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© Federal Statistical Office of Germany, D 201 UNECE – Group of Experts on National Accounts 6 – 9 May 2014 - Geneva Challanges and approaches to the implementation.

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Presentation on theme: "© Federal Statistical Office of Germany, D 201 UNECE – Group of Experts on National Accounts 6 – 9 May 2014 - Geneva Challanges and approaches to the implementation."— Presentation transcript:

1 © Federal Statistical Office of Germany, D 201 UNECE – Group of Experts on National Accounts 6 – 9 May Geneva Challanges and approaches to the implementation of 2008 SNA From the Subprime Crisis to Government Debt Wolfgang Eichmann Federal Statistical Office Germany

2 © Federal Statistical Office of Germany, D 201 From the Subprime Crisis to Government Debt: 1. Subprime Crisis and National Accounts 2. The elementary monetary circuit 3. Generating profit I 4. Generating profit II Wolfgang Eichmann

3 © Federal Statistical Office of Germany, D Mechanics - Presentation in National Accounts Subprime Crisis and National Accounts zurück zur Übersicht

4 © Federal Statistical Office of Germany, D 201 Slide 4 1. Step: Normal mortgage business Mortgage borrower Mortgage bank Liability/Claim Money Collateral

5 © Federal Statistical Office of Germany, D 201 Slide 5 Mortgage bank SPV 4) RMBS 1) Mortgage Bank incorporates Bank incorporates Securisation Rating agency prices 4) Special Purpose Vehicle 1) Residential Mortgage Backed Securities 2. Step: Securisation

6 © Federal Statistical Office of Germany, D 201 Slide 6 SPV 4) CDO 2) Senior Mezzanine Equity Hedge- Funds Rating- agency prices Loan InvestorBanks Institutionel Investors Bank incorporates Bank incorporates Risk transformation Capital contribution 2) Collaterized Debt Obligations 3. Step: Structuring (Risk transformation) 4) Special Purpose Vehicle New development: Re-Remics „Resecurization of Real Estate Mortgage Investment Conduits“

7 © Federal Statistical Office of Germany, D 201 Slide 7 Quelle: „Blei zu Gold“, Institutional Money, Ausgabe 3/2007 zurück zur Übersicht

8 © Federal Statistical Office of Germany, D 201 Slide 8 AAA AA / A BBB AAA AA / A BBB AAA AA / A BBB AAA AA / A BBB The CDO Machine zurück zur Übersicht

9 © Federal Statistical Office of Germany, D 201 Slide 9 AAA AA / A AAA AA / A AAA AA / A AAA AA / A AAA AA / A BBB AAA AA / A BBB The CDO Machine zurück zur Übersicht

10 © Federal Statistical Office of Germany, D 201 Slide 10 AAA AA / A AAA AA / A AAA AA / A AAA AA / A AAA AA / A AAA AA / A AAA AA / A BBB The CDO Machine zurück zur Übersicht

11 © Federal Statistical Office of Germany, D 201 Slide 11 SPV 4) CDO 2) Senior Mezzanine Equity Rating- agency prices Bank incorporates Bank incorporates Risk transformation CDS 5) Insurance AIG 2) Collaterized Debt Obligations 4) Special Purpose Vehicle 5) Credit Default SWAP 3a: Synthetic Securisation by Credit Default SWAPS

12 © Federal Statistical Office of Germany, D 201 Slide 12 SPV 4) Investor ABCP 3) Liquidity convenant Bank incorporates Maturity transformation 3) Asset Backed Commercial Papers 4) Special Purpose Vehicle 4. Step: Maturity transformation

13 © Federal Statistical Office of Germany, D 201 Slide 13 Client Mortgage bank SPV 4) Mortgage RMBS 1) Investor CDO 2) ABCP 3) Mechanics subprime - market - Stylised presentation- Mortgage Senior Mezzanine Equity Hedge- Funds Rating- agency prices Liquidity covenant Capital contribution Loan Investor Banks Institutionel Investors 1) Residential Mortgage Backed Securities 2) Collaterized Debt Obligations 3) Asset Backed Commercial Papers 4) Special Purpose Vehicle Bank incorporates Bank incorporates Bank incorporates Variant: True Sale Securisation Risk- transformation Maturity- transformation Collateral

14 © Federal Statistical Office of Germany, D 201 Slide 14 Gain- and loss account Balance sheet Financial accounts Revaluation Balance sheet Sequence of accounts.. Output (turnover etc. Intermediate consumption Expenditures Of which: holding losses Gain/ loss Proceeds Of which: holding gains Net lending/ borrowing Change in liabilities and net worth Change in assets Liabilities Assets holding gains/ losses Assets new Liabilities new Own funds new National Accounting Business Accounting Balance sheet Liabilities Own funds Assets Balance sheet Assets new Liabilities new Change in net worth total Own funds holding gains/ losses Liabilities Change in net worth due to nominal holding gains/losses Net lending/ borrowing (no gross fixed capital formation) zurück zur Übersicht

15 © Federal Statistical Office of Germany, D 201 The elementary money circuit zurück zur Übersicht

16 © Federal Statistical Office of Germany, D 201 Slide 16 Labour Producing enterprise Banking Systems Households Commercial bill Goods Trading enterprise Commercial bill Goods MoneyCommercial bill Money The elementary money circuit in detail

17 © Federal Statistical Office of Germany, D 201 Slide 17 Labour Producing enterprise Banking Systems Households Commercial bill Goods Trading enterprise Commercial bill Goods MoneyCommercial bill Money The elementary money circuit in detail 1

18 © Federal Statistical Office of Germany, D 201 Slide 18 Labour Producing enterprise Banking Systems Households Commercial bill Goods Trading enterprise Commercial bill Goods MoneyCommercial bill Money The elementary money circuit in detail zurück zur Übersicht

19 © Federal Statistical Office of Germany, D 201 Generating profit I zurück zur Übersicht

20 © Federal Statistical Office of Germany, D 201 Slide 20 How can profit be generated ? Banking System Enterprise Employees Employer 100 Monetary units (MU) Collateral 100 MU 100 (MU) : 1,25 (Price) = 80 Goods Collateral Labour 100 MU 80 Goods Profit = 20 (Goods) x 1,25 (Price) = 25 MU 100 Goods 20 Goods Gross Domestic Product at current prices: 125 MU Compensation of employees: 100 MU Operating Surplus (Profit): 25 MU zurück zur Übersicht

21 © Federal Statistical Office of Germany, D 201 Generating profit II zurück zur Übersicht

22 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 100 RE 100 OF OF = Own Funds RE = Real Estate Balance sheet

23 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 100 RE 100 OF RE = Real Estate OF = Own Funds Investor A Banking System Balance sheet 50 G50 OF G = Gold

24 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 100 RE 100 OF RE = Real Estate OF = Own Funds Investor A Banking System Balance sheet 20 Gold 200 MU 20 G20 OF L = Loan G = Gold MU = Money Units 50 G50 OF

25 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 100 RE 100 OF RE = Real Estate OF = Own Funds Investor A Banking System Balance sheet 20 Gold 200 MU 20 G 180 L 200 MU 20 OF 200 MU L = Loan G = Gold MU = Money Units 180 L 50 G50 OF

26 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 100 RE 100 OF RE = Real Estate OF = Own Funds Investor A Banking System Balance sheet 20 Gold 200 MU 20 G 180 L 200 MU 20 OF 200 MU L = Loan G = Gold MU = Money Units 180 L 200 MU 200 RE 50 G50 OF

27 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 200 MU 100 OF RE = Real Estate OF = Own Funds Investor A Banking System Balance sheet 20 Gold 200 MU 20 G 180 L 200 MU 20 OF 200 RE L = Loan G = Gold MU = Money Units 180 L 200 MU 200 RE +100 Profit = 200 OF 50 G 50 OF

28 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 200 MU 100 OF RE = Real Estate OF = Own Funds Investor A Banking System Balance sheet 20 Gold 200 MU 20 G 180 L 200 MU 20 OF 200 RE L = Loan G = Gold MU = Money Units 180 L 200 MU 200 RE +100 Profit = 200 OF Investor B 40 Gold 400 MU Balance sheet 40 OF 40 G 50 G50 OF

29 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 200 MU 100 OF RE = Real Estate OF = Own Funds Investor A Banking System Balance sheet 20 Gold 200 MU 20 OF 200 RE L = Loan G = Gold MU = Money Units 180 L 200 MU 200 RE +100 Profit = 200 OF Investor B 40 Gold 400 MU Balance sheet 40 OF 40 G Balance sheet 20 G 180 L 200 MU 50 G50 OF

30 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 200 MU 100 OF RE = Real Estate OF = Own Funds Investor A Banking System Balance sheet 20 Gold 200 MU 60 G 540 L 600 MU 20 OF 200 RE L = Loan G = Gold MU = Money Units 180 L 200 MU 200 RE +100 Profit = 200 OF Investor B 40 Gold 400 MU Balance sheet 400 MU 400 RE 400 MU 360 L 40 OF50 G50 OF

31 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 200 MU 100 OF RE = Real Estate OF = Own Funds Investor A Banking System Balance sheet 20 Gold 200 MU 60 G 540 L 600 MU 20 OF 400 MU L = Loan G = Gold MU = Money Units 180 L 200 MU 200 RE +100 Profit = 200 OF Investor B 40 Gold 400 MU Balance sheet 400 MU 400 RE 360 L 40 OF +200 Profit = 220 OF 50 G50 OF

32 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 200 MU 100 OF RE = Real Estate OF = Own Funds Investor A Banking System Balance sheet 20 Gold 200 MU 60 G 540 L 600 MU 20 OF 400 MU L = Loan G = Gold MU = Money Units 180 L 200 MU 200 RE +100 Profit = 200 OF Investor B 40 Gold 400 MU Balance sheet 400 MU 400 RE 360 L 40 OF +200 Profit = 220 OF 50 G50 OF

33 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 200 MU 100 OF RE = Real Estate OF = Own Funds Investor A Banking System Balance sheet 20 Gold 200 MU 40 G 360 L 400 MU 20 OF 200 MU L = Loan G = Gold MU = Money Units 200 MU 200 RE +100 Profit = 200 OF Investor B 40 Gold 400 MU Balance sheet 400 MU 400 RE 360 L 40 OF +200 Profit = 220 OF 20 G 50 G 50 OF

34 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 200 MU 100 OF RE = Real Estate OF = Own Funds Investor A Banking System Balance sheet 20 Gold 200 MU 40 G 360 L 400 MU 20 OF 200 MU L = Loan G = Gold MU = Money Units 200 MU 200 RE +100 Profit = 200 OF Investor B 40 Gold 400 MU Balance sheet 400 MU 400 RE 360 L 40 OF +200 Profit = 220 OF 20 G 80 Gold 800 MU Investor C Balance sheet 80 G80 OF 50 G50 OF

35 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 200 MU 100 OF RE = Real Estate OF = Own Funds Investor A Banking System Balance sheet 20 Gold 200 MU 120 G 1080 L 1200 MU 20 OF 200 MU L = Loan G = Gold MU = Money Units 200 MU 200 RE +100 Profit = 200 OF Investor B 40 Gold 400 MU Balance sheet 400 MU 400 RE 360 L 40 OF +200 Profit = 220 OF 20 G 80 Gold 800 MU Investor C Balance sheet 800 MU80 OF 720 L 800 MU 800 RE 50 G50 OF

36 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 200 MU 100 OF RE = Real Estate OF = Own Funds Investor A Banking System Balance sheet 20 Gold 200 MU 120 G 1080 L 1200 MU 20 OF 200 MU L = Loan G = Gold MU = Money Units 200 MU 200 RE +100 Profit = 200 OF Investor B 40 Gold 400 MU Balance sheet 400 MU 400 RE 800 MU 360 L 40 OF +200 Profit = 220 OF 20 G 80 Gold 800 MU Investor C Balance sheet 800 RE80 OF 720 L 800 MU 800 RE +400 Profit = 440 OF 50 G50 OF

37 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 200 MU 100 OF RE = Real Estate OF = Own Funds Investor A Banking System Balance sheet 20 Gold 200 MU 120 G 1080 L 1200 MU 20 OF 200 MU L = Loan G = Gold MU = Money Units 200 MU 200 RE +100 Profit = 200 OF Investor B 40 Gold 400 MU Balance sheet 400 MU 400 RE 800 MU 360 L 40 OF +200 Profit = 220 OF 20 G 80 Gold 800 MU Investor C Balance sheet 800 RE80 OF 720 L 800 MU 800 RE +400 Profit = 440 OF 50 G50 OF

38 © Federal Statistical Office of Germany, D 201 A real estate bubble Landlord 200 MU 100 OF RE = Real Estate OF = Own Funds Investor A Banking System Balance sheet 20 Gold 200 MU 800 MU 20 OF 200 MU L = Loan G = Gold MU = Money Units 200 MU 200 RE +100 Profit = 200 OF Investor B 40 Gold 400 MU Balance sheet 400 MU 400 RE 40 OF +200 Profit = 220 OF 20 G 80 Gold 800 MU Investor C Balance sheet 800 RE80 OF 720 L 800 MU 800 RE +400 Profit = 440 OF 40 G 400 MU 80 G 720 L … 50 G50 OF

39 © Federal Statistical Office of Germany, D 201 Employees Employer Landlord Investor A Investor B Investor C Banking Sytem Closing Balance Sheet Opening Balance SheetRevaluatio n Closing Balance Sheet 100 RE 100 OF MU 200 OF 20 OF20 G G 200 MU 220 OF 40 G 40 OF G 400 MU 440 OF 80 OF 720 L 800 RE 80 G80 OF 80 G 720 L 800 MU Gross Domestic Product at current prices: 125 MU Compensation of employees: 100 MU Operating Surplus (Profit): 25 MU Landlord Investor A Investor B 50 G50 OF

40 © Federal Statistical Office of Germany, D 201 Employees Employer Landlord Investor A Investor B Investor C Banking Sytem Closing Balance Sheet Opening Balance SheetRevaluatio n Closing Balance Sheet 100 RE 100 OF MU 200 OF 20 OF20 G G 200 MU 220 OF 40 G 40 OF G 400 MU 440 OF 720 L 80 G80 OF 80 G 720 L 800 MU Gross Domestic Product at current prices: 125 MU Compensation of employees: 100 MU Operating Surplus (Profit): 25 MU Landlord Investor A Investor B 50 G50 OF Governmen t 100 RE -700 RE -620 OF

41 © Federal Statistical Office of Germany, D 201 Employees Employer Landlord Investor A Investor B Investor C Banking Sytem Closing Balance Sheet Opening Balance SheetRevaluatio n Closing Balance Sheet 100 RE 100 OF MU 200 OF 20 OF20 G G 200 MU 220 OF 40 G 40 OF G 400 MU 440 OF 80 G80 OF 80 G 100 RE 800 MU Gross Domestic Product at current prices: 125 MU Compensation of employees: 100 MU Operating Surplus (Profit): 25 MU Landlord Investor A Investor B 50 G-570 OF Governmen t -700 RE +/- 0 OF -620 L

42 © Federal Statistical Office of Germany, D 201 Employees Employer Landlord Investor A Investor B Investor C Banking Sytem Closing Balance Sheet Opening Balance SheetRevaluatio n Closing Balance Sheet 100 RE 100 OF MU 200 OF 20 OF20 G G 200 MU 220 OF 40 G 40 OF G 400 MU 440 OF 80 G80 OF 80 G 100 RE 800 MU Gross Domestic Product at current prices: 125 MU Compensation of employees: 100 MU Operating Surplus (Profit): 25 MU Landlord Investor A Investor B 50 G-570 OF Governmen t -700 RE +/- 0 OF -620 L +620 GB GB = Government Bonds

43 © Federal Statistical Office of Germany, D 201 Employees Employer Landlord Investor A Investor B Investor C Banking Sytem Closing Balance Sheet Opening Balance SheetRevaluatio n Closing Balance Sheet 100 RE 100 OF MU 200 OF 20 OF20 G G 220 OF 40 G 40 OF G 440 OF 80 G80 OF 80 G 100 RE 800 MU Gross Domestic Product at current prices: 125 MU Compensation of employees: 100 MU Operating Surplus (Profit): 25 MU Landlord Government 50 G-570 OF Governmen t -700 RE +/- 0 OF -620 L +620 GB 20 GB 200 GB 400 GB +620 MU GB = Government Bonds

44 © Federal Statistical Office of Germany, D 201 Employees Employer Landlord Investor A Investor B Investor C Banking Sytem Closing Balance Sheet Opening Balance SheetRevaluatio n Closing Balance Sheet 100 RE 100 OF MU 200 OF 20 OF20 G G 220 OF 40 G 40 OF G 440 OF 80 G80 OF 80 G 100 RE 180 MU Landlord Gross Domestic Product at current prices: 125 MU Compensation of employees: 100 MU Operating Surplus (Profit): 25 MU 50 G+ 50 OF Governmen t -700 RE +/- 0 OF -620 L 20 GB 200 GB 400 GB GB = Government Bonds -620 GOVERNMENT DEBT +620 GB

45 © Federal Statistical Office of Germany, D 201 „Ferner war es problematisch, dass komplexe Produkte (CDOs mit Exposures auf zweitrangige Kredite) hemmungslos als Sicherheiten in Repogeschäfte eingebracht wurden.“ CDOs were used as collaterals Michael Hüther/ Manfred Jäger-Ambrozewicz: „Von der Finanzkrise zur Regulierungsfalle? Die Rolle der Banken als Intermediär“ Zeitschrift für das gesamte Kreditwesen, Re-Remics enthalten Tranchen, die stärker als CDOs gegen Verluste bei den zugrunde liegenden Krediten schützen. So sollen qualitativ bessere Anleihen von risikoreicheren Papieren getrennt werden. Damit erhöht sich die Chance, dass die besser benoteten Anleihen ihr Spitzenrating behalten, wodurch ihr Wert genügend steigt, um den Gesamtwert des Hypothekenportfolios zu steigern, erläutert Doug Dachille, Vorstandsvorsitzender bei First Principles Capital Management. Each structuring increases the value of the portfolio Wirtschaftsblatt (Österreich), on-line Ausgabe vom

46 © Federal Statistical Office of Germany, D 201 Source: Pro Publica 2011 The Wall Street Money Machine

47 © Federal Statistical Office of Germany, D 201 Source: Pro Publica 2011 Thetica Systems Related story: Banks’ Self-Dealing Super-Charged Financial Crisis zurück zur Übersicht


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