| Bernd Knobloch | ||||||
These are hard times for Germany’s mortgage banks. After having been spoilt by exorbitant growth rates in the 1990s, they now have to face a significant slowdown in new business.
New loans to the public sector declined by 24% in 2000, reflecting low demand as a result of shrinking state budget deficits, as well as borrowers’ aspirations to go straight to the capital markets to raise funds. Even worse, a flattening yield curve has shattered the excellent earnings that were easily made by mismatching collateral assets and Pfandbrief liabilities before interest rates started to rise in 1999.
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