Area Member State in financial difficulties, interventions in the primary and secondary debt markets, action based on a precautionary program, and the extension of loans to governments, or since December 2014 directly to affected financial institutions, for the purposes of recapitalizing financial institutions. Each instrument is to be linked to a memorandum of understanding which sets forth the conditions for financial support that the Member State has negotiated with the European Commission in liaison with the ECB, as well as the monitoring and surveillance procedures established to ensure the Member State is progressing towards financial stability. In principle, decisions under the ESM are taken by mutual agreement. However, in the event that the European Commission and the ECB conclude that an urgent decision related to financial assistance is needed because the financial and economic sustainability of the euro area is threatened, the mutual agreement rule is replaced by a qualified majority of 85%. Given its voting rights of approximately 27%, the Federal Republic may veto any decision even under the emergency voting rule. As of March 2017, the ESM had loans outstanding to Spain, Cyprus and Greece of approximately EUR 71 billion.
| Sources: European Stability Mechanism, History (https://www.esm.europa.eu/about-us/history); European Commission, Business, Economy, Euro, Economic and fiscal policy coordination, EU financial assistance, How is financial assistance given to EU countries? (http://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-financial-assistance/how-financial-assistance-given-eu-countries_en); European Commission, Business, Economy, Euro, Economic and fiscal policy coordination, EU financial assistance, Loan programmes, ESM (http://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-financial-assistance/loan-programmes/european-stability-mechanism-esm_en); European Stability Mechanism, Financial Assistance, Lending toolkit (https://www.esm.europa.eu/assistance/lending-toolkit); European Stability Mechanism, Frequently Asked Questions on the ESM (https://www.esm.europa.eu/sites/default/files/faqontheesm.pdf); European Stability Mechanism, Publications, Investor Presentation (https://www.esm.europa.eu/sites/default/files/efsfesmnewinvestorpresentationmarch20171.pdf). |
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| Financial Assistance to Euro Area Member States |
Greece. Since May 2010, Greece has been receiving financial support from Euro Area Member States and the IMF to cope with its financial difficulties and economic challenges. This support comes in the form of economic adjustment programs, which include measures to support the Greek government’s efforts to address economic imbalances, tackle social challenges, and pave the way for sustainable economic growth and job creation. Under the first economic adjustment program, the Euro Area Member States agreed in May 2010 to provide Greece with stability support in the form of pooled bilateral loans of up to EUR 80 billion to be disbursed over the period May 2010 through June 2013, parallel to a loan facility provided by the IMF of up to EUR 30 billion. The Federal Republic committed to contribute up to approximately EUR 22.3 billion, which was to be extended by KfW on behalf of the Federal Republic. As of December 2011, a total amount of EUR 73 billion had been disbursed under the Greek Loan Facility, of which approximately EUR 53 billion was provided by Euro Area Member States and EUR 20 billion by the IMF.
Under the second economic adjustment program, which was approved by the Euro Area Member States in March 2012, the EFSF and the IMF committed the undisbursed amounts of the first program plus an additional EUR 130 billion in financial assistance for the years 2012 to 2014. Disbursements of financial assistance under the program were conditioned upon the observance of certain quantitative performance criteria and a positive evaluation of progress made on policy criteria. Following an extension by four months, the second program expired at the end of June 2015. The outstanding EFSF loan to Greece under the second program amounts to approximately EUR 130.9 billion.
In July 2015, the Greek government submitted a request to the ESM’s board of governors for further stability support. Following approval by the ESM’s board of governors, the European Commission signed a memorandum of understanding with Greece for a third economic adjustment program. Under this program, the ESM is able to disburse up to EUR 86 billion in financial assistance to Greece over a three-year period ending in August 2018. Disbursements are contingent upon the Greek government’s progress in delivering on certain policy conditions set forth in the memorandum of understanding which aim to enable the Greek economy to return to a sustainable growth path based on sound public finances, enhanced competitiveness, high employment and financial stability. As of the end of March 2017, the total disbursements of ESM financial assistance to Greece amounted to approximately EUR 31.7 billion. The outstanding ESM loan as of the end of March 2017 amounted to EUR 29.7 billion following a repayment in February 2017.
Sources: European Commission, Policies, Information and Services, Financial assistance to Greece
(https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-financial-assistance/which-eu-countries-have-received-assistance/financial-assistance-greece_en); European Stability Mechanism, Financial Assistance, Greece (ongoing)
(https://www.esm.europa.eu/assistance/greece). |
Ireland. The first Euro Area Member State to receive support by the EFSM and EFSF was Ireland. The financial assistance, agreed upon in December 2010 and provided subject to compliance with an economic adjustment program, consisted of financial support in a total amount of EUR 85 billion, including EUR 22.5 billion financed through the EFSM, EUR 17.7 billion through the EFSF and EUR 22.5 billion through the IMF. The financial assistance program for Ireland expired as planned in December 2013. Ireland remains subject to post-program surveillance until at least 75% of the financial assistance received has been repaid which is not expected until 2031. As of the end of March 2017, Ireland had already repaid SDR 15.7 billion of loans to the IMF.
Sources: European Commission, Policies, Information and Services, Financial Assistance in EU Member States, Ireland
(http://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-financial-assistance/which-eu-countries-have-received-assistance/financial-assistance-ireland_en); European Financial Stability Facility, EFSF financial assistance for Ireland ends with successful Irish exit, press release of December 8, 2013
(https://www.esm.europa.eu/press-releases/efsf-financial-assistance-ireland-ends-successful-irish-exit); International Monetary Fund, Ireland: Transactions with the Fund from May 01, 1984 to February 28, 2017
(http://www.imf.org/external/np/fin/tad/extrans1.aspx?memberKey1=470&endDate=2017%2D03%2D22&finposition_flag=YES). |
Portugal. Following the Portuguese Republic’s application for support in early April 2011, euro area, EU and IMF financial assistance was provided for the 2011 to mid-2014 period on the basis of an economic adjustment program agreed between the Portuguese authorities and officials from the European Commission, the IMF and the ECB in May 2011. The total financial package amounted to EUR 78 billion, with EFSM, EFSF and IMF each contributing EUR 26 billion. After the conclusion of the final review mission in May 2014, the Portuguese government decided to exit its macroeconomic adjustment program without successor arrangement. Portugal remains subject to post-program surveillance until at least 75% of the financial assistance received has been repaid which is not expected until 2026. As of the end of March 2017, Portugal had already repaid SDR 11.5 billion of loans to the IMF.
Sources: European Commission, Policies, Information and Services, Financial Assistance in EU Member States, Portugal
(https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-financial-assistance/which-eu-countries-have-received-assistance/financial-assistance-portugal_en); Eurogroup, Eurogroup Statement on Portugal, press release of May 5, 2014
(http://www.consilium.europa.eu/workarea/downloadAsset.aspx?id=15740); International Monetary Fund, Portugal: Transactions with the Fund from May 01, 1984 to February 28, 2017
(http://www.imf.org/external/np/fin/tad/extrans1.aspx?memberKey1=810&endDate=2017%2D03%2D22&finposition_flag=YES). |
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Spain. In June 2012, the Spanish government requested financial assistance from the Euro Area Member States for the recapitalization of certain of its financial institutions. In July 2012, the finance ministers of the Euro Area Member States agreed to grant such financial assistance of up to EUR 100 billion, designed to cover the estimated shortfall in capital requirements along with an additional safety margin. The financial assistance was accompanied by policy conditionality focused on the banking sector. The assistance was initially financed by the EFSF and then transferred to the ESM (without applying seniority status). On December 31, 2013, the financial assistance program expired. The ESM has disbursed a total of EUR 41.3 billion to the Spanish government for the recapitalization of the country’s banking sector. Spain remains subject to post-program surveillance until at least 75% of the financial assistance received has been repaid. As of the end of March 2017, Spain had already repaid EUR 6.6 billion, in part voluntarily. Barring further early repayments, Spain is expected to be able to exit post-program surveillance in 2025.
Sources: European Commission, Policies, Information and Services, Financial Assistance in EU Member States, Spain
(https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-financial-assistance/which-eu-countries-have-received-assistance/financial-assistance-spain_en); ESM, Financial Assistance, Spain
(https://www.esm.europa.eu/assistance/spain); European Stability Mechanism, Spain successfully exits ESM financial assistance programme, press release of December 31, 2013
(https://www.esm.europa.eu/press-releases/spain-successfully-exits-esm-financial-assistance-programme). |
Cyprus. The economic adjustment program for Cyprus was formally agreed in May 2013. The financial package was designed to cover financing needs of up to EUR 10 billion, with the ESM providing up to EUR 9 billion and the IMF contributing around EUR 1 billion. The program addressed Cyprus’s financial sector imbalances including an appropriate downsizing of the country’s financial sector, fiscal consolidation, structural reforms and privatization. The financial assistance program expired in March 2016 as planned. Approximately EUR 2.7 billion of the ESM financing package remained unutilized. Cyprus remains subject to post-program surveillance until at least 75% of the financial assistance received has been repaid, which is not expected before 2029.
Sources: European Commission, Policies, Information and Services, Financial Assistance in EU Member States, Cyprus
(https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-financial-assistance/which-eu-countries-have-received-assistance/financial-assistance-cyprus_en); ESM, Financial Assistance, Cyprus
(https://www.esm.europa.eu/assistance/cyprus); Eurogroup, Eurogroup Statement on Cyprus, press release of March 7, 2016
(http://www.consilium.europa.eu/de/press/press-releases/2016/03/07-eurogroup-statement-cyprus/). |
| Response to Migratory Pressure |
EU Migration Policy. The growing instability in the EU’s southern neighboring countries has increased the number of people trying to reach the EU. The EU and the Member States have been intensifying efforts to establish an effective, humanitarian and safe European migration policy. In the Federal Government’s opinion, because a solution cannot be found by individual Member States alone but only by all Member States together, solving the problem requires a comprehensive approach covering all relevant areas. The EU policy response comprises the following activities: working with countries of origin and transit, strengthening the EU’s external borders, managing migration flows and curbing migrant smuggling activities, reforming the common European asylum system, providing legal migration pathways as well as fostering the integration of third-country nationals. According to Frontex, the European Border and Coast Guard Agency, the total number of detected illegal border crossings in 2016 fell by more than two-thirds from 1,822,000 to 511,000 compared to 2015.
| Sources: European Council, Finding solutions to migratory pressures (http://www.consilium.europa.eu/en/policies/migratory-pressures/); Frontex, Detections of illegal border-crossings statistics download (http://frontex.europa.eu/assets/Detections_of_IBC_Press_for_FX_website_20170303.xlsx). |
Prevention of Illegal Migration Flows. To prevent illegal migration flows, the EU seeks to address the root causes of migration, such as conflicts, political and economic instability, human rights violations and poverty. This involves cooperation with countries of origin and transit of migrants, on a broad range of issues. Specifically, in March 2016, Turkey and the EU agreed to stop the flow of irregular migration via Turkey to the EU. All new irregular migrants crossing from Turkey to the Greek islands will be returned to Turkey. For every Syrian being returned to Turkey from Greek islands, another Syrian will be resettled from Turkey to the EU taking into account the UN vulnerability criteria. In addition, the EU is taking action to meet the urgent humanitarian needs of Syrian refugees in Turkey, Jordan and Lebanon.
Sources: European Council, Working with countries of origin and transit (http://www.consilium.europa.eu/en/policies/migratory-pressures/countries-origin-transit/); European Council, EU-Turkey statement, 18 March 2016, press release of March 18, 2016
(http://www.consilium.europa.eu/en/press/press-releases/2016/03/18-eu-turkey-statement). |
Reinforcement of Border Controls. The recent migratory pressure has led to difficulties in several Member States of ensuring adequate external border controls and the reception and processing of arriving migrants. To control the EU’s external borders more effectively, the European Border and Coast Guard Agency (a transformed version of the former EU agency Frontex) was launched in October 2016. It will closely monitor the EU’s external borders and work together with Member States to quickly identify and address any potential security threats to the EU’s external borders. The adoption of reinforced checks at external borders is being negotiated, as well as improving controls through the use of new technologies.
Effective management of the EU’s external borders is fundamental for the well-functioning of free movement within the EU. Within the Schengen area, which encompasses most Member States, except Bulgaria, Croatia, Cyprus, Ireland, Romania and the UK, any person, irrespective of nationality, may cross internal borders without being subjected to border checks. In
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case of a serious threat to public policy or internal security, a Schengen country may exceptionally temporarily reintroduce border controls at its internal borders. In the context of the migrant crisis and terrorist threats, several Schengen countries, including Germany, have temporarily reintroduced internal border controls.
| Sources: European Council, Strengthening the EU’s external borders (http://www.consilium.europa.eu/en/policies/migratory-pressures/strengthening-external-borders/); European Commission, Migration and Home Affairs, Schengen Area (https://ec.europa.eu/home-affairs/what-we-do/policies/borders-and-visas/schengen_en); European Commission, Migration and Home Affairs, Temporary Reintroduction of Border Control (https://ec.europa.eu/home-affairs/what-we-do/policies/borders-and-visas/schengen/reintroduction-border-control_en). |
Legal Framework. Since 1999, the EU has been working to create a Common European Asylum System (“CEAS”), which is based on a number of EU directives and regulations, to guarantee high standards of protection for refugees as well as fair and effective procedures throughout the EU. Among other matters, the CEAS seeks to harmonize the process for applying for asylum throughout the EU, to provide asylum applicants with material reception conditions such as housing and food, to register applicants by taking their fingerprints and sending them to a special database, and to facilitate identification of the country responsible for a refugee’s asylum application. The Dublin Regulation establishes which Member State is responsible for the examination of an asylum application based on a number of criteria, including, in order of importance, family considerations, recent possession of visa or residence permit in a Member State and through which Member State the applicant has entered the EU. The recent migratory pressure has exposed the weakness of the current CEAS rules. Despite the efforts to harmonize standards, asylum seekers are not treated uniformly and recognition rates vary, which may encourage secondary movements and asylum shopping. In May and in June 2016, the Commission presented two packages of proposals to reform the CEAS. The legislative proposals are currently being discussed by the Council.
Sources: European Commission, Migration and Home Affairs, Common European Asylum System (https://ec.europa.eu/home-affairs/what-we-do/policies/asylum_en); European Commission, Migration and Home Affairs, Common European Asylum System, Country responsible for asylum application (Dublin)
(https://ec.europa.eu/home-affairs/what-we-do/policies/asylum/examination-of-applicants_en); Regulation (EU) No 604/2013 of the European Parliament and of the Council of June 26, 2013
(http://eur-lex.europa.eu/legal-content/EN/ALL/;jsessionid=jHNlTp3HLjqw8mqGbQSpZh1VWpjCyVQq14Hgcztw4pbfSQZffnrn!557467765?uri=CELEX:32013R0604); European Council, Reforming the common European asylum system
(http://www.consilium.europa.eu/en/policies/migratory-pressures/reforming-ceas/ceas-reform-timeline/). |
| Statistical Standard for the National Accounts |
Since August 2014, the Federal Statistical Office calculates the German national accounts in accordance with the European System of National and Regional Accounts 2010 (“ESA 2010”) which, in turn, is based on the System of National Accounts (SNA 2008) of the United Nations. Recalculations have been conducted for all time series since 1991.
| Source: Federal Statistical Office, Major revision of national accounts 2014: results and background (https://www.destatis.de/EN/Methods/NationalAccountRevision/Revision2014_BackgroundPaper.pdf?__blob=publicationFile). |
| Statistical Standard for the Balance of Payments |
Since July 2014, the methodological concept of the German balance of payments statistics follows the sixth edition of the Balance of Payments and International Investment Position Manual (“BPM6”), the revised standard of the IMF. The application of BPM6 is binding for Member States by virtue of a regulation adopted by the European Commission. Balance of payments data since 1991 have been recalculated in accordance with BPM6.
Source: Bundesbank, Changes in the methodology and classifications of the balance of payments and the international investment position, Monthly Report, June 2014
(https://www.bundesbank.de/Redaktion/EN/Downloads/Publications/Monthly_Report_Articles/2014/2014_06_methodology_balance_of_payments.pdf?__blob=publicationFile). |
| Statistical Disclosure Standards of the International Monetary Fund |
Since February 2015, the Federal Republic meets the Special Data Dissemination Standard Plus (“SDDS Plus”) of the IMF relating to coverage, periodicity and timeliness of economic data. The SDDS Plus was created in 2012 as an extension of the existing Special Data Dissemination Standard (“SDDS”). By providing comparable economic and financial data, it is designed to improve the transparency of the financial sector and its international interdependencies, and thus contributes to the identification of risks at an early stage. Although adherence by member countries to the SDDS Plus is voluntary, it carries a commitment requiring members to observe the standard and to provide certain information to the IMF about their practices in disseminating economic and financial data.
Source: Bundesministerium der Finanzen, Deutschland stellt ab heute Indikatoren nach dem “speziellen Datenverbreitungsstandard Plus“ (SDDS Plus) des IWF bereit, press release of February 18, 2015
(http://www.bundesfinanzministerium.de/Content/DE/Pressemitteilungen/Finanzpolitik/2015/02/2015-02-18-PM07.html?source=stdNewsletter). |
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THE ECONOMY
Since 1945, the Federal Republic’s economic system has developed into a social market economy, combining the free initiative of the individual with progressive social principles. The Grundgesetz guarantees freedom of private enterprise and private property, provided that these basic rights are not exercised against the public good. The state mainly has a regulatory function in the market economy, setting the general framework of conditions within which market processes take place. State intervention in price setting is limited to a very small number of industries.
The German economy is one of the world’s largest economies. In 2016, the GDP of Germany expressed at current prices was EUR 3,132.7 billion, compared to EUR 3,032.8 billion in 2015, which represents an increase of 3.3%. GDP adjusted for price effects rose by 1.9% compared to 2015, and exceeded the 1991 level by 39.5%. 1991 represents the first full year after German reunification on October 3, 1990. The growth in GDP since 1991 has been largely driven by productivity gains, as price-adjusted GDP per employee has risen by 24.4% since 1991. In calculating price-adjusted GDP, the Federal Statistical Office (Statistisches Bundesamt) uses a chain index based on the previous year’s prices. In 2016, GDP per capita at current prices was EUR 37,866, while GDP per employee at current prices was EUR 72,057.
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Tables 2.1.1 and 2.1.4. |
As in many advanced economies, the services sector of the Federal Republic has become the largest contributor to GDP (in terms of gross value added). In 2016, services accounted for 68.9% of gross value added, measured at current prices, compared to 61.9% in 1991. The two most important subsectors were “trade, transport, accommodation and food services,” accounting for 15.7% in 2016, compared to 16.2% in 1991, and “public services, education, health,” accounting for 18.3% of gross value added in 2016, compared to 15.9% in 1991. The production sector (excluding construction) generated 25.7% of gross value added compared to 30.9% in 1991. Construction contributed 4.8% to gross value added in 2016, compared to 6.0% in 1991, and agriculture, forestry and fishing accounted for 0.6% of gross value added in 2016, compared to 1.2% in 1991.
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Table 2.2.1. |
In 2016, private final consumption expenditure totaled 53.6% of GDP in current prices, gross capital formation amounted to 19.1% and government final consumption expenditure equaled 19.7%, almost unchanged from 2015. Exports and imports of goods and services accounted for 46.0% and 38.4% of GDP at current prices, respectively. The trade balance (according to national accounts) thus showed a surplus equal to 7.6% of GDP in 2016, also almost unchanged from 2015.
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Table 2.3.1. |
In 2016, price-adjusted GDP rose by 1.9% compared to 2015. The GDP adjusted for both price and calendar effects, increased by 1.8% compared to 2015. Net exports had a slightly negative effect on economic growth in 2016 (growth contribution: -0.2 percentage points). Exports increased by 2.6% (2015: 5.2%), while imports rose by 3.7% (2015: 5.5%), all on a price-adjusted basis. Gross fixed capital formation in machinery and equipment increased in 2016 by 1.1%, compared to a 3.7% increase in 2015, in price-adjusted terms, while gross fixed capital formation in construction increased by 3.0%. Final consumption expenditure of general government rose by 4.0% in 2016 on a price-adjusted basis, and final consumption expenditure of households rose by 2.0% on a price-adjusted basis compared to 2015.
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Tables 2.1.1, 2.3.2, 2.3.5 and 2.3.10. |
The annual average rate of registered unemployment (as computed under the “national definition” of the Federal Employment Agency (Bundesagentur für Arbeit)) declined from 6.4% in 2015 to 6.1% in 2016. However, based on the internationally comparable method of calculation promulgated by the International Labour Organization (“ILO”), which is referred to as the “ILO definition,” the annual average unemployment rate decreased from 4.3% in 2015 to 3.9% in 2016. For an explanation of the differences between the national definition and the ILO definition, see “–Employment and Labor.” Inflation as measured by the percentage increase in the national consumer price index (“CPI”) increased to 0.5% in 2016, compared to 0.3% in 2015. Excluding energy prices, the index rose by 1.2%. General government gross debt stood at EUR 2,140.4 billion at year-end 2016, compared to EUR 2,158.8 billion at year-end 2015.
Sources: Bundesagentur für Arbeit, Monatsbericht Februar 2017, Table 6.1
(https://statistik.arbeitsagentur.de/Statistikdaten/Detail/201702/arbeitsmarktberichte/monatsbericht-monatsbericht/monatsbericht-d-0-201702-pdf.pdf);
Statistisches Bundesamt, Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Table 2.1.13; Statistisches Bundesamt, Fachserie 17, Reihe 7 (February 2017), Table 1.1 and 1.2; Deutsche Bundesbank, Time series BBK01.BJ9059: General government debt as defined in the Maastricht Treaty – Germany – overall
(http://www.bundesbank.de/Navigation/EN/Statistics/Time_series_databases/Macro_economic_time_series/its_details_value_node.html?tsId=BBK01.BJ9059&listId=www_v27_web001_02a). |
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The following table shows selected key economic figures for the Federal Republic for each of the years indicated.
KEY ECONOMIC FIGURES
| 2016 | | 2015 | | 2014 | | 2013 | | 2012 | |
|
| |
| |
| |
| |
| |
| (EUR in billions, unless otherwise indicated) | |
| GDP – at current prices | 3,132.7 | | 3,032.8 | | 2,923.9 | | 2,826.2 | | 2,758.3 | |
| (change from previous year in %) | 3.3 | | 3.7 | | 3.5 | | 2.5 | | 2.0 | |
GDP – price-adjusted, chain-linked index (2010=100),
not adjusted for calendar effects | 110.2 | | 108.2 | | 106.4 | | 104.7 | | 104.2 | |
| (change from previous year in %) | 1.9 | | 1.7 | | 1.6 | | 0.5 | | 0.5 | |
GDP – price-adjusted, chain-linked index (2010=100),
adjusted for calendar effects | 110.0 | | 108.1 | | 106.5 | | 104.8 | | 104.2 | |
| (change from previous year in %) | 1.8 | | 1.5 | | 1.6 | | 0.6 | | 0.7 | |
| Unemployment rate (ILO definition) (in %) (1) | 3.9 | | 4.3 | | 4.7 | | 4.9 | | 5.0 | |
Rate of inflation (year-to-year change in consumer
price index (CPI) in %) | 0.5 | | 0.3 | | 0.9 | | 1.5 | | 2.0 | |
| Balance of payments – current account | 261.4 | | 260.0 | | 218.0 | | 189.6 | | 193.6 | |
| General government gross debt (2) | 2,140.4 | | 2,158.8 | | 2,189.6 | | 2,189.8 | | 2,204.9 | |
| (1) | Unemployed persons, available and seeking work. |
| (2) | Definition according to Maastricht Treaty. |
Sources: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2016 (February 2017), Tables 1.1 and 1.11; Statistisches Bundesamt, Verbraucherpreise, Verbraucherpreisindex für Deutschland, Veränderungsraten zum Vorjahr in %
(https://www.destatis.de/DE/ZahlenFakten/GesamtwirtschaftUmwelt/Preise/Verbraucherpreisindizes/Tabellen_/VerbraucherpreiseKategorien.html?cms_gtp=145114_list%253D2%2526145110_slot%253D2&https=1); Deutsche Bundesbank, Monatsbericht März 2017, Table XII.2; Deutsche Bundesbank, Time series BBK01.BJ9059: General government debt as defined in the Maastricht Treaty – Germany – overall (http://www.bundesbank.de/Navigation/EN/Statistics/Time_series_databases/Macro_economic_time_series/its_details_value_node.html?tsId=BBK01.BJ9059&listId=www_v27_web001_02a). |
In its forecast published in April 2017, the Federal Government projected that GDP in Germany will grow by 1.5% in 2017, with private consumption growing by 1.4% (all growth rates are in price-adjusted terms). Exports and imports are expected to increase by 3.3% and 4.5%, respectively, compared to 2016. Investment in machinery and equipment is projected to increase by 1.1% and construction is forecast to increase by 2.9%. Growth is expected to be driven exclusively by domestic demand. The Federal Government expects that domestic employment will increase by approximately 530,000 persons, or 1.2%, in 2017 compared to 2016, reaching a record level of 44.1 million persons in 2017. Registered unemployment (Arbeitslose) is expected to decrease by 140,000 persons compared to 2016 to 2.55 million persons in 2017 on average.
Source: Bundesministerium für Wirtschaft und Energie, Zypris: Trotz Unwägbarkeiten – Deutsche Wirtschaft wächst solide, press release of April 26, 2017
(http://www.bmwi.de/Redaktion/DE/Pressemitteilungen/2017/20170426-fruejahrsprojektion-2017.html). |
The Federal Government aims to safeguard and build on the foundations for prosperity, social cohesion and a high quality of life in Germany. It is counting on investment, on innovation and research, on efficient infrastructure, on the integration of labor and on the continuing internationalization of the German economy. It aims to implement a modern and practical economic policy in order to overcome impediments to productivity.
The German economy remains competitive, and, despite increasing burdens as well as external and internal risks, the Federal Government expects German economic growth to remain robust. Employment and GDP in Germany increased on an annual average basis from 2010 to 2016. In 2016, a record level of domestic employment was reached, with 43.5 million persons employed. For more information on recent economic developments, see “–Key Economic Figures.”
Sources: Bundesministerium für Wirtschaft und Energie, 2017 Annual Economic Report, page 7 (http://www.bmwi.de/Redaktion/EN/Publikationen/jahreswirtschaftsbericht-2017.pdf?__blob=publicationFile&v=8); Bundesregierung, Boom auf deutschem Arbeitsmarkt
(https://www.bundesregierung.de/Content/DE/Artikel/2017/01/2017-01-03-arbeitsmarkt.html); Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Table 2.1.14. |
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| Current Policy Initiatives |
The Federal Government continues the strategy of sound fiscal and budgetary as well as growth enhancing policies. At the same time the aim is to maintain competitiveness and strengthen the growth potential with public investment to be stepped up and conditions for private investment improved, thus broadening the scope for a sustained boost to the long-term performance of the German economy. Current policy initiatives are outlined below in more detail.
The Federal Government has continued the consolidation of public finances, fully adhering both to the requirements stipulated by the constitutional balanced budget rule (known as the “debt brake” (Schuldenbremse)), as well as to the European frameworks such as the SGP and the fiscal compact. For further details on the budget surveillance procedures, see “General–The European Union and European Integration–EU Economic Governance.” In 2016, overall public sector finances were again positive, with net lending of general government at 0.8% of GDP. This means that the public sector budgets were close-to-balance for the fifth year in succession. This trend is expected to continue in the years ahead. According to the present federal budget planning, no new borrowing will be required in the period between 2017 and 2021. The Federal Government’s goal of cutting the debt-to-GDP ratio to less than 70% was attained by the end of 2016. On this basis, the Federal Government is on track with its plans to cut the debt-to-GDP ratio to below 60% within ten years of the current Federal Government taking office in 2013. For further information on the Federal Republic’s fiscal situation and prospects, see “Public Finance–Germany’s General Government Deficit/Surplus and General Government Gross Debt” and “Public Finance–Fiscal Outlook.”
The Federal Government is particularly enhancing public sector investment. In total, federal investment in current prices has risen by more than 40% since the beginning of the legislative term, to EUR 36.1 billion in the 2017 federal budget. In comparison, the federal budget itself only rose by just under 7% in the same period. The Federal Government is also assisting the Länder and the municipalities by providing additional relief over the current legislative term, thus boosting the scope for municipalities and Länder to invest. For example, financially weak municipalities are to benefit from an additional EUR 3.5 billion provided by the Federal Government from 2015 to 2020 through the Municipal Investment Promotion Fund (Kommunalinvestitionsförderungsfonds), which was doubled up to EUR 7 billion in 2016 to improve school infrastructure, and an additional EUR 3 billion is provided for research. Furthermore, the Federation is also providing more than EUR 7 billion of funding to the Länder from 2016 and 2018 to help them cope with the tasks related to the integration and accommodation of refugees and asylum seekers. In total, the relief provided by the Federal Government for Länder and municipalities amounts to approximately EUR 79 billion.
As of December 31, 2019, the rules on fiscal equalization in Germany in a broad sense – including the financial support for seaports, the special solidarity scheme for the eastern Länder and compensation payments between the Federal Government and the Länder in connection with the abolishment of previous joint financing arrangements for certain public tasks (Entflechtungsmittel) – will cease to apply. At the same time, all Länder budgets have to be structurally balanced from 2020 onwards according to the national “debt brake.”
Consequently, current negotiations between the Federal Government and the Länder, which started in mid-2014, aim at a more general restructuring of their fiscal relations. The Federal Government intends to finalize these negotiations during the current legislative term. In the view of the Federal Government, a further reduction of interdependencies between the Federal Government and the Länder, a more efficient assignment of tasks, more direct responsibilities, more room for maneuver and, accordingly, an improved alignment of incentives for the Länder are necessary to ensure compliance with the national and European budget rules on a sustainable basis.
The Federal Government aims to have broadband infrastructure with a minimum download speed of 50 Mbit/s in place nationwide by the end of 2018. The companies represented in the Network Alliance (Netzallianz) invested EUR 8 billion per year in network expansion in 2015 and 2016. The Federal Government has a EUR 4 billion program for the period up until 2020 to support the expansion of broadband in rural and remote areas where no private-sector network expansion can be expected in the foreseeable future due to a lack of profitability. To date, 340 notifications of awards have been issued representing total support of EUR 2.3 billion, activating in turn investments totaling EUR 5.2 billion. Some 94% of the funding is going directly into expanding the fiber-optic network. At the end of 2016, 75% of German households already had access to band width of at least 50 Mbit/s.
The Federal Government also aims to continue developing and adapting tax legislation in order to bring it in line with the needs of a modern society in a globalized world. In the face of technical, economic and demographic changes, the Federal Government intends to modernize the taxation procedure step by step in cooperation with the Länder. In 2016 the legal framework for inheritance and gift taxes was reformed. As amended, the applicable rules and regulations meet constitutional requirements as well as the needs of small and medium-sized businesses. Another goal is to modernize the real property tax. With targeted tax relief the Federal Government seeks to contribute to the reduction of fiscal drag. Furthermore, measures to combat the shifting of profits across borders by companies which operate internationally are of great significance; the Federal Government is cooperating with its G20 partners in this regard.
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In order to ensure that as many workers as possible can benefit from the strong labor market and to secure adequate working conditions, the Federal Government has launched a number of policy measures. Since January 1, 2015, a general statutory gross minimum wage has been in place. Every two years, the minimum wage is assessed and, if appropriate, adjustments are proposed by a commission comprising representatives of the unions and of the employers’ associations in equal shares. In connection with the first assessment, the minimum wage was raised from EUR 8.50 to EUR 8.84 per hour worked with effect from January 1, 2017. The Federal Government has presented a comprehensive concept to increase the chances of long-term unemployed persons regaining access to the regular labor market. Legislation has been introduced that resolves conflicts between trade unions in collective bargaining. While recognizing that the use of temporary workers and contracts for work and services enable many people to participate in working life and permit companies to respond flexibly, the Federal Government has amended legislation in order to address illegal contract clauses to restrict the use of temporary workers to times of extraordinary capacity needs. The amendment came into effect on April 1, 2017.
The Federal Government is developing strategies to counteract the effects of demographic change on the business sector and to maintain the performance of the German economy. The aim is to strengthen and activate the potential pool of skilled labor in the domestic economy and to make Germany more attractive for qualified professionals from other countries. By reforming the Federal Training Assistance Act (Bundesausbildungsförderungsgesetz), which provides the regulatory framework for student loans, the Federal Government is making an important contribution towards improving the situation of students at school and in higher education. Making family and working life more compatible not only contributes to equal opportunity, but also to activating additional skills for companies. Accordingly, the Federal Government has introduced “parental allowance plus” to assist young parents in working part-time and to re-enter working life more quickly. In order to provide greater support to working patterns that fit in with other aspects of life, the legal framework for a more flexible transition from working life to retirement was improved by the Variable Pension Act (Flexirentengesetz).
Following the nuclear disaster which affected the Japanese nuclear power plant in Fukushima in March 2011, the Federal Government decided to accelerate the transition to a more sustainable energy set-up (Energiewende). Among other things, this energy concept provides for the shutdown of all nuclear power stations in Germany by 2022 and unites other key energy policy objectives (i.e., energy security, climate protection, energy efficiency, renewable energy) within a single strategy. It sets a long-term target of achieving an 80% to 95% reduction in greenhouse gas emissions by 2050, compared to 1990 levels. To this end, the energy concept is intended to increase the production and use of renewable energy sources, making them the primary source of German energy supply. The overarching principle for the future implementation of the energy reforms is the “energy policy triangle” of a secure, affordable and environmentally compatible energy supply.
The Federal Government’s reform of the Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz) has placed the future expansion of renewable energy sources on a viable basis. The other key projects for the current legislative term have been consolidated in a 10-point Energy Agenda, and coordinated in terms of timing and substance so that the energy transition can be rolled out in a methodical and efficient manner. The National Energy Efficiency Action Plan, which was adopted in December 2014, sets out the Federal Government’s efficiency strategy for this legislative term. It aims to raise awareness of the economic viability of efficiency measures on a cross-sectoral basis and to put the conditions in place in order to make full use of the potential for efficiency improvements. The energy efficiency strategy for buildings is intended to make a major contribution towards the achievement of a virtually climate-neutral building stock in Germany by 2050. In the 2020 Climate Action Plan, the Federal Government has adopted further measures to reduce greenhouse-gas emissions by at least 40% between 1990 and 2020 in Germany. Many of the measures adopted in the National Energy Efficiency Action Plan were rolled out in the course of 2015. Building on the Action Plan, the Federal Government has also adopted the Energy Efficiency Strategy for Buildings. Furthermore, the Federal Government adopted the 2050 Climate Action Plan in November 2016, which establishes interim targets for the post-2020 period as well as reduction measures and monitoring processes in order to achieve long-term climate goals.
The Grid Expansion Acceleration Act (Netzausbaubeschleunigungsgesetz) and the Federal Requirements Plan Act (Bundesbedarfsplangesetz) provide the framework for a methodical and accelerated expansion of the transmission grids. The first formal procedures for federal planning of the expansion of the transmission grids have been set in motion. The distribution grids are also to be made fit for the energy transition, and the rules are to be made more investment-friendly.
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For information on recent government measures to stabilize Germany’s financial system, see “Monetary and Financial System–Financial System–German Financial System.” For information on government budgets, see “Public Finance.” For information on the response to the European sovereign debt crisis, see “General–The European Union and European Integration–Response to the European Sovereign Debt Crisis” and “General–The European Union and European Integration–EU Economic Governance.”
Sources: Bundesministerium für Wirtschaft und Energie, 2017 Annual Economic Report (http://www.bmwi.de/Redaktion/EN/Publikationen/jahreswirtschaftsbericht-2017.pdf?__blob=publicationFile&v=8); Statistisches Bundesamt, General government records surplus of nearly 24 billion euros in 2016, press release of February 23, 2017
(https://www.destatis.de/EN/PressServices/Press/pr/2017/02/PE17_063_813.html); Bundesministerium der Finanzen, Bundeskabinett beschließt Eckwerte für Haushalt 2018 und Finanzplan bis 2021, press release of March 15, 2017
(http://www.bundesfinanzministerium.de/Content/DE/Pressemitteilungen/Finanzpolitik/2017/03/2017-03-15-pm-eckwertebeschluss.html); Bundesfinanzministerium, Entwicklung der öffentlichen Finanzen, February 2017
(http://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Oeffentliche_Finanzen/Entwicklung_Oeffentliche_Finanzen/entwicklung-oeffentliche-finanzen.html); Bundesministerium der Finanzen, Förderung von Investitionen finanzschwacher Kommunen (http://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Oeffentliche_Finanzen/Foederale_Finanzbeziehungen/Kommunalfinanzen/Kommunalinvestitionsfoerderungsfonds/Foerderung-von-Investitionen-finanzschwacher-Kommunen.html); Bundesministerium der Finanzen, Gesetz zur Änderung des Kommunalinvestitionsförderungsgesetzes und zur Änderung weiterer Gesetze (http://www.bundesfinanzministerium.de/Content/DE/Gesetzestexte/Gesetze_Verordnungen/2016-11-25-kommunalinvestitionsfoerderungsgesetz.html); Gesetz zur Beteiligung des Bundes an den Kosten der Integration und zur weiteren Entlastung von Ländern und Kommunen, December 2016
(http://www.bundesfinanzministerium.de/Content/DE/Gesetzestexte/Gesetze_Verordnungen/2016-12-06-G-z-Beteiligung-d-Bundes-an-d-Kosten-d-Integration.html); Bundesrgierung, Erbschaftsteuerreform in Kraft getreten
(https://www.bundesregierung.de/Content/DE/Artikel/2016/09/2016-09-29-erbschaftsteuer-reform-beschlossen.html); Bundesregierung, Ab 2017 beträgt der Mindestlohn 8,84 Euro
(https://www.bundesregierung.de/Content/DE/Artikel/2016/10/2016-10-26-neuer-mindestlohn2017.html); Bundesministerium für Arbeit und Soziales, Klare Regeln für Leiharbeit und Werkverträge
(http://www.bmas.de/DE/Presse/Pressemitteilungen/2016/pk-leiharbeit-werkvertraege.html); Climate Action Plan 2050, Executive Summary (http://www.bmub.bund.de/fileadmin/Daten_BMU/Download_PDF/Klimaschutz/klimaschutzplan_2050_kurzf_en_bf.pdf), German Text: Bundesministerium für Umwelt, Naturschutz, Bau und Reaktorsicherheit, Klimschutzplan 2050 (http://www.bmub.bund.de/fileadmin/Daten_BMU/Download_PDF/Klimaschutz/klimaschutzplan_2050_bf.pdf); Bundesministerium für Wirtschaft und Energie, 2014 Annual Economic Report (Summary in English:
https://www.bmwi.de/Redaktion/EN/Publikationen/2014-annual-economic-report.pdf?__blob=publicationFile&v=1, German text: https://www.bmwi.de/Redaktion/DE/Publikationen/Wirtschaft/jahreswirtschaftsbericht-2014.pdf?__blob=publicationFile&v=6). |
The following tables show the structure of the Federal Republic’s GDP at current prices by use and origin for each of the years indicated along with changes over the respective preceding period.
STRUCTURE OF GDP – USE
| 2016 | | 2015 | | 2014 | | 2013 | | 2012 | | | 2016 | | 2015 | | 2014 | | 2013 | |
|
| |
| |
| |
| |
| | |
| |
| |
| |
| |
| (EUR in billions) | | | (change in %) | | |
| Domestic uses | 2,893.9 | | 2,803.3 | | 2,733.2 | | 2,657.8 | | 2,590.3 | | | 3.2 | | 2.6 | | 2.8 | | 2.6 | |
| Final private consumption | 1,679.2 | | 1,636.0 | | 1,594.4 | | 1,565.7 | | 1,538.0 | | | 2.6 | | 2.6 | | 1.8 | | 1.8 | |
| Final government consumption | 616.1 | | 583.7 | | 561.1 | | 542.2 | | 519.7 | | | 5.6 | | 4.0 | | 3.5 | | 4.3 | |
| Gross fixed capital formation | 626.7 | | 603.8 | | 585.1 | | 557.1 | | 554.7 | | | 3.8 | | 3.2 | | 5.0 | | 0.4 | |
| Machinery and equipment | 204.4 | | 200.2 | | 191.5 | | 180.5 | | 183.8 | | | 2.1 | | 4.6 | | 6.1 | | -1.8 | |
| Construction | 309.4 | | 295.0 | | 288.7 | | 277.2 | | 273.0 | | | 4.9 | | 2.2 | | 4.2 | | 1.5 | |
| Other products | 112.9 | | 108.6 | | 105.0 | | 99.5 | | 97.9 | | | 3.9 | | 3.5 | | 5.5 | | 1.6 | |
| Changes in inventories (1) | -28.1 | | -20.2 | | -7.4 | | -7.2 | | -22.2 | | | — | | — | | — | | — | |
| Net exports (1) | 238.8 | | 229.5 | | 190.7 | | 168.4 | | 168.0 | | | — | | — | | — | | — | |
| Exports | 1,441.4 | | 1,418.8 | | 1,334.8 | | 1,284.7 | | 1,268.3 | | | 1.6 | | 6.3 | | 3.9 | | 1.3 | |
| Imports | 1,202.6 | | 1,189.3 | | 1,144.1 | | 1,116.4 | | 1,100.3 | | | 1.1 | | 3.9 | | 2.5 | | 1.5 | |
|
| |
| |
| |
| |
| | |
| |
| |
| |
| |
| Gross domestic product | 3,132.7 | | 3,032.8 | | 2,923.9 | | 2,826.2 | | 2,758.3 | | | 3.3 | | 3.7 | | 3.5 | | 2.5 | |
|
| |
| |
| |
| |
| | |
| |
| |
| |
| |
| (1) | Percentage changes are not presented due to the potentially changing signs of these net positions. |
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2016 (February 2017), Tables 3.1 and 3.9. |
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STRUCTURE OF GDP – ORIGIN
| 2016 | | 2015 |
| 2014 |
| 2013 |
| 2012 | |
| 2016 |
| 2015 |
| 2014 |
| 2013 | |
|
| |
| |
| |
| |
| | |
| |
| |
| |
| |
| (EUR in billions) | | | (change in %) | | |
| Gross value added of all economic sectors | 2,821.0 | | 2,729.7 | | 2,631.3 | | 2,542.6 | | 2,478.6 | | | 3.3 | | 3.7 | | 3.5 | | 2.6 | |
| Agriculture, forestry and fishing | 17.9 | | 17.4 | | 20.4 | | 24.0 | | 19.4 | | | 3.4 | | -15.1 | | -14.9 | | 23.8 | |
| Production sector (excluding construction) | 723.6 | | 707.5 | | 685.1 | | 654.2 | | 650.1 | | | 2.3 | | 3.3 | | 4.7 | | 0.6 | |
| Construction | 135.5 | | 124.8 | | 118.2 | | 113.2 | | 111.0 | | | 8.6 | | 5.5 | | 4.4 | | 2.1 | |
| Trade, transport, accommodation and food services | 443.1 | | 430.2 | | 413.9 | | 395.4 | | 387.0 | | | 3.0 | | 3.9 | | 4.7 | | 2.2 | |
| Information and communication | 137.3 | | 131.6 | | 125.4 | | 120.5 | | 116.4 | | | 4.3 | | 5.0 | | 4.0 | | 3.5 | |
| Financial and insurance services | 110.8 | | 110.9 | | 110.0 | | 109.3 | | 108.4 | | | -0.1 | | 0.9 | | 0.6 | | 0.8 | |
| Real estate activities | 306.8 | | 297.3 | | 286.0 | | 286.9 | | 278.6 | | | 3.2 | | 4.0 | | -0.3 | | 3.0 | |
| Business services | 315.1 | | 303.3 | | 289.6 | | 276.8 | | 264.6 | | | 3.9 | | 4.7 | | 4.6 | | 4.6 | |
| Public services, education, health | 517.3 | | 497.2 | | 476.6 | | 459.0 | | 442.8 | | | 4.1 | | 4.3 | | 3.8 | | 3.7 | |
| Other services | 113.7 | | 109.7 | | 106.0 | | 103.2 | | 100.4 | | | 3.6 | | 3.4 | | 2.7 | | 2.8 | |
| Taxes on products offset against subsidies on products | 311.7 | | 303.2 | | 292.7 | | 283.6 | | 279.7 | | | 2.8 | | 3.6 | | 3.2 | | 1.4 | |
|
| |
| |
| |
| |
| | |
| |
| |
| |
| |
| Gross domestic product | 3,132.7 | | 3,032.8 | | 2,923.9 | | 2,826.2 | | 2,758.3 | | | 3.3 | | 3.7 | | 3.5 | | 2.5 | |
|
| |
| |
| |
| |
| | |
| |
| |
| |
| |
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2016 (February 2017), Tables 1.14 and 2.1. |
Following German reunification in 1990, industry in the eastern Länder (i.e., the former German Democratic Republic), has undergone a restructuring process. Today, the German production sector is characterized by a balanced mix of small, medium and large enterprises and is almost entirely privately owned. Measured by its share in value added, approximately 60% of the production sector is geographically concentrated in the western Länder of Bavaria, Baden-Württemberg and North Rhine-Westphalia. The main segments of the production sector relate to the manufacturing of motor vehicles, machinery and equipment, electrical and optical equipment, basic metals and fabricated metal products, as well as chemicals and chemical products. In 2016, the production sector’s aggregate contribution to gross value added at current prices was 25.7% (excluding construction) and 30.5% (including construction), respectively. Its price-adjusted gross value added (excluding construction) increased by 1.6% year-on-year in 2016, after increasing by 1.6% in 2015.
| Sources: Volkswirtschaftliche Gesamtrechnungen der Länder, Reihe 1, Länderergebnisse Band 1 (February 2017), Table 2.3; Statistisches Bundesamt, Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (February 2017), Tables 2.2.1 and 2.2.2. |
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OUTPUT IN THE PRODUCTION SECTOR (1)
(2010 = 100)
| 2016 | | 2015 | | 2014 | | 2013 | |
|
| |
| |
| |
| |
| Production sector, total | 109.6 | | 108.5 | | 107.9 | | 106.4 | |
| Industry (2) | 111.7 | | 110.3 | | 109.8 | | 107.8 | |
| of which: | | | | | |
| Intermediate goods (3) | 107.3 | | 106.2 | | 106.3 | | 104.4 | |
| Capital goods (4) | 119.4 | | 117.6 | | 116.6 | | 114.0 | |
| Durable goods (5) | 105.8 | | 102.8 | | 100.5 | | 100.1 | |
| Nondurable goods (6) | 102.9 | | 101.9 | | 102.2 | | 100.6 | |
| Energy (7) | 96.0 | | 97.5 | | 92.7 | | 96.4 | |
| Construction (8) | 106.9 | | 106.0 | | 108.4 | | 105.5 | |
| (1) | Adjusted for working-day variations. |
| (2) | Manufacturing sector, unless assigned to the main grouping energy, plus mining and quarrying. |
| (3) | Including mining and quarrying except energy-producing goods. |
| (4) | Including manufacture of motor vehicles and components. |
| (5) | Consumption goods that have a long-term use, such as furniture. |
| (6) | Consumption goods that have a short-term use, such as food. Including printing and service activities related to printing. |
| (7) | Electricity, gas, steam and hot water supply, mining and quarrying of energy-producing materials, and especially manufacture of refined petroleum products. |
| (8) | Comprises the economic classifications “Site preparation” and “Building of complete constructions or parts thereof; civil engineering.” |
| Source: Deutsche Bundesbank, Monatsbericht März 2017, Table XI.2. |
As in most other industrialized countries, the services sector, which comprises “trade, transport, accommodation and food services,” “information and communication,” “financial and insurance services,” “real estate activities,” “business services,” “public services, education, health” as well as “other services,” has expanded rapidly in recent years and is currently the largest contributor to gross value added. In 2016, the services sector’s aggregate contribution to gross value added at current prices was 68.9%, nearly matching the previous year’s level of 69.0%, compared to only 61.9% in 1991. Within the services sector, “public services, education, health” represented the largest subsector in terms of contribution to total gross value added at current prices, contributing 18.3% in 2016 and 18.2 % in 2015, compared to 15.9% in 1991.
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Table 2.2.1. |
As solid economic growth continued in 2016, labor market conditions improved further. In 2016, the average unemployment rate according to the national definition was 6.1%, compared to 6.4% in 2015. Under the ILO definition, the average unemployment rate was 3.9% in 2016 compared to 4.3% in 2015, having declined to the lowest level of unemployment since 1991. The number of persons resident in Germany who were either employed or self-employed in 2016 was 43.4 million, an increase of 1.0% compared to 2015.
| Sources: Bundesagentur für Arbeit, Der Arbeits- und Ausbildungsmarkt in Deutschland: Monatsbericht Februar 2017, Table 6.1 (https://statistik.arbeitsagentur.de/Statistikdaten/Detail/201702/arbeitsmarktberichte/monatsbericht-monatsbericht/monatsbericht-d-0-201702-pdf.pdf); Statistisches Bundesamt, Fachserie 18, Reihe 1.4- 2016 (March 2017), Tables 2.1.13. |
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The following table presents data with respect to employment and unemployment for each of the years indicated. Persons who are participating in programs such as vocational training, job creation plans or early retirement, which are designed to reduce unemployment, are not included in the unemployment rates shown below, as they are not treated as unemployed.
EMPLOYMENT AND UNEMPLOYMENT
| 2016 | | 2015 | | 2014 | | 2013 | | 2012 | |
|
| |
| |
| |
| |
| |
| Employed (in thousands)-ILO definition | 43,393 | | 42,979 | | 42,602 | | 42,271 | | 42,006 | |
| Unemployed (in thousands)-ILO definition (1) | 1,775 | | 1,950 | | 2,090 | | 2,182 | | 2,224 | |
| Unemployment rate (in %)-ILO definition | 3.9 | | 4.3 | | 4.7 | | 4.9 | | 5.0 | |
| Unemployed (in thousands)-national definition (2) | 2,691 | | 2,795 | | 2,898 | | 2,950 | | 2,897 | |
| Unemployment rate (in %)-national definition (3) | 6.1 | | 6.4 | | 6.7 | | 6.9 | | 6.8 | |
| (1) | Unemployed persons, available and seeking work. |
| (2) | Registered unemployed persons, available and seeking work (but including persons working up to 15 hours per week). |
| (3) | As a percentage of the total work force (excluding armed forces). |
| Sources: Bundesagentur für Arbeit, Der Arbeits- und Ausbildungsmarkt in Deutschland: Dezember und das Jahr 2016, Table 10.1; Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2016 (February 2017), Table 1.11. |
The following table presents data with respect to the employment rate broken down by gender and age for 2015 and 2005.
EMPLOYMENT RATE – BREAKDOWN BY GENDER AND AGE
| | Total | | Men | | Women | |
| | |
| |
| |
| |
| (Age in years) | | 2015 | | 2005 | | 2015 | | 2005 | | 2015 | | 2005 | |
| |
| |
| |
| |
| |
| |
| |
| (Employed persons as a percentage of total population of same gender and age) | |
| 15 to 19 | | 25.4 | | 25.7 | | 27.0 | | 28.6 | | 23.6 | | 22.7 | |
| 20 to 24 | | 63.5 | | 59.3 | | 64.5 | | 61.2 | | 62.5 | | 57.4 | |
| 25 to 29 | | 77.9 | | 69.7 | | 80.4 | | 74.0 | | 75.4 | | 65.2 | |
| 30 to 34 | | 82.3 | | 75.5 | | 88.2 | | 84.6 | | 76.2 | | 66.4 | |
| 35 to 39 | | 84.1 | | 79.3 | | 89.9 | | 87.2 | | 78.3 | | 71.2 | |
| 40 to 44 | | 85.6 | | 80.9 | | 90.4 | | 86.5 | | 80.7 | | 75.1 | |
| 45 to 49 | | 86.5 | | 79.8 | | 90.3 | | 84.7 | | 82.6 | | 74.8 | |
| 50 to 54 | | 83.9 | | 75.2 | | 87.6 | | 80.8 | | 80.1 | | 69.7 | |
| 55 to 59 | | 77.2 | | 63.3 | | 81.5 | | 71.3 | | 73.1 | | 55.3 | |
| 60 to 64 | | 53.1 | | 28.1 | | 58.8 | | 35.8 | | 47.8 | | 20.7 | |
| 65 and older | | 5.9 | | 3.3 | | 8.4 | | 5.0 | | 3.9 | | 2.1 | |
| |
| |
| |
| |
| |
| |
| |
| Total (15 and older) | | 56.8 | | 51.5 | | 62.2 | | 58.4 | | 51.7 | | 45.0 | |
| |
| |
| |
| |
| |
| |
| |
| Source: Statistisches Bundesamt, Erwerbsbeteiligung, Erwerbstätige und Erwerbstätigenquote nach Geschlecht und Alter 2005 und 2015, Ergebnis des Mikrozensus – Jährlicher Durchschnitt (https://www.destatis.de/DE/ZahlenFakten/GesamtwirtschaftUmwelt/Arbeitsmarkt/Erwerbstaetigkeit/TabellenArbeitskraefteerhebung/ErwerbsbeteiligungRente70.html). |
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The following table presents data with respect to the structure of employment by economic sector for 2016 and 2006.
STRUCTURE OF EMPLOYMENT – ECONOMIC SECTORS
| 2016 | | 2006 | |
|
| |
| |
| (Percent of total) | |
| Agriculture, forestry and fishing | 1.4 | | 1.6 | |
| Production sector (excluding construction) | 18.6 | | 19.5 | |
| of which: manufacturing | 17.3 | | 18.1 | |
| Construction | 5.6 | | 5.7 | |
| Trade, transport, accommodation and food services | 22.9 | | 23.4 | |
| Information and communication | 2.8 | | 3.0 | |
| Financial and insurance services | 2.7 | | 3.2 | |
| Real estate activities | 1.1 | | 1.2 | |
| Business services | 13.5 | | 11.6 | |
| Public services, education, health | 24.5 | | 23.6 | |
| Other services | 6.8 | | 7.3 | |
|
| |
| |
| Total (1) | 100.0 | | 100.0 | |
|
| |
| |
| (1) | Figures may not add up due to rounding. |
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Table 2.2.9. |
The following table shows changes in the annual wage level per employee and unit labor costs per hour worked for each of the years indicated.
WAGE TRENDS AND LABOR COSTS
| 2016 | | 2015 | | 2014 | | 2013 | | 2012 | |
|
| |
| |
| |
| |
| |
| Gross wages and salaries per employee in EUR | 33,259 | | 32,477 | | 31,631 | | 30,761 | | 30,146 | |
| Change from previous year in % | 2.4 | | 2.7 | | 2.8 | | 2.0 | | 2.7 | |
| Unit labor costs per hour worked | | | | | | | |
| Index (2010=100) | 110.2 | | 108.7 | | 107.0 | | 105.3 | | 103.5 | |
| Change from previous year in % | 1.4 | | 1.5 | | 1.7 | | 1.7 | | 3.0 | |
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2016 (February 2017), Tables 2.17 and 2.20. |
More than one-sixth of the German work force consists of members of unions. The German Trade Union Federation (Deutscher Gewerkschaftsbund) serves as an umbrella organization for eight such unions. In 2016, approximately 6.0 million persons were members of a union under the umbrella of the Deutscher Gewerkschaftsbund, roughly unchanged since 2013, but considerably less compared to the 11.8 million members in 1991, the first full year after German reunification. One major reason contributing to the strong decline since 1991 is the significant fall in manufacturing employment in the eastern Länder after reunification.
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Each member union typically covers employees of an entire industry, regardless of the precise type of work done by those employees (the “one union, one industry” principle). As a result, employers usually deal with only one negotiating partner on the labor side in each specific industry. The unions and employers of each specific industry enter into collective labor agreements (Tarifverträge) without government intervention. The collective labor agreements often apply to all employees of a given industry, regardless of whether or not a particular employee is a member of a union, so long as the employer is a member of the relevant association of employers, which is often the case. Despite their binding character, collective labor agreements in many cases contain opt-out clauses (Öffnungsklauseln) allowing for company-specific adjustments to be negotiated between the employer and the works council at the specific company. Moreover, there is a range of additional possibilities to deviate from these agreements. Many employers in the eastern Länder are not members of employers’ associations, which means that wages are individually negotiated, often resulting in wage levels that are lower than those provided for by the collective labor agreements.
Sources: Deutscher Gewerkschaftsbund, DGB-Mitgliederzahlen ab 2010 (http://www.dgb.de/uber-uns/dgb-heute/mitgliederzahlen/2010); Deutscher Gewerkschaftsbund, Mitgliederzahlen 1950-1993
(http://www.dgb.de/uber-uns/dgb-heute/mitgliederzahlen/1950-1993); European Trade Union Institute, National Industrial Relations, Countries, Germany, Trade Unions
(http://www.worker-participation.eu/National-Industrial-Relations/Countries/Germany); Bundeszentrale für politische Bildung, Tarifautonomie,
(http://www.bpb.de/nachschlagen/lexika/handwoerterbuch-politisches-system/202193/tarifautonomie). |
| Social Security, Social Protection and Social Policy |
The comprehensive system of social security and protection in effect in the Federal Republic includes in particular health insurance, long-term care insurance, retirement and disability pensions, participation benefits and benefits for medical rehabilitation, protection against the effects of occupational accidents and diseases by means of the mandatory occupational accident insurance, unemployment benefits, family benefits, benefits and rehabilitation for persons with disabilities, allowances to orphans and to single persons with dependents, and the provision of general public assistance to persons in need. The majority of the German population is covered by mandatory statutory retirement pensions and health insurance. Hospitals and institutions caring for children and handicapped persons are operated by municipalities, churches, charitable institutions, and private providers.
Most of these social services are mainly funded through social security contributions from employers and employees, and a smaller part is funded through direct contributions by the Federal Republic, the Länder, municipalities and other public institutions, depending notably upon whether the respective social service is provided by an insurance-based system funded through contributions or a social-assistance-like program funded through taxes.
The Federal Republic’s statutory retirement insurance system operates on a pay-as-you-go basis, with contributions from current employers and employees funding payments to current retired persons. Generally, all employed and some self-employed and other persons are subject to mandatory insurance in the statutory retirement system. Certain persons, including employed members of particular professions (including some free-lance professions) may apply for exemption, while others, as in the case of civil servants, are automatically exempted from mandatory participation in the statutory retirement pension insurance system. Instead, exempted persons have to contribute to professional or public pension schemes or, in the case of civil servants and similar groups, they will benefit from special pension schemes for civil servants. Furthermore, the Retirement Funds Act (Altersvermögensgesetz) aims to ensure the long-term viability of the statutory retirement pension insurance system by encouraging insureds to also sign up for designated privately funded or funded corporate pension schemes, for which certain bonus payments and tax incentives are provided, with a view to offsetting the expected decline of payments from the statutory retirement pension insurance.
Statutory health insurance coverage must be made available to all persons fulfilling the applicable eligibility criteria. Within the statutory health insurance system, insureds may choose among a large number of statutory health insurance funds that have developed historically. Persons whose gross income exceeds certain thresholds as well as civil servants, self-employed persons and members of certain professions may opt out of the statutory system and choose private health insurance coverage, which, in case of opting-out, is obligatory as well. Contributions to the statutory health insurance system are based solely on the insured’s income situation and are independent of the insured’s gender, age and medical risk. By contrast contributions towards private health insurance coverage are mainly calculated based on age, medical risk and the desired level of coverage.
In 2016, social security revenue, as shown in the national accounts, amounted to EUR 606.4 billion, and expenditure was EUR 598.2 billion. The social security budget thus incurred a surplus of EUR 8.2 billion in 2016, after a surplus of EUR 2.1 billion in 2015.
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Table 3.4.3.7. |
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In light of a changing population structure, the Federal Government has already implemented structural reforms of the statutory pension system in order to safeguard the sustainability of the social security system in the long term. In addition, Germany has implemented reforms of the statutory pension insurance which gradually raise the regular retirement age by two years to the age of 67 between 2012 and 2029. Since 2012, people with an insurance record with at least 45 years of mandatory contributions from employment or care or child-raising periods up to the child’s tenth year can claim a pension from age 65 without reductions. In July 2014, the Federal Government temporarily reduced the retirement age to the age of 63 for this exemption from the age limit increase; the age of 63 will gradually be raised back to 65 years until 2029.
To increase the sustainability of the health care system, Germany has implemented several structural reform measures to strengthen competition among payers and providers in order to improve the efficiency and quality of health care services.
Sources: Growth. Education. Unity. Coalition Agreement between CDU, CSU and FDP, page 121 (https://www.fdp.de/files/565/2009-203_en_Koalitionsvertrag_2009.pdf); Bundesministerium der Gesundheit, Gesundheitsfonds
(http://www.bmg.bund.de/themen/krankenversicherung/finanzierung/gesundheitsfonds.html); Bundesministerium für Arbeit und Soziales, Altersrenten
(http://www.bmas.de/DE/Themen/Rente/Gesetzliche-Rentenversicherung/altersrenten.html); Bundesministerium für Arbeit und Soziales, Pensions from age 67
(http://www.bmas.de/EN/Our-Topics/Pensions/pensions-from-age-67.html); Bundesministerium für Arbeit und Soziales, press release of January 29, 2014
(http://www.bmas.de/DE/Presse/Pressemitteilungen/2014/rentenpaket-kabinettsbeschluss.html); Bundesministerium für Arbeit und Soziales, Abschlagsfreie Rente ab 63
(http://www.bmas.de/DE/Themen/Rente/Gesetzliche-Rentenversicherung/rente-ab-63-art.html). |
| International Economic Relations |
International economic relations are of major importance to the German economy. In 2016, exports and imports of goods and services amounted to 46.0% and 38.4% of GDP at current prices, respectively. The Federal Republic supports the European Union in pursuing a liberal foreign trade policy aimed at dismantling tariffs and other barriers to trade. The responsibility for trade matters (particularly negotiating Free Trade Agreements) in the European Union rests with the European Commission.
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Table 2.3.1. |
Because the Federal Republic’s economy depends on exports, it is particularly vulnerable to trade barriers, such as protective tariffs. The Federal Government thus supports efforts to reduce trade barriers, such as the current negotiations within the framework of the WTO under the Doha Development Agenda and to continue the negotiations for the proposed Transatlantic Trade and Investment Partnership between the EU and the United States. The Federal Government also supports the Comprehensive Economic and Trade Agreement (CETA), a trade agreement between the EU and Canada. This agreement was approved by the European Parliament in February 2017 and needs to be ratified by all Member States prior to its full entry into force.
Sources: Bundesministerium für Wirtschaft und Energie, WTO-Welthandelsrunde “Doha Development Agenda”
(https://www.bmwi.de/Redaktion/DE/Artikel/Aussenwirtschaft/wto-doha.html); Bundesministerium für Wirtschaft und Energie, CETA – Das europäisch- kanadische Wirtschafts- und Handelsabkommen
(http://www.bmwi.de/Redaktion/DE/Dossier/ceta.html); Bundesministerium für Wirtschaft und Energie, Europäisches Parlament stimmt CETA zu, press release of February 15, 2017
(http://www.bmwi.de/Redaktion/DE/Pressemitteilungen/2017/20170215-europaeisches-parlament-stimmt-ceta-zu.html); European Commission, CETA explained (http://ec.europa.eu/trade/policy/in-focus/ceta/ceta-explained/). |
The Federal Republic typically achieves a surplus in the trading of goods. Traditionally, this surplus has been partially offset by deficits in other fields, such as services and secondary income. In 2016, the current account surplus totaled EUR 261.4 billion, compared to EUR 260.0 billion in 2015, an increase of EUR 1.4 billion.
| Source: Deutsche Bundesbank, Monatsbericht März 2017, Table XII.2. |
According to data prepared by the Deutsche Bundesbank, applying the annual averages of a broad monthly indicator of Germany’s price competitiveness compared to 56 trading partners based on consumer price indices, Germany’s price competitiveness has been relatively stable since 1999, fluctuating within a range of 10% of the average indicator value in the period from 1999 to 2016. In 2016, price competitiveness deteriorated by 1.3% compared to 2015, mainly due to the appreciation of the euro relative to several currencies, including the pound sterling, the Swiss franc and the Chinese yuan renminbi. However, the influence of variations in the exchange rates should be viewed in light of the fact that the Euro Area Member States account for a major part of German exports (36.7% in 2016).
Since the introduction of the euro, the exchange rate against the U.S. dollar has shown high volatility. After appreciating by approximately 85% against the U.S. dollar between June 2001 and July 2008, the euro depreciated considerably relative to the U.S. dollar by approximately 23% between July 2008 and June 2010, breaking a long-term trend of appreciation. In 2016, the euro depreciated slightly by 0.2% from its 2015 average versus the U.S. dollar. The average value of the euro against the U.S. dollar in February 2017 was 3.8% lower than the 2016 average.
| Sources: Deutsche Bundesbank, Monatsbericht März 2002, Table X.11; Deutsche Bundesbank, Monatsbericht März 2009, Table XI.11; Deutsche Bundesbank, Monatsbericht März 2011, Table XI. 11; Deutsche Bundesbank, Monatsbericht März 2017, Tables XII.3, XII.10 and XII.12 (https://www.bundesbank.de/Redaktion/DE/Downloads/Veroeffentlichungen/Monatsberichte/2017/2017_03_monatsbericht.pdf?__blob=publicationFile). |
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The following table shows the Federal Republic’s balance of payments for each of the years indicated.
BALANCE OF PAYMENTS (BALANCES)
| 2016 | | 2015 | | 2014 | | 2013 | | 2012 | |
|
| |
| |
| |
| |
| |
| (EUR in millions) | |
| Current account | | | | | | | |
| Trade in goods (1) | 271,668 | | 261,182 | | 228,361 | | 212,662 | | 200,401 | |
| Services (2) | -22,419 | | -18,602 | | -25,323 | | -41,376 | | -32,775 | |
| Primary income | 52,136 | | 57,370 | | 56,177 | | 61,969 | | 64,858 | |
| Secondary income | -40,023 | | -39,987 | | -41,188 | | -43,639 | | -38,894 | |
|
| |
| |
| |
| |
| |
| Total current account | 261,361 | | 259,963 | | 218,026 | | 189,616 | | 193,590 | |
| Capital account (3) | 1,112 | | -635 | | 2,355 | | -563 | | -413 | |
| Financial account | | | | | | | |
| Net German investment abroad (increase: +) | 382,910 | | 249,102 | | 301,030 | | 62,651 | | 373,797 | |
| Net foreign investment in Germany (increase: +) | 151,658 | | 14,499 | | 62,400 | | -162,709 | | 222,380 | |
|
| |
| |
| |
| |
| |
Net financial account
(net lending: + / net borrowing: -) | 231,252 | | 234,603 | | 238,630 | | 225,360 | | 151,417 | |
| Net errors and omissions (4) | -31,221 | | -24,725 | | 18,248 | | 36,307 | | -41,759 | |
| (1) | Including supplementary trade items. |
| (2) | Including the freight and insurance costs of foreign trade. |
| (3) | Including net acquisition/disposal of non-produced non-financial assets. |
| (4) | Statistical errors and omissions, resulting from the difference between the balance on the financial account and the balances on the current account and the capital account. |
| Source: Deutsche Bundesbank, Statistisches Beiheft 3 zum Monatsbericht März 2017, Zahlungsbilanzstatistik, Tables I.1 and I.9.a. |
The following tables show information relating to foreign trade of the Federal Republic for each of the years indicated.
TRADE IN GOODS (1)
| 2016 | | 2015 | | 2014 | | 2013 | | 2012 | |
|
| |
| |
| |
| |
| |
| (EUR in millions) | |
| Exports of goods | 1,195,023 | | 1,179,210 | | 1,115,751 | | 1,080,212 | | 1,071,431 | |
| Imports of goods | 923,355 | | 918,028 | | 887,390 | | 867,550 | | 871,031 | |
|
| |
| |
| |
| |
| |
| Trade balance | 271,668 | | 261,182 | | 228,361 | | 212,662 | | 200,401 | |
|
| |
| |
| |
| |
| |
| (1) | Including supplementary trade items. |
| Source: Deutsche Bundesbank, Statistisches Beiheft 3 zum Monatsbericht März 2017, Zahlungsbilanzstatistik, Table I.1. |
The Federal Republic’s principal export goods are motor vehicles, machinery of all kinds, and chemical products. The principal import goods are crude petroleum and natural gas, computer, electronic and optical products and motor vehicles. The Federal Republic has relatively few resources of industrial raw materials. As a result, it largely depends on imports to satisfy its demand for raw materials. This dependence on foreign supplies is particularly significant in the case of metals such as copper, tungsten, niobium, rare earth, rock phosphate, lithium carbonate, bauxite, manganese, titanium, and tin. The Federal Republic currently imports about two-thirds of its energy requirements, including virtually all of its oil and a significant portion of its natural gas requirements as well as all enriched uranium needed for nuclear energy.
| Sources: Statistisches Bundesamt, Fachserie 7 Reihe 1 – Dezember 2016, pages 53 et seq.; Bundesanstalt für Geowissenschaften und Rohstoffe, Deutschland – Rohstoffsituation 2015, pages 18 et seq (https://www.bgr.bund.de/DE/Themen/Min_rohstoffe/Downloads/Rohsit-2015.pdf?__blob=publicationFile&v=3); Bundesministerium für Wirtschaft und Energie, Zahlen und Fakten Energiedaten, Tabelle 3 (http://www.bmwi.de/Redaktion/DE/Artikel/Energie/energiedaten-gesamtausgabe.html). |
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| Germany’s Current Account Surplus and the Macroeconomic Imbalance Procedure |
Within the framework of the MIP established in 2011, on November 16, 2016, the European Commission published the Alert Mechanism Report 2017, which, similar to the previous year’s report, inter alia noted the current account surplus observed in Germany. An in-depth review was conducted on Germany to scrutinize its external position and analyze internal developments, and to assess whether it is experiencing macroeconomic imbalances. According to the results of this review, Germany continues to experience macroeconomic imbalances that are not excessive. The Commission points out that subdued private and public investment has contributed to the high and persistent current account surplus. The Federal Government supports the European Commission in the resolute implementation of the MIP. Together with the European partners, the Federal Government aims to reduce economic imbalances while complying with the rules of the reformed SGP. However, it points out that the competitiveness and the exporting strength of German companies are an important pillar of the entire European economy. The Federal Government is taking a comprehensive approach to strengthen both public and private sector investments and has already taken numerous measures in the current legislative term to give a further boost to investment dynamics. Based on record-high employment, rising salaries and targeted fiscal expansion especially in public investment, domestic demand continues to be the main driver of robust growth in Germany. Furthermore, it should be noted that Germany’s current account surplus to a large extent may be explained by temporary factors, e.g., the development of exchange rates and the decline in oil prices since 2014, as well as by fundamentals, e.g., demographic change. These factors usually remain unaffected by short-term economic and financial policy measures.
Sources: European Commission, Report from the Commission to the European Parliament, the Council, the European Central Bank and the European Economic and Social Committee, Alert Mechanism Report 2017, dated November 16, 2016
(http://www.europarl.europa.eu/RegData/docs_autres_institutions/commission_europeenne/com/2016/0728/COM_COM(2016)0728_EN.pdf); European Commission, Commission Staff Working Document, Country Report Germany 2017, Including an In-Depth Review on the prevention and correction of macroeconomic imbalances
(https://ec.europa.eu/info/sites/info/files/2017-european-semester-country-report-germany-en.pdf); European Commission, Communication from the Commission to the European Parliament, the Council, the European Central Bank and the Eurogroup, 2017 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under regulation (EU) No 1176/2011 (https://ec.europa.eu/info/sites/info/files/2017-european-semester-country-reports-comm-en.pdf); European Commission, Economic and Financial Affairs, EU Economic governance: monitoring, prevention, correction , Macroeconomic imbalance procedure
(http://ec.europa.eu/economy_finance/economic_governance/macroeconomic_imbalance_procedure/mip_reports/index_en.htm); Bundesministerium für Wirtschaft und Energie, Gabriel: Competitiveness and exports of German companies important for Europe, press release of March 5, 2014
(http://www.bmwi.de/Redaktion/EN/Pressemitteilungen/2014/20140305-gabriel-wettbewerbsfaehigkeit-und-exporte-deutscher-unternehmen-wichtig-fuer-europa.html); Bundesministerium für Wirtschaft und Energie, Nationales Reformprogramm 2017
(http://www.bmwi.de/Redaktion/DE/Publikationen/Europa/nationales-reformprogramm-2017.pdf?__blob=publicationFile&v=20); Bundesministerium der Finanzen, Monatsbreciht des BMF März 2017, Analysen und Berichte, Der deutsche Leistungsbilanzsaldo – Entwicklung und wirtschaftspolitische Implikationen
(http://www.bundesfinanzministerium.de/Monatsberichte/2017/03/Inhalte/Kapitel-3-Analysen/3-2-Der-deutsche-Leistungsbilanzsaldo.html). |
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COMPOSITION OF EXPORTED AND IMPORTED GOODS
| 2016 (1) | |
|
| |
| Imports | | Exports | |
|
| |
| |
| (Percent of total) | |
| Products of agriculture and hunting | 3.1 | | 0.8 | |
| Products of forestry | 0.1 | | 0.0 | |
| Fish and products of fishing | 0.1 | | 0.0 | |
| Coal and lignite | 0.4 | | 0.0 | |
| Crude petroleum and natural gas | 4.8 | | 0.4 | |
| Metal ores | 0.6 | | 0.0 | |
| Other mining and quarrying products | 0.2 | | 0.1 | |
| Food products | 4.6 | | 4.2 | |
| Beverages | 0.6 | | 0.5 | |
| Tobacco products | 0.1 | | 0.3 | |
| Textiles | 1.1 | | 0.9 | |
| Wearing apparel | 3.3 | | 1.3 | |
| Leather and related products | 1.4 | | 0.6 | |
| Wood and of products of wood and cork, except furniture; articles of straw and plaiting materials | 0.6 | | 0.5 | |
| Paper and paper products | 1.5 | | 1.6 | |
| Coke and refined petroleum products | 1.8 | | 0.9 | |
| Chemicals and chemical products | 7.7 | | 8.8 | |
| Basic pharmaceutical products and pharmaceutical preparations | 5.2 | | 5.9 | |
| Rubber and plastic products | 3.0 | | 3.6 | |
| Other non-metallic mineral products | 1.1 | | 1.2 | |
| Basic metals | 5.2 | | 4.0 | |
| Fabricated metal products, except machinery and equipment | 2.9 | | 3.4 | |
| Computer, electronic and optical products | 10.8 | | 8.3 | |
| Electrical equipment | 5.8 | | 6.3 | |
| Machinery and equipment not elsewhere classified | 7.9 | | 14.0 | |
| Motor vehicles, trailers and semi-trailers | 11.0 | | 18.9 | |
| Other transport equipment | 3.7 | | 4.9 | |
| Furniture | 1.3 | | 0.8 | |
| Energy | 0.1 | | 0.2 | |
| Other goods | 10.3 | | 7.6 | |
|
| |
| |
| Total | 100.0 | | 100.0 | |
|
| |
| |
Source: Statistisches Bundesamt, Fachserie 7, Reihe 1 – 2016 (March 2017), Tables 1.11.1 and 1.11.2; calculation of percentages by KfW based on import and export values in EUR thousands, respectively. |
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FOREIGN TRADE (SPECIAL TRADE) BY GROUPS OF COUNTRIES AND COUNTRIES (1)
| 2016 | | 2015 | | 2014 | |
|
| |
| |
| |
| (EUR in millions) | |
| Exports to: | | | | | |
| Total | 1,206,889 | | 1,193,555 | | 1,123,746 | |
of which: | | | | | |
| United States | 106,919 | | 113,733 | | 95,928 | |
| France | 101,399 | | 102,762 | | 100,580 | |
| United Kingdom | 86,071 | | 89,018 | | 79,163 | |
| The Netherlands | 79,102 | | 79,191 | | 72,736 | |
| China (2) | 76,109 | | 71,284 | | 74,369 | |
| Italy | 61,427 | | 57,987 | | 54,240 | |
| Austria | 59,788 | | 58,217 | | 55,807 | |
| New industrial countries and emerging markets of Asia (3) | 51,898 | | 51,510 | | 48,476 | |
| Switzerland | 50,353 | | 49,070 | | 46,202 | |
| Belgium/Luxembourg | 47,100 | | 46,196 | | 47,345 | |
| Spain | 40,634 | | 38,715 | | 34,820 | |
| Japan | 18,354 | | 16,968 | | 16,910 | |
| Imports from: | | | | | |
| Total | 954,675 | | 949,245 | | 910,145 | |
of which: | | | | | |
| China (2) | 93,757 | | 91,930 | | 79,828 | |
| The Netherlands | 83,590 | | 87,889 | | 87,796 | |
| France | 65,778 | | 66,819 | | 66,714 | |
| United States | 57,823 | | 60,217 | | 49,207 | |
| Italy | 51,774 | | 49,038 | | 48,522 | |
| Switzerland | 43,910 | | 42,089 | | 39,392 | |
| New industrial countries and emerging markets of Asia (3) | 42,805 | | 42,478 | | 38,782 | |
| Belgium/Luxembourg | 41,084 | | 40,116 | | 42,548 | |
| Austria | 38,558 | | 37,250 | | 36,218 | |
| United Kingdom | 35,647 | | 38,414 | | 38,545 | |
| Spain | 27,771 | | 26,442 | | 24,804 | |
| Japan | 21,952 | | 20,180 | | 19,007 | |
| (1) | Exports (f.o.b.) by country of destination, imports (c.i.f.) by country of origin. Special trade consists mainly of goods that are imported into the Federal Republic for use, consumption, adaptation or processing, as well as goods that are produced, manufactured, adapted or processed in the Federal Republic and subsequently exported. |
| (3) | Includes Brunei Darussalam, Hong Kong, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand. |
| |
| Source: Deutsche Bundesbank, Monatsbericht März 2016, Table XII.3. |
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| Foreign Direct Investment |
The following table presents data with respect to foreign direct investment stocks at year-end 2014.
FOREIGN DIRECT INVESTMENT STOCKS AT YEAR-END 2014
| Outward (1) | | Inward (2) | |
|
| |
| |
| (EUR in billions) | |
| Total (3) | 957.9 | | 461.8 | |
| Selected countries and regions | | | |
| European Union | 394.9 | | 361.5 | |
of which: European Monetary Union | 174.6 | | 309.3 | |
of which: United Kingdom | 109.9 | | 37.9 | |
| Switzerland | 31.2 | | 28.7 | |
| Russia | 16.6 | | 3.2 | |
| United States | 271.2 | | 27.0 | |
| Canada | 13.7 | | 0.9 | |
| Central America | 15.6 | | 3.5 | |
| South America | 29.4 | | 0.1 | |
| Asia | 129.7 | | 27.3 | |
of which: China | 59.7 | | 1.6 | |
of which: Japan | 12.6 | | 17.3 | |
| Australia | 18.1 | | 1.2 | |
| Africa | 9.2 | | 0.8 | |
| Selected economic sectors of investment object | | | |
| Manufacturing | 341.4 | | 114.1 | |
of which: Chemicals and chemical products | 77.4 | | 14.2 | |
of which: Machinery and equipment | 30.2 | | 17.7 | |
of which: Motor vehicles, trailers and semi-trailers | 86.7 | | 0.9 | |
| Electricity, gas, steam and air conditioning supply | 44.8 | | 13.9 | |
| Wholesale and retail trade; repair of motor vehicles | 149.3 | | 50.7 | |
| Information and communication | 48.6 | | 52.3 | |
| Financial and insurance activities | 204.7 | | 94.3 | |
| Real estate activities | 29.4 | | 28.7 | |
| Activities of holding companies | 65.4 | | 80.2 | |
| (1) | German foreign direct investment abroad. |
| (2) | Foreign direct investment in Germany. |
| (3) | Primary and secondary direct investment (consolidated). |
| |
| Source: Deutsche Bundesbank, Bestandserhebung über Direktinvestitionen, Statistische Sonderveröffentlichung 10 (April 2016), Tables 1.2.a, I.2. c, II.2.a, II.2.b. |
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MONETARY AND FINANCIAL SYSTEM
| The European System of Central Banks and the Eurosystem |
The ESCB comprises the ECB and the national central banks of the Member States, while the Eurosystem consists of the ECB and the national central banks of the Euro Area Member States.
The Eurosystem is responsible for the single monetary policy for the euro area. Its decision-making bodies are the Governing Council and the Executive Board of the ECB. The national central banks of the Member States that are not part of the Eurosystem are represented in the General Council of the ECB, but have no voting right in the decision-making process, particularly with respect to monetary policy. The ESCB’s primary objective is to maintain price stability. Without prejudice to this objective, the ESCB supports the general economic policies of the EU.
The Deutsche Bundesbank – Germany’s national central bank within the ESCB – has the responsibility of implementing the single monetary policy in Germany and continues to perform various other tasks, including operating cashless payment systems, cash management and playing an important role in banking and financial market supervision, as further described below under the caption “–Financial System.”
Sources: European Central Bank, Annual Report 2004, pages 162-168 (http://www.ecb.eu/pub/pdf/annrep/ar2004en.pdf); Deutsche Bundesbank,
Tasks (http://www.bundesbank.de/Navigation/EN/Tasks/tasks.html). |
| |
| Monetary Policy Instruments of the ESCB |
To achieve its operational goals, the ESCB conducts open market operations, offers standing facilities and requires credit institutions to maintain minimum reserves in accounts with the ESCB. Open market operations play an important role in the ESCB’s monetary policy for the purposes of steering interest rates and managing the liquidity situation in the market. Available open market operations are reverse transactions, outright transactions, the issuance of debt certificates or foreign exchange swaps, and the collection of fixed-term deposits. Standing facilities are designed to provide or absorb overnight liquidity and the imposition of minimum reserve requirements allows the ESCB to stabilize money market interest rates, create (or enlarge) a structural liquidity shortage and possibly contribute to the control of monetary expansion. The ESCB has employed a variety of policy instruments in response to the global economic and financial crisis and the European sovereign debt crisis. For further information, see “–Financial System–European Financial System–Recent Policy Responses to the Global Financial and Economic Crisis.”
| Source: European Central Bank, Implementation of Monetary Policy in the Euro Area, September 2006, pages 7-9 (http://www.ecb.int/pub/pdf/other/gendoc2006en.pdf). |
| |
| Monetary Policy Strategy and Prices |
The ECB’s primary goal is to maintain medium-term price stability, which is defined as a year-on-year increase in the harmonized index of consumer prices for the euro area of less than 2%. However, the ECB has clarified that, within this definition, it aims at an inflation rate close to 2%. This goal indicates the commitment to provide an adequate margin to avoid the risk of deflation. The stability-oriented monetary policy strategy of the Eurosystem used by the ECB to achieve this goal is based on two pillars: (1) analysis and assessment of short- to medium-term risks to price stability (economic analysis); and (2) assessment of medium- to long-term monetary developments (monetary analysis).
| Sources: European Central Bank, Monthly Bulletin, January 1999, pages 45-50 (http://www.ecb.eu/pub/pdf/mobu/mb199901en.pdf); European Central Bank, The Monetary Policy of the ECB, 2004, page 50ff. (http://www.ecb.int/pub/pdf/other/monetarypolicy2004en.pdf). |
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The following table shows price trends in Germany for the periods indicated.
PRICE TRENDS
| 2016 | | 2015 | | 2014 | | 2013 | | 2012 | |
|
| |
| |
| |
| |
| |
| (change from previous year in %) | |
| Harmonized index of consumer prices (HICP) | 0.4 | | 0.1 | | 0.8 | | 1.6 | | 2.1 | |
| Consumer price index (CPI) | 0.5 | | 0.3 | | 0.9 | | 1.5 | | 2.0 | |
| Index of producer prices of industrial products sold on the domestic market (1) | -1.7 | | -1.8 | | -1.0 | | -0.1 | | 1.6 | |
| (1) | Excluding value-added tax. |
| |
Sources: Statistisches Bundesamt, Verbraucherpreise, Harmonisierter Verbraucherpreisindex, Veränderungsraten zum Vorjahr in %
(https://www.destatis.de/DE/ZahlenFakten/GesamtwirtschaftUmwelt/Preise/Verbraucherpreisindizes/Tabellen_/HarmonisierterVerbraucherpreisindex.html?cms_gtp=146602_list%253D2%2526146598_slot%253D2&https=1); Statistisches Bundesamt, Verbraucherpreisindizes, Harmonisierter Verbraucherpreisindex für Deutschland, Veränderungsraten zum Vorjahr in %
(https://www.destatis.de/DE/ZahlenFakten/GesamtwirtschaftUmwelt/Preise/Verbraucherpreisindizes/Tabellen_/VerbraucherpreiseKategorien.html?cms_gtp=145114_list%253D2%2526145110_slot%253D2&https=1); Deutsche Bundesbank, Monatsbericht Februar 2016, Table XI.7. |
| |
| Official Foreign Exchange Reserves |
The following table shows the breakdown of the Federal Republic’s official foreign exchange reserves as of the end of the years indicated.
OFFICIAL FOREIGN EXCHANGE RESERVES OF THE FEDERAL REPUBLIC (1)
| As of December 31 | |
|
| |
| 2016 | | 2015 | | 2014 | | 2013 | | 2012 | |
|
| |
| |
| |
| |
| |
| (EUR in millions) | |
| Gold | 119,253 | | 105,792 | | 107,475 | | 94,876 | | 137,513 | |
| Foreign currency balances | 34,993 | | 33,423 | | 30,646 | | 28,080 | | 28,774 | |
| Special drawing rights | 14,938 | | 15,185 | | 14,261 | | 12,837 | | 13,583 | |
| Reserve position in the IMF | 6,581 | | 5,132 | | 6,364 | | 7,961 | | 8,760 | |
|
| |
| |
| |
| |
| |
| Total | 175,765 | | 159,532 | | 158,745 | | 143,753 | | 188,630 | |
|
| |
| |
| |
| |
| |
| (1) | External position of the Deutsche Bundesbank in the EMU. Assets and liabilities vis-à-vis all EMU member countries and non-EMU member countries. |
| |
| Source: Deutsche Bundesbank, Monatsbericht Februar 2017, Table XII.8. |
The Federal Republic’s foreign reserve assets are managed by the Deutsche Bundesbank. The Euro Area Member States have transferred foreign reserve assets to the ECB in an aggregate amount equivalent to approximately EUR 40.8 billion, consisting of foreign currency reserves and gold. The ECB manages the foreign reserve assets transferred to it. The foreign reserve assets not transferred to the ECB continue to be held and managed by the national central banks of the Euro Area Member States. In order to ensure consistency within the single monetary and foreign exchange policies of the EMU, the ECB monitors and coordinates market transactions conducted with those assets.
| Sources: European Central Bank, Annual Report 1998, page 74 (http://www.ecb.int/pub/pdf/annrep/ar1998en.pdf); European Central Bank, Annual Accounts 2016, page 20 (https://www.ecb.europa.eu/pub/pdf/annrep/ar2016annualaccounts_en.pdf). |
| |
| External Positions of Banks |
The following table shows the external assets and liabilities of the Deutsche Bundesbank and the banks (monetary financial institutions) of the Federal Republic as of the end of each of the years indicated.
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EXTERNAL FINANCIAL ASSETS AND LIABILITIES BY SECTOR
| 2016 | | 2015 | | 2014 | | 2013 | | 2012 | |
|
| |
| |
| |
| |
| |
| (EUR in billions) | |
| Deutsche Bundesbank | | | |
| Assets | 990.5 | | 800.7 | | 678.8 | | 721.7 | | 921.0 | |
of which: clearing accounts within ESCB (1) | 754.3 | | 584.2 | | 460.8 | | 510.2 | | 655.7 | |
| Liabilities (2) | 607.6 | | 481.8 | | 396.3 | | 401.5 | | 425.0 | |
|
| |
| |
| |
| |
| |
| Net position | 382.9 | | 318.9 | | 282.5 | | 320.2 | | 496.0 | |
| Banks | | | | | | | |
| Loans to foreign banks | 1,055.9 | | 1,066.9 | | 1,125.2 | | 1,019.7 | | 1,046.0 | |
| Loans to foreign non-banks | 756.2 | | 751.5 | | 735.1 | | 701.0 | | 729.0 | |
| Loans from foreign banks | 696.1 | | 611.9 | | 609.2 | | 515.7 | | 691.1 | |
| Loans from foreign non-banks | 206.2 | | 201.1 | | 221.0 | | 257.8 | | 237.6 | |
| (1) | Consists mainly of net claims from the interbank payment system for the real-time processing of cross-border transfers throughout the EMU (TARGET2). |
| (2) | Including estimates of currency in circulation abroad. |
| |
| Source: Deutsche Bundesbank, Monatsbericht März 2017, Tables IV.4 and XII.8. |
| |
| Foreign Exchange Rates and Controls |
The euro is a freely convertible currency. Since its introduction in 1999, the euro has become the second most widely used currency internationally. Currency transactions do not require licenses or other permissions. Capital market transactions are not subject to any license or similar requirements. Gold may be imported and exported freely, subject only to the levy of value added tax (“VAT”) on some transactions.
Sources: International Monetary Fund, Selected Decisions and Selected Documents of the IMF, Thirty-Eighth Issue – Freely Usable Currencies, Prepared by the Legal Department of the IMF, As updated as of February 29, 2016
(https://www.imf.org/external/pubs/ft/sd/index.asp?decision=11857-(98/130)); Bank for International Settlements, Triennial Central Bank Survey, Foreign exchange turnover in April 2016, September 2016, Annex tables revised on 11 December 2016
(http://www.bis.org/publ/rpfx16fx.pdf).
The following table shows the annual average exchange rates for selected currencies in relation to the euro for the years indicated.
ANNUAL AVERAGE EXCHANGE RATES OF THE EURO (1)
| 2016 | | 2015 | | 2014 | | 2013 | | 2012 | |
|
| |
| |
| |
| |
| |
| U.S. dollars per euro | 1.1069 | | 1.1095 | | 1.3285 | | 1.3281 | | 1.2848 | |
| Pound sterling per euro | 0.81948 | | 0.72584 | | 0.80612 | | 0.84926 | | 0.81087 | |
| Japanese yen per euro | 120.20 | | 134.31 | | 140.31 | | 129.66 | | 102.49 | |
| Swiss franc per euro | 1.0902 | | 1.0679 | | 1.2146 | | 1.2311 | | 1.2053 | |
| Chinese yuan per euro | 7.3522 | | 6.9733 | | 8.1857 | | 8.1646 | | 8.1052 | |
| (1) | Calculated from daily values. |
| |
| Source: Deutsche Bundesbank, Monatsbericht Februar 2017, Table XII.10. |
Overview. As of January 31, 2017, 1,701 monetary financial institutions in Germany reported an aggregate balance sheet total of EUR 7,889.3 billion to the Deutsche Bundesbank. According to the Deutsche Bundesbank’s classification, these institutions included:
| | | • | 262 commercial banks, with an aggregate balance sheet total of EUR 3,232.8 billion; |
| | | • | 399 savings banks, with an aggregate balance sheet total of EUR 1,167.6 billion; |
| | | • | the nine regional institutions of those savings banks, including DekaBank Deutsche Girozentrale (the central asset managing institution of the German savings banks) and eight Landesbanken (German public law financial institutions traditionally focusing on the banking business for and in the Land in which they operate), with an aggregate balance sheet total of EUR 917.9 billion; |
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| | | • | 20 special-purpose credit institutions, including KfW, KfW IPEX-Bank, promotional banks of the federal states (Landesförderinstitute), and, since July 2016, DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main (DZ Bank), the only remaining central institution of German credit cooperatives, with an aggregate balance sheet total of EUR 1,274.3 billion; |
| | | • | 976 credit cooperatives, with an aggregate balance sheet total of EUR 847.2 billion; |
| | | • | 15 mortgage banks, with an aggregate balance sheet total of EUR 273.9 billion; |
| | | • | 20 building and loan associations, with an aggregate balance sheet total of EUR 220.0 billion; and |
| | | • | 138 subsidiaries and branches of foreign banks located in the Federal Republic, with an aggregate balance sheet total of EUR 1,109.9 billion. |
| Source: Deutsche Bundesbank, Monatsbericht März 2017, Table IV.2. |
The German Banking Act (Kreditwesengesetz, or “KWG”) currently regulates all banks except for the Deutsche Bundesbank and KfW (although it does regulate KfW IPEX-Bank). Many important provisions of the KWG have become applicable by analogy to KfW with effect from January 1, 2016. German commercial banking institutions operate as “universal” banks and are not restricted by law or otherwise from offering a complete range of diverse financial services.
Supervision. The Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, or “BaFin”) is responsible for the integrated supervision of financial services. Its primary objective is to ensure the proper functioning, stability and integrity of Germany as a financial center in the context of European integration and international cooperation, as well as to strengthen collective consumer protection through its regulatory actions. The BaFin, which is subject to the legal and technical oversight of the Federal Ministry of Finance, operates exclusively in the public interest. It helps to ensure the ability of banks, financial services institutions and insurance companies to meet their payment obligations (solvency supervision), and it also enforces standards of professional conduct aimed at preserving investors’ trust in the financial markets (market supervision). In addition, the BaFin has an investor protection role in that it seeks to prevent unauthorized financial business from being carried out.
The Deutsche Bundesbank is closely involved in the ongoing supervision of credit institutions by the BaFin and has been assigned a substantial number of the ongoing operational tasks in banking supervision. The German Federal Agency for Financial Market Stabilization (Bundesanstalt für Finanzmarktstabilisierung, or “FMSA”) is responsible for drawing up and adopting plans for the resolution of banks. It also manages the restructuring fund (Restrukturierungsfonds) for banks and the German Financial Market Stabilization Fund (Finanzmarktstabilisierungsfonds, or “FMS”, also known as “SoFFin”) and supervises the two wind-up institutions (Abwicklungsanstalten) for troubled German banks established in 2009/2010.
In order to facilitate the timely identification of risks to financial stability, the Financial Stability Commission (Ausschuss für Finanzstabilität), which consists of representatives of the Federal Ministry of Finance, the Deutsche Bundesbank, BaFin and FMSA, was established in March 2013. Due to its macroeconomic and financial market expertise, the Deutsche Bundesbank is responsible for contributing towards safeguarding financial stability and tasked with analyzing all relevant factors in order to identify threats to financial stability. Warnings or recommendations for corrective measures are submitted to the Financial Stability Commission, which may pass resolutions with respect thereto. In addition, the Financial Stability Commission is tasked with defining concerted reactions to emerging threats to financial stability by issuing warnings and recommendations and publishing them if appropriate. The recipients of such warnings or recommendations are obliged to report on the implementation of corrective measures.
Sources: Bundesministerium der Justiz, Gesetz über das Kreditwesen (http://www.gesetze-im-internet.de/kredwg/index.html); Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin, Functions & history
(https://www.bafin.de/EN/DieBaFin/AufgabenGeschichte/aufgabengeschichte_node_en.html); Deutsche Bundesbank and Bundesanstalt für Finanzdienstleistungsaufsicht, Joint press release of November 4, 2002
(http://www.bundesbank.de/Redaktion/EN/Downloads/Press/Pressenotizen/2002/2002_11_04_banking_supervision.pdf? blob=publicationFile); Bundesanstalt für Finanzdienstleistungsaufsicht, Aufsichtsrichtlinie-Richtlinie zur Durchführung und Qualitätssicherung der laufenden Überwachung der Kredit- und Finanzdienstleistungsinstitute durch die Deutsche Bundesbank (Aufsichtsrichtlinie), May 21, 2013, altered on December 19, 2016 (https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Aufsichtsrecht/Richtlinie/rl_130521_aufsichtsrichtlinie.html); BaFin, Act on the Strengthening of German Financial Supervision, January 18, 2013
(https://www.bafin.de/SharedDocs/Veroeffentlichungen/EN/Fachartikel/2013/fa_bj_2013_01_finstabg_en.html); Bundesbank, German macroprudential oversight strengthened, press release of March 18, 2013
(http://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK/2013/2013_03_18_macropudential_oversight.html). |
Bank Recovery and Resolution. Since January 1, 2015, the FMSA has been acting as the German national resolution authority for banks. Resolution powers were pooled under the FMSA, although the BaFin and the ECB retained their supervisory right to make decisions about bank closures. In December 2016, the German parliament passed a law for the reorganization of FMSA, under which Germany’s national resolution authority will be integrated into the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) and the administration and management of FMS will be assumed by the Federal Republic of Germany – Finance Agency (Bundesrepublik Deutschland – Finanzagentur GmbH). FMSA will remain responsible for the German wind-up institutions FMS-Wertmanagement and Erste Abwicklungsanstalt. The reorganization is expected to be completed by January 1, 2018. Until December 31, 2015, the FMS,
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which was established in 2008 in the wake of the global financial crisis and is currently managed by the FMSA, was responsible for applications for assistance from German credit institutions. As of January 1, 2016, the date on which the Single Resolution Mechanism (“SRM”) became fully operational, FMS has been closed for new applications. FMS was tasked with stabilizing the German banks by extending guarantees up to a total amount of EUR 400 billion with respect to banks’ securities and by incurring loans in a total amount of up to EUR 80 billion. Its mandate, which was originally limited until December 31, 2010, had been repeatedly extended until December 31, 2015. As of December 31, 2016, the outstanding stabilization measures provided by FMS amounted to EUR 14.6 billion in capital injections, while loss compensation payments made to FMS Wertmanagement totaled EUR 9.3 billion.
For more information on the SRM, see “–European Financial System-European System of Financial Supervision and European Banking Union”.
| Sources: Deutsche Bundesbank, Glossary: Restructuring Act (https://www.bundesbank.de/Navigation/EN/Service/Glossary/Functions/glossary.html?lv2=129546&lv3=145952#145952.de); Bundesministerium der Finanzen, Wirtschaft und Verwaltung, Was macht die Bundesanstalt für Finanzmarktstabilisierung? Neue Aufgaben der FMSA zur Stabilisierung des Finanzsektors, September 20, 2010 (http://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Internationales_Finanzmarkt/Finanzmarktpolitik/Bankenabgabe/2010-09-17-FMSA.html); Bundestagsdrucksache 17/3407 (http://dip21.bundestag.de/dip21/btd/17/034/1703407.pdf); Bundesministerium der Finanzen, German government moves forward with package of measures for European banking union, press release of July 9, 2014 (http://www.bundesfinanzministerium.de/Content/EN/Pressemitteilungen/2014/2014-07-09-package-of-measures-for-european-banking-union.html); Bundesministerium der Finanzen, Verordnung über die Erhebung der Beiträge zum Restrukturierungsfonds für Kreditinstitute (Restrukturierungsfonds-Verordnung – RStruktFV) (http://www.bundesfinanzministerium.de/Content/DE/Gesetzestexte/Gesetze_Verordnungen/2015-07-22-RStruktFV.html); Die Beschlüsse des Bundestages am 26. und 27. Januar, publication of January 27, 2012 (http://www.bundestag.de/dokumente/textarchiv/2012/37536609_kw04_angenommen_abgelehnt/index.html); Bundestag, Drittes Gesetz zur Umsetzung eines Maßnahmenpakets zur Stabilisierung des Finanzmarktes, Dokumentations- und Informationssystem für parlamentarische Vorgänge (http://dipbt.bundestag.de/extrakt/ba/WP17/483/48345.html); FMSA Bundesanstalt für Finanzmarktstabilisierung, FMSA nimmt Arbeit als Nationale Abwicklungsbehörde auf, press release of January 2015 (http://www.fmsa.de/de/presse/pressemitteilungen/2015/20150102_pressemitteilung_fmsa.html); FMSA Bundesanstalt für Finanzmarktstabilisierung, Hintergrund FMSA (http://www.fmsa.de/de/presse/hintergrund-fmsa); FMSA Bundesanstalt für Finanzmarktstabilisierung, Stabilisierungsmaßnahmen des SoFFin (http://www.fmsa.de/de/oeffentlichkeit/c_soffin/Berichte/SoFFin-Massnahmen/SoFFin-Massnahmen.html); Gesetz zur Neuordnung der Aufgaben der Bundesanstalt für Finanzmarktstabilisierung (FMSA-Neuordnungsgesetz – FMSANeuOG) (http://www.bundesfinanzministerium.de/Content/DE/Gesetzestexte/Gesetze_Verordnungen/2016-12-28-FMSANeuOG.html). |
Wind-up Institutions. In the wake of the global financial crisis, two wind-up institutions (Abwicklungsanstalten) for troubled German banks were established. The first wind-up institution, Erste Abwicklungsanstalt, was established in December 2009 to liquidate a portfolio of EUR 77.5 billion assumed from WestLB. It assumed a second portfolio consisting of an asset portfolio worth EUR 72.3 billion and a trading portfolio with a market value of around EUR 52.1 billion following the restructuring of WestLB. As of December 31, 2016, the combined asset portfolios had been reduced to approximately EUR 53 billion.
The second wind-up institution, FMS Wertmanagement, assumed a portfolio of EUR 175.7 billion from Hypo Real Estate Group in October 2010 to support restructuring efforts. In December 2014, FMS Wertmanagement acquired DEPFA Bank plc, which, as of December 31, 2013, had consolidated total assets amounting to EUR 49.1 billion from Hypo Real Estate Holding AG. DEPFA will have to be wound down in accordance with an EU state aid decision of July 18, 2011. As of December 31, 2016, FMS Wertmanagement’s portfolio had been reduced to EUR 88.9 billion.
Sources: Erste Abwicklungsanstalt, Geschäftsbericht 2009/2010 (https://www.aa1.de/presse/geschaeftsberichte/); Landtag NRW, Sitzungsprotokoll 15. Sitzung des Haushalts- und Finanzausschuss, from January 31, 2013 (http://www.landtag.nrw.de/portal/WWW/dokumentenarchiv/Dokument/MMA16-151.pdf);
Erste Abwicklungsanstalt, The EAA generates a net profit once again – and makes significant progress in winding up the investment portfolio, Press briefing with Matthias Wargers, Spokesman of the Managing Board, Düsseldorf, March 16, 2017, p. 6 (https://www.aa1.de/index.php?eID=tx_nawsecuredl&u=0&g=0&t=1494344624&hash=60a0157be7f80fcc844327404a0349e049adf77b&file=/fileadmin/content/downloads/1_Presse/20170316_Attachment_PR_AR_2016_e.pdf); FMS Wertmanagement AöR, Geschäftsbericht 2015
(http://www.fms-wm.de/de/downloadcenter-de/investoren/berichte/107-geschaeftsbericht-2015-1); FMS Wertmanagement AöR, FMS Wertmanagement delivers a positive wind-up result again in 2015, press release of April 13, 2016
(http://www.fms-wm.de/en/press/305-fms- wertmanagement-delivers-a-positive-wind-up-result-again-in-2015); Bundesanstalt für Finanzmarktstabilisierung, Gemeinsame Pressemitteilung von FMSA und HRE, press release of May 13, 2014
(http://www.fmsa.de/de/presse/pressemitteilungen/2014/20140513_pressemitteilung_fmsa.html); FMS Wertmanagement, Joint Press Release of FMS- WM and HRE: FMS Wertmanagement closes acquisition of DEPFA Bank plc from HRE, press release of December 19, 2014
(http://www.fms-wm.de/en/press/245-joint-press- release-of-fms-wm-and-hre-fms-wertmanagement-closes-acquisition-of-depfa-bank-plc-from-hre); European Commission, Commission Decision of 18 July 2011 on State Aid C 15/2009 (ex N 196/2009), which Germany implemented and is planning to implement for Hypo Real Estate (http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1490275422217&uri=CELEX:32012D0118). |
| European Financial System |
European System of Financial Supervision and European Banking Union. The European system of financial supervisors became operational on January 1, 2011. At the macro-financial level, a European Systemic Risk Board (“ESRB”) was established, which provides macro-prudential oversight of the financial system. The ESRB’s role is to monitor and assess potential risks to the stability of the financial system. If necessary, it will issue risk warnings and recommendations for remedial action and will monitor their implementation. The ESRB is currently chaired by the President of the ECB.
At the micro-financial level, three supervisory authorities were established:
| | | • | the European Banking Authority (“EBA”); |
| | | • | the European Insurance and Occupational Pensions Authority; and |
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| | | • | the European Securities and Markets Authority. |
The three European Supervisory Authorities (“ESAs”) cooperate with the supervisory authorities of the Member States. National authorities are responsible for the day-to-day supervision of individual financial institutions, whereas the ESAs are responsible for ensuring that a single set of harmonized rules and consistent supervisory practices are applied by supervisory authorities of the Member States. The ESAs have, for example, the power to settle disputes among national financial supervisors by imposing legally binding mediation and to impose temporary bans on risky financial products or activities.
One of the key elements of Europe’s banking union, which was established in the wake of the European sovereign debt crisis, is the Single Supervisory Mechanism (“SSM”) composed of the ECB and the national supervisory authorities of participating Member States. The SSM’s main aims are to contribute to the safety and soundness of credit institutions and the stability of the European financial system and to ensure consistent supervision. The SSM became operational in November 2014. In its role within the SSM, the ECB directly supervises 126 significant banks and banking groups, which represent almost 82% of the total assets on the aggregated balance sheets of all credit institutions under its supervision. For the remaining banks, the ECB is responsible for setting and monitoring the supervisory standards and for working closely with the national competent authorities in the supervision of these banks.
Another key element of Europe’s banking union is the SRM which was established by a regulation adopted in July 2014 and has become fully operational starting January 1, 2016 with the purpose of ensuring the orderly resolution of failing banks. The SRM consists of a single resolution board (“SRB”), which has broad powers in cases of bank resolution, and the Single Resolution Fund (“SRF”). The SRB is responsible for the planning and resolution phases of cross-border banks and those directly supervised by the ECB, while since January 1, 2015, national resolution authorities are responsible for all other banks under the BRRD. However, the SRB will always be responsible if the resolution of a bank requires access to the SRF. The SRF is being built up over a period of eight years from 2016 to 2023 to reach a target level of at least 1% of the amount of covered deposits of all credit institutions authorized in all the participating Member States (estimated to be approximately EUR 55 billion in 2014). Banks will have to make annual contributions to the SRF calculated on the basis of their liabilities, excluding own funds and covered deposits, and adjusted for risk. Companies defined in article 2 paragraph 5 of the EU Capital Requirements Directive IV (“CRD IV”), including KfW, are not required to contribute to the fund. In the aggregate, the European Commission estimates that the German banking sector is required to contribute just under EUR 15.5 billion to the SRF by 2023. During the transitional period each participating Member State is providing an individual national credit line to the SRB to back its banks’ contributions to the SRF in the event of possible funding shortfalls following resolution cases of its banks. By now all 19 participating Member States have signed the Loan Facility Agreements with the SRB which are the basis for the bridge financing in the form of national credit lines to the SRB. The maximum aggregate amount of the credit lines of the participating Member States will amount to around EUR 55 billion. The repartition key among Member States corresponds to the contributions to the SRF, which will be made by banks in each Member State by 2023.
In November 2015, the European Commission proposed a European Deposit Insurance Scheme. Since then, work on a technical level has continued. Negotiations on a political level will start as soon as sufficient further progress has been made on the measures on risk reduction, as mentioned in the Roadmap, adopted by the Council on June 17, 2016. To date, the EU has agreed on common rules to harmonize the national deposit insurance schemes.
In response to the global economic and financial crisis, regulatory authorities and central banks launched a comprehensive regulatory reform program. As a result, in December 2010, the Basel Committee on Banking Supervision launched a package of new standards on bank capital adequacy and liquidity to enhance the banking regulatory framework. The capital and liquidity reform package, typically referred to as Basel III, will be phased in by 2019. In order to transpose the Basel III agreement into EU law, previous EU capital requirement directives were replaced by the Capital Requirements Regulation (CRR), a regulation establishing prudential requirements, and CRD IV, a directive governing access to deposit-taking activities, both of which entered into force on January 1, 2014 and have since been gradually implemented in the Member States.
In November 2016, the European Commission published proposals which aim to further strengthen the resilience of banks, ensure an efficient and orderly resolution process and enhance financial stability in the EU. They also aim to align the EU’s banking union rules with a number of elements agreed at the international level, in particular, the standards agreed within the Basel Committee on Banking Supervision and by the Financial Stability Board. The amendments are designed to update the capital requirements for banks and make these rules less complex and burdensome for smaller banks, as well as to improve the capacity of credit institutions to support the economy. In December 2016 the Council of the European Union started working on these proposals. It is expected to adopt the amendments together with the European Parliament, in accordance with the ordinary legislative procedure.
| Sources: European Commission, European system of financial supervision (https://ec.europa.eu/info/business-economy-euro/banking-and-finance/financial-supervision-and-risk-management/european-system-financial-supervision_en); European Commission, Banking Union (http://ec.europa.eu/finance/general-policy/banking-union/index_en.htm); European Central Bank, ECB assumes responsibility for euro area banking supervision, press release of November 4, 2014 (http://www.ecb.europa.eu/press/pr/date/2014/html/pr141104.en.html); European Central Bank, Banking Supervision, Single Supervisory Mechanism (https://www.bankingsupervision.europa.eu/about/thessm/html/index.en.html); European Commission, Single Resolution Mechanism to come into effect for the |
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| Banking Union, press release of December 31, 2015 (http://europa.eu/rapid/press-release_IP-15-6397_en.htm); European Banking Authority, Implementing Basel III in Europe: CRD IV Package http://www.eba.europa.eu/regulation-and-policy/implementing-basel-iii-europe); Deutsche Bundesbank, Service, Schule und Bildung, Schülerbuch Geld und Geldpolitik digital, Das Banken und Finanzsystem: Sicherung der Stabilität des Finanzsystems (https://www.bundesbank.de/Redaktion/DE/Dossier/Service/schule_und_bildung_kapitel_4.html?notFirst=true&docId=147562#chap); Deutsche Bundesbank, Compromise reached over resolution fund, article dated December 22, 2014 (https://www.bundesbank.de/Redaktion/EN/Topics/2014/2014_12_22_compromise_reached_resolution_fund.html); Banking Union – Single Resolution Board completes signature of Loan Facility Agreements with all 19 participating Member States, February 8, 2016 (https://srb.europa.eu/en/node/196); Council of the European Union, Banking Union (http://www.consilium.europa.eu/en/policies/banking-union/); Council of the European Union, Banking Union, Amendments to the banking union rules (http://www.consilium.europa.eu/en/policies/banking-union/2016-amendments). |
Recent Policy Responses to the Global Financial and Economic Crisis. In response to the tensions in the financial markets and the loss of confidence in the financial sector overall in the wake of the global financial and economic crisis, a number of measures were taken at the EU level in recent years to restore confidence in the financial sector and prevent market disruptions. These measures were, or continue to be, mainly directed at preserving adequate capitalization of financial institutions, at enhancing credit support measures to improve bank lending and liquidity in the euro area money market, at safeguarding the flow of credit from financial institutions to the real economy and, most recently, at addressing the risk of a prolonged period of low inflation. A central role was, and continues to be, played by the ECB, which introduced a number of non-standard monetary policy measures, including, among others, asset purchase programs, long-term refinancing operations and measures aimed at increasing collateral availability. These measures are unprecedented in nature, scope and magnitude and aim to safeguard the primary objective of price stability and ensure an appropriate monetary policy transmission mechanism.
In September 2012, the ECB announced Outright Monetary Transactions in secondary markets for euro-denominated sovereign bonds in the euro area aimed at enabling the ECB to address severe distortions in government bond markets. In June 2014, the ECB announced several measures designed to enhance the functioning of the monetary policy transmission mechanism by supporting lending to the real economy. In particular, the ECB decided to conduct a series of eight targeted longer-term refinancing operations (“TLTROs”) between September 2014 and June 2016. These TLTROs were aimed at improving bank lending to the euro-area non-financial private sector (defined as euro-area households and non-financial corporations), excluding loans to households for house purchases. The last operation of this series of TLTROs was successfully conducted and settled in June 2016. All these TLTROs will mature in September 2018.
In addition, the ECB seeks to provide monetary stimulus to the economy through its asset purchase program which was launched in October 2014 and significantly expanded in March 2015. This program is being conducted to further ease monetary and financial conditions in a context where key ECB interest rates are at their lower bound. Since mid-2016, it has consisted of four elements: a covered bond purchase program, an asset-backed securities purchase program, a public sector purchase program (including, among others, debt securities of KfW) and a corporate sector purchase program. Monthly purchases of public and private sector securities are currently intended to amount to EUR 60 billion (from April 2016 to March 2017 this average monthly figure amounted to EUR 80 billion). The ECB has announced that it intends to carry out these purchases until at least December 2017 and, in any case, until the ECB sees a sustained adjustment in the path of inflation that is consistent with its aim of achieving inflation rates below, but close to 2% over the medium term.
Furthermore, the ECB conducted four additional TLTROs with four-year maturities (“TLTROs II”) on a quarterly basis from June 2016 to March 2017. Counterparties exceeding an ECB-defined lending benchmark until January 2018 may borrow at an interest rate that can be as low as the interest rate on the deposit facility prevailing at the time of allotment. Since the interest rate on the deposit facility stood below zero at the time of the allotments of all TLTROs II, this means that counterparties would, in fact, be paid for their lending efforts if they exceeded their benchmarks. Like the previous TLTROs, the TLTROs II intend to promote bank lending to the euro-area non-financial private sector and again exclude mortgage loans. Banks were able to borrow larger amounts through TLTROs II compared to the previous TLTROs. The last operation of the TLTRO II series was successfully conducted and settled in March 2017. This operation will mature in March 2021.
Sources: European Central Bank, The Eurosystem’s instruments (https://www.ecb.europa.eu/mopo/implement/html/index.en.html); European Central Bank, Monetary policy decisions: Non-standard measures (https://www.ecb.europa.eu/mopo/decisions/html/index.en.html); European Central Bank, Technical features of Outright Monetary Transactions, press release of September 6, 2012
(http://www.ecb.int/press/pr/date/2012/html/pr120906_1.en.html); European Central Bank, ECB announces further details of the targeted long-term refinancing operations, press release of July 3, 2014 (https://www.ecb.europa.eu/press/pr/date/2014/html/pr140703_2.en.html); European Central Bank, Asset purchase programmes
(https://www.ecb.europa.eu/mopo/implement/omt/html/index.en.html); European Central Bank, Introductory Statement to the press conference (with Q&A), Mario Draghi, President of the ECB, Frankfurt am Main, January 22, 2015
(https://www.ecb.europa.eu/press/pressconf/2015/html/is150122.en.html), European Central Bank, ECB announces expanded asset purchase programme, press release of January 22, 2015 (https://www.ecb.europa.eu/press/pr/date/2015/html/pr150122_1.en.html); European Central Bank, Monetary policy decisions, press release of March 10, 2016
(http://www.ecb.europa.eu/press/pr/date/2016/html/pr160310.en.html); European Central Bank, ECB adds corporate sector purchase programme (CSPP) to the asset purchase programme (APP) and announces changes to APP, press release of March 10, 2016
(http://www.ecb.europa.eu/press/pr/date/2016/html/pr160310_2.en.html); European Central Bank, ECB announces new series of targeted longer-term refinancing operations (TLTRO II), press release of March 10, 2016
(http://www.ecb.europa.eu/press/pr/date/2016/html/pr160310_1.en.html); European Central Bank, Consolidated financial statement of the Eurosystem as at 1 July 2016
(https://www.ecb.europa.eu/press/pr/wfs/2016/html/fs160706.en.html); Bundesbank, Gezielte längerfristige Refinanzierungsgeschäfte I
(https://www.bundesbank.de/Redaktion/DE/Standardartikel/Aufgaben/Geldpolitik/glrg_1_ausstehende_glrg.html), European Central Bank, Consolidated financial statement of the Eurosystem as at 31 March 2017
(https://www.ecb.europa.eu/press/pr/wfs/2017/html/fs170405.en.html); |
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| Bundesbank, Gezielte längerfristige Refinanzierungsgeschäfte II (https://www.bundesbank.de/Redaktion/DE/Standardartikel/Aufgaben/Geldpolitik/glrg_2_ausstehende_glrg.html). |
The Federal Republic’s securities market is among Europe’s largest. Trading in listed securities is not legally or otherwise confined to the stock exchanges. It is estimated, however, that most transactions in equity securities are executed through stock exchanges. By contrast, debt securities, although typically listed, are predominantly traded over-the-counter.
Highly developed secondary markets, combined with the distribution capabilities of an extensive network of financial institutions, provide the basis for the Federal Republic’s position in the world’s capital markets. Equity and debt issues are generally underwritten and distributed through banking syndicates, which typically include commercial banks as well as certain regional and specialized institutions. The regulated securities markets in Berlin, Dusseldorf, Frankfurt am Main, Hamburg, Hanover, Munich and Stuttgart, the futures and options exchange Eurex Deutschland and the European Energy Exchange are recognized as regulated markets of the EU according to Article 47 of Directive 2004/39/EC on Markets in Financial Instruments and comply with globally accepted regulatory standards.
Based on total turnover on German securities exchanges, the Frankfurt Stock Exchange, operated by Deutsche Börse AG, is by far the most important stock exchange in the Federal Republic.
In January 2013, the Heads of State or Government of the European Union adopted a decision authorizing eleven Member States to proceed with the introduction of a financial transaction tax (“FTT”) through “enhanced cooperation.” The eleven countries are Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.
In February 2013, the European Commission presented its “Proposal for a Council Directive implementing enhanced cooperation in the area of financial transaction tax.” The proposal involves a harmonized minimum 0.1% tax rate for transactions in all types of financial instruments except derivatives (0.01% rate). On May 6, 2014, the Federal Republic and nine other Member States issued a joint statement on the financial transaction tax stating that the tax should be implemented progressively. On December 8, 2015, the Federal Republic and nine other Member States issued a joint statement that a first agreement on several core components of the future tax has been reached.
| Sources: Council of the European Union, Financial transaction tax: Council agrees to enhanced cooperation, press release of January 22, 2013 (http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ecofin/134949.pdf); Bundesministerium der Finanzen, Finanztransaktionsteuer in verstärkter Zusammenarbeit, topical information originating from press release of January 27, 2015 (http://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Weitere_Steuerthemen/Finanztransaktionsteuer/2014-01-27-ftt-statement.html). |
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PUBLIC FINANCE
| Receipts and Expenditures |
The Federal Government, each of the Länder governments and each of the municipalities (Gemeinden) have separate budgets. The federal budget is the largest single public budget.
The fiscal year of the Federal Republic is the calendar year. The annual federal budget is passed by an act of parliament. On the basis of a proposal prepared by the Ministry of Finance, the Federal Government introduces the federal budget bill to the parliament, generally in the summer of each year. The proposal has to pass through three Bundestag sessions, the budget committee of the Bundestag, and the Bundesrat, which deliberates the proposal twice. The final vote on the proposal is taken by the Bundestag in its third session.
In addition to the federal, Länder and municipal budgets, there are separate budgets for the social security funds and various special funds (Sondervermögen) of the federal administration and the Länder, as well as other off-budgetary entities at all levels of government that are created for specific public purposes. General government, as defined in the national accounts, comprises all these different levels of government activity.
In 2016, total consolidated general government revenue, as presented in the national accounts, amounted to EUR 1,411.4 billion, with tax revenue of EUR 731.2 billion and social contributions of EUR 523.1 billion.
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Table 3.4.3.2. |
In 2016, VAT and the taxes on income and wealth, as presented in the national accounts, amounted to EUR 218.8 billion and EUR 396.8 billion, respectively. These joint taxes are distributed among the Federal Government, the Länder governments and municipal authorities, according to predetermined formulae. In addition to joint taxes, the Federal Government, the Länder governments and the municipal authorities each levied special taxes, for example, on tobacco and beer.
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Table 3.4.3.16. |
Consolidated general government expenditure in 2016, as presented in the national accounts, amounted to a total of EUR 1,387.7 billion. The most significant consolidated general government expenditures were monetary social benefits (EUR 487.7 billion), social benefits in kind (EUR 268.1 billion) and employee compensation (EUR 235.8 billion). Other significant consolidated general government expenditures included intermediate consumption (EUR 151.7 billion), interest on public debt (EUR 43.4 billion) and gross capital formation (EUR 66.5 billion).
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Table 3.4.3.2. |
GENERAL GOVERNMENT ACCOUNTS (1)
| 2016 | | 2015 | | 2014 | | 2013 | | 2012 | |
|
| |
| |
| |
| |
| |
| (EUR in billions) | |
| Federal Government, Länder governments and municipalities | | |
| Revenue | 916.3 | | 881.0 | | 852.1 | | 820.3 | | 796.9 | |
of which: Taxes (2) | 731.2 | | 700.0 | | 668.6 | | 645.9 | | 620.5 | |
| Expenditure | 900.8 | | 862.2 | | 846.5 | | 830.9 | | 816.3 | |
|
| |
| |
| |
| |
| |
Balance | 15.5 | | 18.8 | | 5.5 | | -10.7 | | -19.4 | |
| Social security funds | | | | | |
| Revenue | 606.4 | | 579.1 | | 557.6 | | 539.9 | | 539.2 | |
| Expenditure | 598.2 | | 577.0 | | 554.6 | | 534.6 | | 520.7 | |
|
| |
| |
| |
| |
| |
Balance | 8.2 | | 2.1 | | 3.0 | | 5.3 | | 18.4 | |
| General government | | | | | |
| Revenue | 1,411.4 | | 1,354.8 | | 1,306.8 | | 1,258.4 | | 1,220.9 | |
| Expenditure | 1,387.7 | | 1,333.9 | | 1,298.2 | | 1,263.7 | | 1,221.8 | |
|
| |
| |
| |
| |
| |
Balance | 23.7 | | 20.9 | | 8.6 | | -5.4 | | -0.9 | |
|
| |
| |
| |
| |
| |
| (1) | Definition according to the national accounts. |
| (2) | Excluding capital taxes and taxes of domestic sectors paid to EU. |
| |
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Tables 3.4.3.2, 3.4.3.3 and 3.4.3.7. |
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FEDERAL GOVERNMENT ACCOUNTS (1)
| 2016 | | 2015 | | 2014 | | 2013 | | 2012 | |
|
| |
| |
| |
| |
| |
| (EUR in billions) | |
| Revenue | 401.0 | | 393.6 | | 385.2 | | 369.6 | | 365.6 | |
of which: Taxes (2) | 353.8 | | 347.8 | | 336.6 | | 326.1 | | 319.2 | |
| Expenditure | 393.3 | | 383.6 | | 376.6 | | 377.8 | | 381.8 | |
|
| |
| |
| |
| |
| |
| Balance | 7.7 | | 10.0 | | 8.6 | | -8.1 | | -16.1 | |
|
| |
| |
| |
| |
| |
| (1) | Definition according to the national accounts. |
| (2) | Excluding taxes of domestic sectors paid to EU. |
| |
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Table 3.4.3.4. |
GENERAL GOVERNMENT EXPENDITURE: BREAKDOWN BY FUNCTIONS (1)
| 2016 | | 2015 | | 2014 | | 2013 | | 2012 | |
|
| |
| |
| |
| |
| |
| (EUR in billions) | |
| General public services | 181.7 | | 180.4 | | 189.1 | | 182.8 | | 180.1 | |
| Defense | 31.1 | | 30.5 | | 29.3 | | 30.6 | | 30.9 | |
| Public order and safety | 49.8 | | 47.5 | | 45.7 | | 44.4 | | 43.1 | |
| Economic affairs | 100.4 | | 95.2 | | 92.0 | | 94.1 | | 94.9 | |
| Environmental protection | 20.1 | | 18.5 | | 17.8 | | 17.4 | | 16.6 | |
| Housing and community amenities | 12.1 | | 11.6 | | 11.4 | | 11.7 | | 12.1 | |
| Health | 225.0 | | 217.2 | | 209.4 | | 199.0 | | 188.0 | |
| Recreation, culture and religion | 32.6 | | 30.8 | | 30.2 | | 28.9 | | 20.7 | |
| Education | 132.7 | | 127.4 | | 123.9 | | 120.9 | | 116.1 | |
| Social protection | 602.3 | | 574.8 | | 549.2 | | 533.9 | | 519.4 | |
|
| |
| |
| |
| |
| |
| Total expenditure | 1,387.7 | | 1,333.9 | | 1,298.2 | | 1,263.7 | | 1,221.8 | |
|
| |
| |
| |
| |
| |
| (1) | Definition according to the national accounts. |
| |
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Table 3.4.3.11. |
| |
| Germany’s General Government Deficit/Surplus and General Government Gross Debt |
For purposes of the Member States’ reports to the European Commission under the EDP, the general government or “Maastricht” deficit/surplus refers to the difference between consolidated public sector revenue and consolidated public sector expenditure and is the balancing item “net borrowing/net lending” of general government (central government, state government, local government and social security funds) as defined in ESA 2010. In 2016, Germany’s general government surplus amounted to EUR 23.7 billion, or 0.8% of nominal GDP. The German general government gross debt-to-GDP ratio decreased from 71.2% in 2015 to 68.3% in 2016, which is above the EU’s 60% reference value.
| Sources: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2016 (March 2017), Table 1.10; The European Union, Consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union (http://data.consilium.europa.eu/doc/document/ST-6655-2008-REV-8/en/pdf); Deutsche Bundesbank, German general government debt down in 2016 by €18 billion to €2.14 trillion – debt ratio down to 68.3%, press release of March 31, 2017 (http://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK/2017/2017_03_31_schuldenstand.html). |
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The following table shows historical information on the Federal Republic’s general government deficit/surplus and debt as a percentage of GDP.
THE FEDERAL REPUBLIC’S FISCAL MAASTRICHT CRITERIA
| 2016 | | 2015 | | 2014 | | 2013 | | 2012 | |
|
| |
| |
| |
| |
| |
| (% of GDP) | |
| General government deficit (-) / surplus (+) | 0.8 | | 0.7 | | 0.3 | | -0.2 | | -0.0 | |
| General government gross debt | 68.3 | | 71.2 | | 74.9 | | 77.5 | | 79.9 | |
| Sources: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2016 (February 2017), Table 1.10; Deutsche Bundesbank, German general government debt down in 2016 by €18 billion to €2.14 trillion – debt ratio down to 68.3%, press release of March 31, 2017 (http://www.bundesbank.de/Redaktion/EN/Pressemitteilungen/BBK/2017/2017_03_31_schuldenstand.html). |
The April 2017 update of the German stability program forecasts the general government budget to remain in surplus until 2021, the end of the forecasting period. The medium-term objective of a structural deficit not exceeding 0.5% of GDP is expected to be met with a safety margin during the entire forecasting period (2017 to 2020).
According to the April 2017 update of the German stability program, Germany’s general government gross debt-to-GDP ratio is projected to be 66¼% in 2017 and to decrease further to around 57% by 2021, the end of the forecast horizon. The reference values for the upper limit of the debt ratio according to the 1/20th-rule of the enhanced SGP are expected to be undershot significantly in all years of the forecasting period. However, the debt ratio is expected to continue to be in excess of the EU’s reference value of 60% of nominal GDP until 2019. One reason for the decrease is expected to be the liquidation of parts of the wind-up institutions’ portfolios, which is expected to continue over the coming years. In addition to the liquidation effect, the consolidation efforts in the federal, Länder and municipal authorities’ budgets are expected to contribute to the decline in the debt-to-GDP ratio during the forecasting period.
| Source: Bundesministerium der Finanzen, Deutsches Stabilitätsprogramm Aktualisierung 2017 (https://www.bundesfinanzministerium.de/Content/DE/Downloads/Abt_2/Stabilitaetsprogramm-2017.pdf? blob=publicationFile&v=3), Tables 13 and 16. |
GENERAL GOVERNMENT BUDGETARY PROSPECTS (1)
| 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | |
|
| |
| |
| |
| |
| |
| |
| (% of GDP) | |
| Revenue | 45¼ | | 45¼ | | 45¼ | | 45¼ | | 45¼ | | 45.1 | |
| Total taxes | 23½ | | 23½ | | 23½ | | 23½ | | 23½ | | 23.3 | |
| Social contributions | 17¼ | | 17 | | 17 | | 17 | | 17 | | 16.7 | |
| Property income | ½ | | ½ | | ½ | | ½ | | ½ | | 0.6 | |
| Other | 4 | | 4 | | 4 | | 4 | | 4¼ | | 4.4 | |
| Expenditure (2) | 44¾ | | 44¾ | | 45 | | 45 | | 44¾ | | 44.3 | |
| Compensation of employees and intermediate consumption | 12 | | 12¼ | | 12¼ | | 12½ | | 12½ | | 12.4 | |
| Social payments | 25 | | 24¾ | | 24¾ | | 24½ | | 24½ | | 24.1 | |
| Interest expenditure | 1¼ | | 1¼ | | 1¼ | | 1¼ | | 1¼ | | 1.4 | |
| Subsidies | 1 | | 1 | | 1 | | ¾ | | ¾ | | 0.9 | |
| Gross fixed capital formation | 2¼ | | 2¼ | | 2¼ | | 2¼ | | 2¼ | | 2.1 | |
| Capital transfers | 1 | | 1 | | 1 | | 1 | | 1 | | 1.1 | |
| Other | 3½ | | 3½ | | 3½ | | 3¾ | | 3½ | | 3.4 | |
|
| |
| |
| |
| |
| |
| |
| General government deficit (-) / surplus (+) | ½ | | ½ | | ¼ | | ¼ | | ½ | | 0.8 | |
| Federal Government | ¼ | | ¼ | | 0 | | 0 | | 0 | | 0.2 | |
Länder governments | ¼ | | ¼ | | 0 | | 0 | | ¼ | | 0.2 | |
| Municipalities | 0 | | 0 | | 0 | | 0 | | ¼ | | 0.1 | |
| Social security funds | 0 | | 0 | | 0 | | 0 | | 0 | | 0.3 | |
| General government gross debt | 57 | | 59¾ | | 61¾ | | 64 | | 66¼ | | 68.3 | |
| (1) | Forecast figures are rounded to one-quarter of a percent of GDP. |
| (2) | Adjusted by the net amount of payments in connection with swaps. |
| |
| Source: Bundesministerium der Finanzen, Deutsches Stabilitätsprogramm Aktualisierung 2017 (http://www.bundesfinanzministerium.de/Content/DE/Downloads/Abt_2/Stabilitaetsprogramm-2017.pdf?__blob=publicationFile&v=3), Tables 13 and 16. |
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Significant sources of revenue for the general government are the various types of income taxes. Income taxation for employees and self-employed persons is based on a progressive tax scale ranging from 14% to 45% subject to the amount of taxable income. Employees pay taxes on their income from employment in the form of wage taxes. Self-employed persons typically pay estimated taxes during the year before filing their annual income tax return. Income generated by partnerships (Personengesellschaften) is not subject to tax at the partnership level, but at the level of the partners. The partners pay tax on this income according to their individual income tax brackets.
Income generated by corporations is subject to corporate income tax (Körperschaftsteuer) at a flat rate of 15%.
Capital income received by domestic taxpayers (all types of income from capital as well as private shareholders’ net gains from sales of shares in corporations) is subject to a final uniform tax rate of 25% (Abgeltungssteuer), taking into consideration an allowance (Sparerpauschbetrag) of EUR 801 (EUR 1,602 for married couples).
In addition to the various types of income tax, a solidarity surcharge of 5.5% is imposed on the applicable income tax liability.
| Sources: Bundesministerium der Justiz und für Verbraucherschutz, Einkommensteuergesetz (http://www.gesetze-im-internet.de/estg/index.html); Bundesministerium der Justiz und für Verbraucherschutz, Solidaritätszuschlaggesetz 1995, § 4 Zuschlagssatz (http://www.gesetze-im-internet.de/solzg_1995/__4.html); Bundesministerium der Justiz und für Verbraucherschutz, Körperschaftsteuergesetz (http://www.gesetze-im-internet.de/kstg_1977/index.html). |
| |
| VAT and Consumption Taxes |
VAT serves as a significant source of revenue. VAT is a general consumption tax that is imposed on the value of most goods and services. The standard rate applicable to most goods and services is 19%. Certain items that are classified as basic necessities, such as food (except food and beverages in restaurants) and books, are subject to a reduced rate of 7%.
In addition to the VAT, there are specific consumption taxes. The most significant specific consumption taxes relate to energy and tobacco.
| Sources: Bundesministerium der Justiz und für Verbraucherschutz, Umsatzsteuergesetz (http://www.gesetze-im-internet.de/ustg_1980/index.html); Bundesministerium der Justiz und für Verbraucherschutz, Umsatzsteuergesetz, § 12 Steuersätze (http://www.gesetze-im-internet.de/ustg_1980/__12.html); Bundesministerium der Justiz und für Verbraucherschutz, Energiesteuergesetz (http://www.gesetze-im-internet.de/energiestg/); Bundesministerium der Justiz und für Verbraucherschutz, Tabaksteuergesetz (http://www.gesetze-im-internet.de/tabstg_2009/index.html). |
The environmental tax regime aims to encourage energy conservation and to allocate the burden of taxes and contributions more equally among labor, capital and natural resources. Key points of the environmental tax regime are an electricity tax imposed on the consumption of electricity and an energy tax on mineral oil and coal. The electricity tax rate is EUR 20.50 per megawatt-hour. The rates of the energy tax are assessed in accordance with certain environmental criteria.
| Sources: Bundesministerium der Justiz und für Verbraucherschutz, Stromsteuergesetz (http://www.gesetze-im-internet.de/stromstg/index.html); Bundesministerium der Justiz und für Verbraucherschutz, Stromsteuergesetz, § 3 Steuertarif (http://www.gesetze-im-internet.de/stromstg/__3.html). |
Trade tax (Gewerbesteuer) is levied at the municipal level and is imposed on businesses and their objective earning power. The trade tax rate varies and depends on the municipality that levies the tax. Basis of assessment are the profits of a business enterprise as determined under income tax law or corporation tax law, increased or decreased by certain adjustments. The result is multiplied by the basic federal rate (Gewerbesteuermesszahl) to achieve the base amount for the trade tax (Steuermessbetrag), which is then multiplied by the municipal multiplier (Hebesatz). Beyond a required minimum level of 200%, municipalities have discretion to fix the municipal tax collection rate.
| Source: Bundesministerium der Justiz und für Verbraucherschutz, Gewerbesteuergesetz (http://www.gesetze-im-internet.de/gewstg/index.html). |
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The following table provides an overview of the annual tax revenues of the general government divided by categories for each of the years indicated, as presented in the national accounts.
TAXES (1)
| 2016 | | 2015 | | 2014 | | 2013 | | 2012 | |
|
| |
| |
| |
| |
| |
| (EUR in billions) | |
| Current taxes | 731.2 | | 700.0 | | 668.6 | | 645.9 | | 620.5 | |
| Taxes on production and imports | 334.4 | | 327.4 | | 314.7 | | 305.4 | | 300.7 | |
of which: VAT | 218.8 | | 211.6 | | 203.1 | | 197.0 | | 194.0 | |
| Current taxes on income and wealth | 396.8 | | 372.6 | | 353.9 | | 340.5 | | 319.9 | |
of which: Wage tax | 223.6 | | 215.0 | | 203.9 | | 194.1 | | 184.9 | |
Assessed income tax | 52.1 | | 46.9 | | 43.9 | | 41.0 | | 36.9 | |
Non-assessed taxes on earnings | 26.9 | | 27.7 | | 25.6 | | 27.0 | | 30.0 | |
Corporate tax | 29.7 | | 21.6 | | 21.6 | | 21.1 | | 18.5 | |
| Capital taxes | 7.0 | | 6.3 | | 5.5 | | 4.6 | | 4.3 | |
|
| |
| |
| |
| |
| |
| Tax revenue of general government | 738.2 | | 706.3 | | 674.0 | | 650.6 | | 624.9 | |
| Taxes of domestic sectors to EU | 5.2 | | 5.4 | | 4.6 | | 4.3 | | 4.5 | |
|
| |
| |
| |
| |
| |
| Taxes | 743.4 | | 711.7 | | 678.7 | | 654.9 | | 629.4 | |
|
| |
| |
| |
| |
| |
| (1) | Definition according to the national accounts. |
| |
| Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2016 (March 2017), Table 3.4.3.16. |
| |
| Government Participations |
The Federal Republic and its various special funds held direct participations in 108 public and private enterprises as of December 31, 2015.
| Source: Bundesministerium der Finanzen, Die Beteiligungen des Bundes – Beteiligungsbericht 2016 (http://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Bundesvermoegen/Privatisierungs_und_Beteiligungspolitik/Beteiligungspolitik/Beteiligungsberichte/beteiligungsbericht-des-bundes-2016.pdf?__blob=publicationFile&v=15), Chapter A. |
The following table shows information on the Federal Republic’s significant direct participations (including those held through special funds) as of December 31, 2015.
PARTICIPATIONS OF THE FEDERAL REPUBLIC
| Enterprises | | Nominal capital of enterprise | | Participation of the Federal
Republic | |
|
|
| |
| |
| | (EUR in millions) | | (%) | |
| Significant majority participations: | | | | |
| Deutsche Bahn AG | | 2,150 | | 100.0 | |
| KfW | | 3,750 | | 80.0 | |
| Hypo Real Estate Holding AG (1) | | 909 | | 100.0 | |
| Significant minority participations exceeding 25%: | | | | |
| Flughafen München GmbH | | 307 | | 26.0 | |
| (1) | Participations held by a special fund. |
| |
| Source: Bundesministerium der Finanzen, Die Beteiligungen des Bundes – Beteiligungsbericht 2016 (http://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Bundesvermoegen/Privatisierungs_und_Beteiligungspolitik/Beteiligungspolitik/Beteiligungsberichte/beteiligungsbericht-des-bundes-2016.pdf?__blob=publicationFile&v=15), Chapters B, E and O paragraph II. |
Direct Debt of the Federal Government |
As of December 31, 2016, the Federal Government’s direct debt totaled EUR 1,089.2 billion, compared to EUR 1,097.2 billion as of December 31, 2015.
| Source: Bundesrepublik Deutschland Finanzagentur GmbH, Übersicht über den Stand der Schuld der Bundesrepublik Deutschland (http://www.deutsche-finanzagentur.de/fileadmin/user_upload/finanzagentur/pdf/schuldenstand_jahresarchiv.pdf). |
The Federal Government raises funds primarily through the issuance of bonds and notes. Euro-denominated bonds and notes issued by the Federal Republic are evidenced by book entry and no certificates are issued.
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In addition to its own direct debt obligations, the Federal Government and its special funds had outstanding guarantees in an aggregate amount of EUR 470.1 billion as of December 31, 2015. Of this amount, EUR 132.8 billion was outstanding in the form of export credit insurance, which is handled by Euler Hermes on behalf and for the account of the Federal Government. Furthermore, EUR 22.4 billion of the aggregate amount was outstanding in the form of a guarantee for a loan to Greece according to the German Financial Stability Act, and EUR 84.7 billion of the aggregate amount was outstanding in the form of a guarantee for the European Financial Stability Facility.
| Source: Bundesministerium der Finanzen, Finanzbericht 2017 (https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Oeffentliche_Finanzen/Wirtschafts_und_Finanzdaten/Finanzberichte/Finanzbericht-2017-anl.pdf?__blob=publicationFile&v=2), Overview 4, page 376. |
For more detailed information regarding the Federal Government’s debt and guarantees, see “Tables and Supplementary Information.”
For information on the Federal Government’s liability as of December 31, 2016 for capital subscriptions to various international financial organizations, see the table entitled “Tables and Supplementary Information–III. Liabilities to International Financial Organizations.”
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TABLES AND SUPPLEMENTARY INFORMATION
I. DIRECT DEBT OF THE FEDERAL GOVERNMENT
SUMMARY
| Aggregate principal amount outstanding as of
December 31, 2016 | |
|
| |
| (EUR in millions) | |
| Federal Bonds (Bundesanleihen) | 708,905 | |
of which: | | |
– Bonds of the Federal Republic and the Länder (Bund-Länder-Anleihe) | 405 | |
| Inflation-linked Securities (inflationsindexierte Bundeswertpapiere) | 68,500 | |
| Five-year Federal Notes (Bundesobligationen) | 228,000 | |
| Federal Treasury Notes (Bundesschatzanweisungen) | 101,000 | |
| Federal Savings Notes (Bundesschatzbriefe) | 737 | |
| Treasury Discount Paper (Unverzinsliche Schatzanweisungen) | 19,088 | |
| German Government Day-Bonds (Tagesanleihe des Bundes) | 1,010 | |
| Further short term debt (< 1 year) | 66 | |
| Borrowers’ note loans (Schuldscheindarlehen) | 9,785 | |
of which: | | |
| – From residents | 9,747 | |
| – From non-residents | 38 | |
| Old debt (1) | 4,475 | |
of which: | | |
| – Equalization claims | 4,155 | |
| Repurchased debt | 52,415 | |
|
| |
| Total | 1,089,151 | |
|
| |
| (1) | Mainly equalization and covering claims of the Deutsche Bundesbank, other banks and insurance companies in connection with the currency reform of 1948. |
| |
| Source: Bundesministerium der Finanzen, Übersicht über den Stand der Schuld der Bundesrepublik Deutschland zum 30. Juni 2016 und 31. Dezember 2016, Bundesanzeiger of February 06, 2017. |
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DEBT TABLES
1. FEDERAL BONDS (1)
| Title | | Interest rate | | Year of issue | | Maturity | | Aggregate principal amount
outstanding as of December 31, 2016 | |
|
|
| |
| |
| |
| |
| | (% per annum) | | | | | | (EUR in millions) | |
| 6.25% Bonds of the Federal Republic of 1994 | | 6.25 | | 1994 | | 2024 | | 10,250 | |
| 6.5% Bonds of the Federal Republic of 1997 | | 6.5 | | 1997 | | 2027 | | 11,250 | |
| 5.625% Bonds of the Federal Republic of 1998 | | 5.625 | | 1998 | | 2028 | | 14,500 | |
| 4.75% Bonds of the Federal Republic of 1998 (II) | | 4.75 | | 1998 | | 2028 | | 11,250 | |
| 6.25% Bonds of the Federal Republic of 2000 | | 6.25 | | 2000 | | 2030 | | 9,250 | |
| 5.5% Bonds of the Federal Republic of 2000 | | 5.5 | | 2000 | | 2031 | | 17,000 | |
| 4.75% Bonds of the Federal Republic of 2003 | | 4.75 | | 2003 | | 2034 | | 20,000 | |
| 4% Bonds of the Federal Republic of 2005 | | 4 | | 2005 | | 2037 | | 23,000 | |
| 3.75% Bonds of the Federal Republic of 2006 | | 3.75 | | 2006 | | 2017 | | 20,000 | |
| 4.25% Bonds of the Federal Republic of 2007 (I) | | 4.25 | | 2007 | | 2039 | | 14,000 | |
| 4.25% Bonds of the Federal Republic of 2007 (II) | | 4.25 | | 2007 | | 2017 | | 19,000 | |
| 4% Bonds of the Federal Republic of 2007 | | 4 | | 2007 | | 2018 | | 20,000 | |
| 4.25% Bonds of the Federal Republic of 2008 | | 4.25 | | 2008 | | 2018 | | 21,000 | |
| 3.75% Bonds of the Federal Republic of 2008 | | 3.75 | | 2008 | | 2019 | | 24,000 | |
| 4.75% Bonds of the Federal Republic of 2008 | | 4.75 | | 2008 | | 2040 | | 16,000 | |
| 3.5% Bonds of the Federal Republic of 2009 | | 3.5 | | 2009 | | 2019 | | 24,000 | |
| 3.25% Bonds of the Federal Republic of 2009 | | 3.25 | | 2009 | | 2020 | | 22,000 | |
| 3.25% Bonds of the Federal Republic of 2010 | | 3.25 | | 2010 | | 2042 | | 15,000 | |
| 3% Bonds of the Federal Republic of 2010 | | 3 | | 2010 | | 2020 | | 22,000 | |
| 2.25% Bonds of the Federal Republic of 2010 | | 2.25 | | 2010 | | 2020 | | 16,000 | |
| 2.5% Bonds of the Federal Republic of 2010 | | 2.5 | | 2010 | | 2021 | | 19,000 | |
| 3.25% Bonds of the Federal Republic of 2011 | | 3.25 | | 2011 | | 2021 | | 19,000 | |
| 2.25% Bonds of the Federal Republic of 2011 | | 2.25 | | 2011 | | 2021 | | 16,000 | |
| 2% Bonds of the Federal Republic of 2011 | | 2 | | 2011 | | 2022 | | 20,000 | |
| 1.75% Bonds of the Federal Republic of 2012 | | 1.75 | | 2012 | | 2022 | | 24,000 | |
| 1.50% Bonds of the Federal Republic of 2012 | | 1.50 | | 2012 | | 2022 | | 18,000 | |
| 2.50% Bonds of the Federal Republic of 2012 | | 2.50 | | 2012 | | 2044 | | 19,000 | |
| 1.5% Bonds of the Federal Republic of 2013 | | 1.50 | | 2013 | | 2023 | | 18,000 | |
| 1.5% Bonds of the Federal Republic of 2013 (II) | | 1.50 | | 2013 | | 2023 | | 18,000 | |
| 2% Bonds of the Federal Republic of 2013 | | 2 | | 2013 | | 2023 | | 18,000 | |
| 1.5% Bonds of the Federal Republic and the Länder of 2013 | | 1.50 | | 2013 | | 2020 | | 405 | |
| 1.75% Bonds of the Federal Republic of 2014 | | 1.75 | | 2014 | | 2024 | | 18,000 | |
| 2.5% Bonds of the Federal Republic of 2014 | | 2.50 | | 2014 | | 2046 | | 19,000 | |
| 1.5% Bonds of the Federal Republic of 2014 | | 1.50 | | 2014 | | 2024 | | 18,000 | |
| 1% Bonds of the Federal Republic of 2014 | | 1 | | 2014 | | 2024 | | 18,000 | |
| 0.5% Bonds of the Federal Republic of 2015 | | 0.5 | | 2015 | | 2025 | | 23,000 | |
| 1% Bonds of the Federal Republic of 2015 | | 1 | | 2015 | | 2025 | | 23,000 | |
| 0.5% Bonds of the Federal Republic of 2016 | | 0.5 | | 2016 | | 2026 | | 26,000 | |
| 0% Bonds of the Federal Republic of 2016 | | 0 | | 2016 | | 2026 | | 25,000 | |
| | | | | | | |
| |
| Total Federal Bonds | | | | | | | | 708,905 | |
| | | | | | | |
| |
| (1) | Federal Bonds (Bundesanleihen) are evidenced by book entry, and no certificates are issued. Maturities are 10 to 30 years. No redemption prior to maturity; including principal strips. |
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2. INFLATION-LINKED SECURITIES (1)
| Title | | Interest rate | | Year of issue | | Maturity | | Aggregate principal amount outstanding as of December 31, 2016 | |
|
|
| |
| |
| |
| |
| | (% per annum) | | | | | | (EUR in millions) | |
| 1.75% Inflation-linked Bonds of the Federal Republic of 2009 | | 1.75 | | 2009 | | 2020 | | 16,000 | |
| 0.75% Inflation-linked Notes of the Federal Republic of 2011 | | 0.75 | | 2011 | | 2018 | | 15,000 | |
| 0.10% Inflation-linked Bonds of the Federal Republic of 2012 | | 0.10 | | 2012 | | 2023 | | 16,000 | |
| 0.50% Inflation-linked Bonds of the Federal Republic of 2014 | | 0.50 | | 2014 | | 2030 | | 8,000 | |
| 0.10% Inflation-linked Bonds of the Federal Republic of 2015 | | 0.10 | | 2015 | | 2026 | | 8,500 | |
| 0.10% Inflation-linked Bonds of the Federal Republic of 2015 | | 0.10 | | 2015 | | 2046 | | 5,000 | |
| | | | | | | |
| |
| Total Inflation-linked Securities | | | | | | | | 68,500 | |
| | | | | | | |
| |
| (1) | Inflation-linked Securities (Inflationsindexierte Bundeswertpapiere) are evidenced by book entry, and no certificates are issued. Maturities are five to ten years. No redemption prior to maturity. |
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3. FIVE-YEAR FEDERAL NOTES (1)
| Title | | Interest rate | | Year of issue | | Maturity | | Aggregate principal amount outstanding as of
December 31, 2016 | |
|
|
| |
| |
| |
| |
| | (% per annum) | | | | | | (EUR in millions) | |
| 0.75% Bonds of 2012-Series 162 | | 0.75 | | 2012 | | 2017 | | 16,000 | |
| 0.50% Bonds of 2012-Series 163 | | 0.50 | | 2012 | | 2017 | | 18,000 | |
| 0.50% Bonds of 2012-Series 164 | | 0.50 | | 2012 | | 2017 | | 16,000 | |
| 0.50% Bonds of 2013-Series 165 | | 0.50 | | 2013 | | 2018 | | 17,000 | |
| 0.25% Bonds of 2013-Series 166 | | 0.25 | | 2013 | | 2018 | | 17,000 | |
| 1.00% Bonds of 2013-Series 167 | | 1.0 | | 2013 | | 2018 | | 17,000 | |
| 1.00% Bonds of 2014-Series 168 | | 1.0 | | 2014 | | 2019 | | 16,000 | |
| 0.50% Bonds of 2014-Series 169 | | 0.50 | | 2014 | | 2019 | | 16,000 | |
| 0.25% Bonds of 2014-Series 170 | | 0.25 | | 2014 | | 2019 | | 16,000 | |
| 0.00% Bonds of 2015-Series 171 | | 0.00 | | 2015 | | 2020 | | 20,000 | |
| 0.25% Bonds of 2015-Series 172 | | 0.25 | | 2015 | | 2020 | | 19,000 | |
| 0.00% Bonds of 2016-Series 173 | | 0.00 | | 2016 | | 2021 | | 21,000 | |
| 0.00% Bonds of 2016-Series 174 | | 0.00 | | 2016 | | 2021 | | 19,000 | |
| | | | | | | |
| |
| Total Five-Year Federal Notes | | | | | | | | 228,000 | |
| | | | | | | |
| |
| (1) | Five-Year Federal Notes (Bundesobligationen) are evidenced by book entry, and no certificates are issued. Maturities are approximately five years. No redemption prior to maturity. |
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4. FEDERAL TREASURY NOTES (1)
| Title | | Interest rate | | Year of issue | | Maturity | | Aggregate principal amount outstanding as of
December 31, 2016 | |
|
|
| |
| |
| |
| |
| | (% per annum) | | | | | | (EUR in millions) | |
| 0.00% Notes of 2015 | | 0.00 | | 2015 | | 2017 | | 14,000 | |
| 0.00% Notes of 2015 (II) | | 0.00 | | 2015 | | 2017 | | 13,000 | |
| 0.00% Notes of 2015 (III) | | 0.00 | | 2015 | | 2017 | | 13,000 | |
| 0.00% Notes of 2015 (IV) | | 0.00 | | 2015 | | 2017 | | 13,000 | |
| 0.00% Notes of 2016 | | 0.00 | | 2016 | | 2018 | | 13,000 | |
| 0.00% Notes of 2016 (II) | | 0.00 | | 2016 | | 2018 | | 14,000 | |
| 0.00% Notes of 2016 (III) | | 0.00 | | 2016 | | 2018 | | 13,000 | |
| 0.00% Notes of 2016 (IV) | | 0.00 | | 2016 | | 2018 | | 8,000 | |
| | | | | | | | |
| |
| Total Federal Treasury Notes | | | | | | | | 101,000 | |
| | | | | | | | |
| |
| (1) | Federal Treasury Notes (Bundesschatzanweisungen) are evidenced by book-entry, and no certificates are issued. Maturities are two years. No redemption prior to maturity. |
5. FEDERAL SAVINGS NOTES (1)
| | Interest rate | | Year of issue | | Maturity | | Aggregate principal amount outstanding as of
December 31, 2016 | |
| |
| |
| |
| |
| |
| | (% per annum) | | | | | | (EUR in millions) | |
| Federal Savings Notes | | 0.0001% to 4.5% | | 2010 to 2012 | | 2017 to 2019 | | 737 | |
6. TREASURY DISCOUNT PAPER (2)
| | Interest rate (3) | | Year of issue | | Maturity | | Aggregate principal amount outstanding as of
December 31, 2016 | |
| | |
| |
| |
| |
| |
| | (% per annum) | | | | | | (EUR in millions) | |
| Treasury Discount Paper | | -0.72 to -0.43 | | 2016 | | 2017 | | 23,500 | |
7. GERMAN GOVERNMENT DAY-BONDS
| | Interest rate | | Year of issue | | Maturity | | Aggregate principal amount outstanding as of
December 31, 2016 | |
| | |
| |
| |
| |
| |
| | (% per annum) | | | | | | (EUR in millions) | |
| German Government Day-Bonds | | variable,
tied to EONIA | | 2008 | | unlimited | | 1,010 | |
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8. BORROWERS’ NOTE LOANS (4)
| | Interest rate | | Year of issue | | Maturity | | Aggregate principal amount outstanding as of
December 31, 2016 | |
| | |
| |
| |
| |
| |
| | (% per annum) | | | | | | (EUR in millions) | |
| | | | | | | | | |
| Borrowers’ note loans | | | |
| (Schuldscheindarlehen) | | 0.12% to 7.75% | | 1954 to 2014 | | 2017 to 2037 | | 9,785 | |
9. FURTHER SHORT-TERM DEBT (< 1 YEAR)
| | Interest rate | | Year of issue | | Maturity | | Aggregate principal amount outstanding as of
December 31, 2016 | |
| | |
| |
| |
| |
| |
| | (% per annum) | | | | | | (EUR in millions) | |
| Further short-term debt (< 1 year) | | money market rates | | 2016 | | 2017 | | 66 | |
| (1) | Federal Savings Notes (Bundesschatzbriefe) are evidenced by book entry and no certificates are issued. Maturities are six or seven years. The terms of the Federal Savings Notes provide for interest rates that increase during the term of the bonds. In addition, the seven-year Federal Savings Notes provide for payment of compounded interest at maturity or upon redemption prior to maturity. No redemption is permitted prior to maturity. Since January 1, 2013 the Federal Republic of Germany stopped offering new Federal savings notes and Federal Treasury financing papers. |
| (2) | Treasury Discount Papers (Unverzinsliche Schatzanweisungen) are issued at a discount and repaid at par value on the maturity date. No interest payments are made during the term of the paper. The papers are auctioned and intended for institutional investors. Maturities range from six months to twelve months. No redemption is permitted prior to maturity. The aggregate principal amount outstanding as of December 31, 2016 includes EUR 4,522 million of Treasury Discount Papers issued as money market instruments. |
| (3) | Reflects annual interest rate paid to the holder by way of the initial issue discount. No redemption is permitted prior to maturity. |
| (4) | Borrowers’ note loans (Schuldscheindarlehen) are an instrument of the German capital market where the lending entity, generally an institutional investor, receives a certificate evidencing its loan to the borrower and the term of such loans. The certificate generally authorizes at least three assignments. No redemption is permitted prior to maturity. |
10. OTHER LIABILITIES
| Interest rate | | Year of issue | | Maturity | | Aggregate principal amount outstanding as of
December 31, 2016 | |
| |
| |
| |
| |
| |
| (% per annum) | | | | | | (EUR in millions) | |
| Old debt (1) | 0% to 3% | | Various | | Various | | 4,475 | |
| Other debt (2) | Various | | Various | | Various | | 40 | |
| (1) | Includes mainly equalization and covering claims of the Deutsche Bundesbank, other banks and insurance companies in connection with the currency reform of 1948. |
| (2) | Includes liabilities of the Federal Government to repay amounts received from the Investitionshilfeabgabe, a special duty levied on income, the proceeds of which were to be used to promote investments. |
| |
| Source: Bundesrepublik Deutschland Finanzagentur GmbH, Übersicht über den Stand der Schuld der Bundesrepublik Deutschland, published on February 22, 2016 (http://www.deutsche-finanzagentur.de/fileadmin/user_upload/finanzagentur/pdf/schuldenstand_jahresarchiv.pdf). |
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II. GUARANTEES BY THE FEDERAL GOVERNMENT (1)
| Aggregate principal amount outstanding
as of December 31, | |
| | |
|
|
| |
| Purpose of Guarantees | | 2015 | | 2014 | |
|
|
| |
| |
| (EUR in millions) | |
| Export finance loans (including rescheduled loans) (2) | | 132,778 | | 134,145 | |
| Untied loans; direct foreign investments by German companies; Loans of the European Investment Bank to non-EU borrowers | | 45,075 | | 44,796 | |
| Loans in connection with EU agricultural policy measures | | 0 | | 0 | |
| Loans to domestic corporations and for projects in areas of Agriculture, fishing and housing construction | | 106,027 | | 97,633 | |
| Contributions to international financing institutions | | 56,848 | | 56,848 | |
| Co-financing of bilateral projects of German financial co-operation | | 13,285 | | 9,738 | |
| Successor agencies to Treuhandanstalt | | 1,009 | | 1,009 | |
| Interest compensation guarantees | | 8,000 | | 8,000 | |
| |
| |
| |
| Total guarantees pursuant to the 2010 German Budget Act | | 363,023 | | 352,170 | |
| |
| |
| |
| Guarantee for a loan to Greece according to the German Financial Stability Act | | 22,400 | | 22,400 | |
| | |
| |
| |
| Loan guarantees under the Act on Guarantees pertaining to the European Financial Stability Facility | | 84,700 | | 89,229 | |
| Total guarantees | | 470,123 | | 463,799 | |
| |
| |
| |
| (1) | Does not include guarantees under the KfW Law with respect to money borrowed, bonds issued and derivative transactions entered into by KfW. |
| (2) | Includes export finance loans extended by KfW IPEX-Bank guaranteed by the Federal Republic through Euler Hermes Aktiengesellschaft (“HERMES”), the official German export credit insurer. |
| |
| Source: Bundesministerium der Finanzen, Finanzbericht 2017 (https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Oeffentliche_Finanzen/Wirtschafts_und_Finanzdaten/Finanzberichte/Finanzbericht-2017-anl.pdf?__blob=publicationFile&v=2), Overview 4, page 376. |
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III. LIABILITIES TO INTERNATIONAL FINANCIAL ORGANIZATIONS
The Federal Republic is obligated to contribute to the capital subscriptions and, in some cases, to additional financing, according to the requirements of each respective membership. Such contributions are in many cases stated initially in 1944 with one U.S. dollar being an equivalent to 0,888671 grams of gold, and later – with the creation of the Special Drawing Right (“SDR”) – being an equivalent to the SDR at the same value. The SDR was established by an amendment to the Articles of Agreement of the IMF in July 1969. From July 1, 1974 to June 1978 the exchange rate between world currencies and the SDR was determined on the basis of a basket of 18 currencies, including the U.S. dollar, which accounted for approximately one-third of the value of the basket. From July 1978 to December 31, 1980, the exchange rate was determined on the basis of a basket of 15 currencies. From 1981 to 2000, the basket was further reduced to the five key currencies, including the U.S. dollar. The value of the SDR, the possible inclusion of new currencies in the basket, the weight of each of these currencies in the basket, and the financial instruments used in determining the interest rate on the SDR, are reviewed every five years. During the last review in November 2015, it was decided that from October 2016 onwards the Chinese currency renminbi will be part of the SDR basket. With effect from October 1, 2016, the SDR basket consists of five currencies with the following weights: U.S. dollar (42%), euro (31%), Chinese renminbi (11%), Japanese yen (8%) and pound sterling (8%).
SUBSCRIPTIONS OR COMMITMENTS BY THE FEDERAL REPUBLIC
TO INTERNATIONAL FINANCIAL ORGANIZATIONS
AS OF END OF DECEMBER, 2016
| Name of organization | | Subscription or
commitment by the Federal Republic (1) | | Amount paid in | |
|
|
| |
| |
| | | (USD in millions) | |
| IMF (2) | | 35,805.7 | | 35,805.7 | |
| International Bank for Reconstruction and Development (IBRD) (3) | | 11,650.2 | | 717.9 | |
| International Development Association (IDA) (3)(4) | | 25,381.8 | | 22,459.0 | |
| International Finance Corporation (IFC) (3)(4) | | 128.9 | | 128.9 | |
| European Investment Bank (EIB) (5) | | 41,315.5 | | 3,685 | |
| African Development Bank (AfDB) (3) | | 3,602.0 | | 213.2 | |
| African Development Fund (AfDF) (3) | | 3,623.1 | | 3,623.1 | |
| Asian Development Bank (AsDB) (3) | | 6,173.2 | | 308.7 | |
| Asian Development Fund (AsDF) (3) | | 1,862.0 | | 1,723.0 | |
| Inter-American Development Bank (IDB) (3) | | 3,240.9 | | 114.5 | |
| Inter-American Investment Corporation (IIC) (3) | | 13.3 | | 13.3 | |
| Fund for Special Operations (FSO) (3) | | 241.3 | | 241.3 | |
| International Fund for Agricultural Development (IFAD) (3) | | 517.7 | | 498.4 | |
| Caribbean Development Bank (CDB) (3) | | 106.6 | | 23.5 | |
| Special Development Fund of the Caribbean Development Bank (SDF) (3) | | 96.4 | | 96.4 | |
| European Bank for Reconstruction and Development (EBRD) (3)(5) | | 2,695.3 | | 561.8 | |
| Council of Europe Development Bank (CEB) ((3)(5) | | 965.3 | | 107.2 | |
| Asia Infrastructure Investment Bank (AIIB) (3) | | 4,484.2 | | 358.7 | |
| (1) | Subscriptions are in part committed in USD, SDR or EUR. SDR or EUR commitments are converted to USD at year-end exchange rates, except that certain SDR commitments are converted at the fixed conversion rate of SDR 1 = USD 1.34433. |
| (2) | Source: computation provided by the Ministry of Finance based on data provided by the IMF; the subscription (quota) is fully paid in by the Deutsche Bundesbank. The foreign currency part of the quota (25% of the subscription) and the Deutsche Bundesbank’s further contributions to Fund’s financing are part of the foreign currency reserves of the Deutsche Bundesbank. The government does not provide any guarantees or provisions for risks of IMF loans. |
| (3) | Source: computation provided by the Ministry of Finance and the Ministry for Economic Cooperation and Development. |
| (4) | Source: IFC and IDA: Worldbank Corporate Secretariat, February 2016. |
| (5) | Source: computation provided by the Ministry of Finance based on euro exchange rate of the European Central Bank at year-end 2016 of EUR 1 per USD 1.0541. |
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Consent of Independent Auditor
To the Board of Managing Directors
Landwirtschaftliche Rentenbank:
We consent to the incorporation by reference in the registration statement (No. 333-215084) under Schedule B of Landwirtschaftliche Rentenbank of our reports dated March 15, 2017, with respect to:
| • | the consolidated financial statements, comprising the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement, and the notes to the consolidated financial statements, together with the combined management report of Landwirtschaftliche Rentenbank as of and for the year ended December 31, 2016 prepared in accordance with International Financial Reporting Standards as adopted by the European Union and the additional requirements of German commercial law pursuant to § 315a Abs. 1 HGB (Handelsgesetzbuch or German Commercial Code), and |
| • | the unconsolidated financial statements, comprising the balance sheet, the income statement and the notes to the financial statements, together with the bookkeeping system and the combined management report of Landwirtschaftliche Rentenbank as of and for the year ended December 31, 2016 prepared in accordance with the German commercial law and supplementary provisions of the Governing Law of Landwirtschaftliche Rentenbank (Gesetz über die Landwirtschaftliche Rentenbank), |
which reports appear in Exhibit (d) to Landwirtschaftliche Rentenbank Annual Report on Form 18-K for the year ended December 31, 2016.
/s/ KPMG AG Wirtschaftsprüfungsgesellschaft
Frankfurt
May 18, 2017
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Consent of the Federal Republic of Germany
On behalf of the Federal Republic of Germany, I hereby consent to the making of the statements with respect to the Federal Republic of Germany included in the Annual Report on Form 18-K of Landwirtschaftliche Rentenbank for the year ended December 31, 2016, and to the incorporation by reference of such information in the Registration Statement under Schedule B (Registration No. 333-215084) of Landwirtschaftliche Rentenbank filed with the Securities and Exchange Commission of the United States of America.
May 18, 2017
| | | | |
| | | Federal Republic of Germany |
| | | |
| | | By: | /s/ Volker Schlechtriemen |
| | | | Volker Schlechtriemen
Regierungsdirektor (Senior Government Official) |
