Illustration: Kevin February
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When in 1948 the US and British occupation authorities in Germany were squabbling over how much to enfeeble the banking sector that had financed the Third Reich, they eventually reached a compromise that endures to this day.
To complement the heavily decentralized commercial and central banking sectors in ‘Bizonia’, as their jointly run territory was informally called, would be an institution that could provide desperately needed longer-term credit to rebuild Germany.
Sir Eric Coates, finance chief of the British military government, proposed a ‘Reconstruction Loan Corporation’ – so named by him to remind the firmly decentralizing Americans he was haggling with of their own government’s nationwide Reconstruction Finance Corporation. It was to be a “capital distribution agency” rather than a bank; and one with a legally restricted borrowing limit.
The KfW Law, passed in November 1948 after much to-ing and fro-ing among the occupiers and with the occupied, stipulated an institution that was not to take deposits or have branches and was to distribute funds via other credit institutions, where they themselves “are not in a position to provide the required means”.
It was supposed to finance itself from the capital markets, which today the bank does with prodigious ease, but had proved unworkable at first. Instead, funds from the European Recovery Programme (ERP) – ‘Marshall Aid’ – were re-deployed. The ERP Special Fund continues as a hypothecated portion of KfW to this day.
Kreditanstalt für Wiederaufbau (credit institute for reconstruction) remains a development bank quite unlike any other – a “bank behind the banks”, as it says. As well as financing the public good at home and abroad, KfW offers German domestic banks sovereign-rated liquidity they can on-lend, usually at their own risk, to Germany’s vaunted small and medium-sized enterprise sector in particular.
On occasion KfW also provides investment banking services to the government. The success of the economy in which this system sits speaks for itself.
Bridge
KfW is a triple A-rated state-guaranteed bank, which in 2018 lent €76 billion, with a balance sheet similar in size to Commerzbank’s. Some 40% of this lending was spent on measures aimed at protecting the environment.
KfW, whose supervisory board is chaired by the finance minister – as it is currently – and the economy minister on an alternate basis, describes itself as a bridge between the public sector and the banking sector, fulfilling policy needs that the market cannot meet economically.
Since the very first discussions about its creation, a debate has taken place about how that should work. The European Commission conducted a review of KfW’s state advantages in 2002, obliging it to spin out its export and project-financing operations into a separately run and regulated commercial entity, KfW Ipex-Bank.
What remains is an institution entitled to finance ‘the public good’, mostly via third parties. Some bankers grumble privately that KfW continues to encroach on areas that could find a market bid, such as infrastructure finance. One told Euromoney that “nobody has the balls” to complain publicly.
But this is Germany – there are others who think KfW should do more.
KfW is more an instrument of structural economic policy; addressing the somewhat longer economic, social needs of society rather than a short-term business cycle institution – Frank Czichowski
The German savings bank network, DSGV, which disburses 40% of all the KfW-refinanced promotional loans, points out that demand for their joint product has shrunk by a quarter between the first half of 2018 and the first half of 2019 (while total lending by savings banks rose 3% overall) and has contracted by half over five years.
Given that liquidity is not the bottleneck these days, the DSGV has suggested to KfW that it should assume more risk in various ways instead, such as: “Higher shares of working capital for startups, or by not charging higher margins than the house banks for their share of financing risk.”
KfW is said to be “somewhat reluctant to enter on that path,” according to close observers.
The private sector has no public complaints. Christian Ossig, chief executive of the German bank association Bankenverband, says that maintaining the equilibrium, where KfW supports rather than competes with the banks, is an “almost daily exercise”. His association is one of the many and varied stakeholders on KfW’s supervisory board.
“KfW”, he says, should always be “the second-best solution”. However: “It is clear that KfW is not at the root of the problems facing German banking.”
Furthermore, KfW is more necessary than ever, he believes, because of the ever-tightening Basel constraints for banks on risk weights and in particular equity financing. Regulation, in other words, is steadily increasing the areas of “market failure” where KfW would need to step in. Both associations are fielding visitors from other countries looking at copying the German structure.
People outside this consensual structure may raise an eyebrow at the wide definition of market failure, which ranges from clearly unavailable to available but a bit more expensive.
Dissenting voices
There are occasionally dissenting public voices. A 2017 article entitled ‘The worrying growth of the KfW-octopus’ in the right-of-centre Die Welt newspaper ripped the institution to shreds on a partly informed neo-liberal basis.
KfW helps bank government policy aims, such as the Energiewende (‘energy transformation’ to renewable sources) and student finance, through a rigorous process of negotiation and oversight in accordance with its founding law. From time to time it is also the government’s investment bank, carrying out Zuweisungsgeschäfte (mandated transactions), albeit without assuming the financial risk, as well as advising on the bankability of its policy initiatives.
While only 6% of balance sheet and not part of day-to-day business, these Zuweisungsgeschäfte are often critical tasks, such as helping privatize Deutsche Telekom and Deutsche Post, and more recently thwarting the Chinese acquisition of an energy company.
KfW was at the government’s side when it helped bail out Greece in 2010 and stepped in with an EC-approved short-term loan, recently recouped in full, to prevent the disorderly bankruptcy of Air Berlin in 2017.
Is there something of a ‘KfW reflex’ in the German government? Where in other countries a finance ministry in a bind might turn to its domestic bulge bracket, the best first answer in Germany seems to be the government’s own bank.
In January, the economy minister, Peter Altmaier, suggested to Manager Magazin that KfW might house a sovereign wealth fund “to protect the technical know-how of companies”.
The suggestion has since vanished without trace and KfW firmly resists comment on it.
When German financiers are challenged by outsiders on their fragmented and over-supplied banking system they often wryly draw attention to the economic, and now social and political, carnage left behind by the vigorous private-sector banks in Anglo-Saxon countries. Or they point to the Mittelstand, which exports over €200 billion-worth of goods and services a year.
KfW was devised to work around the (then involuntary) fragmentation of German banks. That it would survive as a key channel for capital transmission was not a given. Many of its key personnel drifted away in the 1950s, considering its reconstruction task to be drawing to a close.
That it persisted is in a no small part due to Hermann Josef Abs, the German financier famous for arduously reconstituting Deutsche Bank through the 1950s and 1960s. Abs was KfW’s deputy chairman from its inception until 1959 and then chairman until 1973. He remained honorary chairman until his death in 1994.
As former KfW historian Heinrich Harries says: “His outstanding experience in the banking industry, his ability to influence politicians and his leadership qualities at a key interface between politics and economics” enabled him to navigate the institution’s early years adroitly and to “prevent KfW from encroaching on the territory of the still dismembered big commercial banks”.
Fresh in his mind as a Deutsche board director during the Second World War was the unwelcome competition from the Reichs-Kredit-Gesellschaft. Until his death, Abs “always endeavoured to exert his only slowly waning influence” on the institution he helped form.
Hermann Josef Abs, (fourth from left) signing the agreement on the regulation of German external debt. The Deutsche Bank rebuilder was also a key player in shaping KfW
Development banking, like the sustainability it is now KfW’s job to promote, is difficult to segment robustly in real terms. A recent addition to the KfW board, in a position to make comparisons, told Euromoney with exasperation: “Development banking is a great deal more complicated than central banking.”
If KfW was not there, would German banks be stronger? Could they fulfil the sustainability agenda or supply capital to the Mittelstand in the same way without it? Who or what would fill the gap? KfW continues to live in symbiosis with the (much improved) fragmentation. It has changed several times to fill the pressing economic and social demands of the day.
Euromoney explores this institution and its role in Germany with Frank Czichowski, KfW’s treasurer. A 30-year veteran of the bank who began as a project manager in KfW’s Asia department, he is responsible for liquidity management, funding, asset liability management, portfolio management and securitization. Well known in capital markets as the de facto public face of the institution, he also oversees its privatization activities.
If you ever wonder how such a successful economy manages with only one – rather beleaguered – global systemically important bank, this unusual institution is a big part of the explanation.
John Orchard, Euromoney: KfW is 70 years old – a few months older even than the Federal Republic. What is its greatest achievement in that time?
Frank Czichowski (FC): The greatest overall I would say is that KfW has changed itself. It was from the very start a public institution with a banking function, and part of its function is a bridge between the government, the public and industry. Increasingly, over the years, it’s become a bridge between the public sector and the banking sector, assisting through the banking sector.
It was a key institution to rebuilding Germany in the 1950s. It helped German industry. It helped Germany to develop into what it is today, an export-led economy, very much integrated into the world.
Also think about German reunification. KfW helped to build houses for the soldiers in the former Soviet Europe, so they can go back from eastern Germany, and so on.
This kind of constant adaption to the burning issues of society is what I think is its greatest achievement.
Frank Czichowski
Is KfW used as a countercyclical tool?
FC I wouldn’t call it that. In difficult years we increased programmes, but I think it’s more an instrument of structural economic policy; addressing the somewhat longer economic, social needs of society rather than a short-term business cycle institution.
Is there an opportunity that KfW has missed in the last 70 years, or something you regret that perhaps it could have done better?
FC I can’t think of any.
One reason that KfW was founded was that banking and credit markets were too fragmented after the war to match Germany’s economic needs and challenges. Do you think that remains true?
FC The law creating KfW was passed in October 1948, and it started work in January 1949. It had, obviously, hardly any funds available. Think about Germany in those days. There was no capital whatsoever. And then, in 1949 – we are still proud of this – we issued the first ever bonds in the Federal Republic of Germany.
However the deal was an absolute flop. And for about 10 years the capital markets were closed. Where could we get money for operations? It was clear that this had to come from outside sources, so it was a great idea to have these Marshall Plan funds recycled and lent on again and used as a basis for KfW’s promotional work.
The needs at the time were basic: people had no housing, no heating, infrastructure was a shambles. Everything was destroyed. So we engaged in rebuilding the steel industry, the coal industry, power and, also relatively early, with housing projects.
Obviously our needs today are different. What hasn’t changed is that we look at the needs of society, which are currently not covered to the extent necessary by the private-sector banks.
KfW is governed by its own federal law
And there are still areas where the private-sector banks can’t meet demand?
FC To take one aspect: Germany has a banking sector with a lot of small banks, in particular in savings and loans, the cooperative sector. The funding base of these banks is normally a little bit more short-term, so we can provide long-term funding for longer-term investment products. We complement rather than compete.
Our role evolves. We started student financing in Germany. And, although there were small single-student financing programmes by individual banks, there was not a broad-based offer to students in general.
And since investments in education have a very high return on investment, KfW said we need to harvest this social return on investment and offer a broad-based programme. Nobody else did it – that doesn’t mean that nobody does some student financing – but nobody else did it to that extent.
This is actually one of the very few programmes which we do directly with the end customer. But I can’t see anybody from the banking sector who complains about this.
So you fill necessary gaps that the commercial sector can’t fill. Will that situation eventually improve and KfW need to do less again?
FC It is true that KfW appears to have grown, but it’s only relative, not absolute. We have now a balance sheet around €500 billion for a number of years. And, the fact that KfW today is the third-largest bank in Germany has not so much to do with its own growth, which is actually quite stable, but with other banks getting smaller.
We’re asked by the government to provide certain subsidies for loans if the investment is not taking place to the extent that is publicly desirable.
A good example is energy efficiency or renewable energy. Climate change is a big issue. We want to do more to save energy and so we provide subsidized loans in order to incentivize people, house owners. And, I think this is basically by design a function that a private bank cannot and should not do. It has its own targets, and this is a task that will remain with KfW.
KfW spends a lot of its effort supporting small and medium-sized enterprise credit that the commercial sector feels unable to underwrite on its own. Do you think that that is, in part, a function of the risk aversion that has come around in the wake of the crisis?
FC I think you are talking about something that happened immediately after. At the height of the crisis all banks were short of capital, uncertainty was very big. So KfW, with the help of the German government, which provided guarantees at the time, embarked on a loan programme for industry, because industry could not get credit in the commercial banking sector.
That was not a situation that went on for long. I think credit is available. The ECB has provided a lot of liquidity to the banking sector. Banks have repaired their balance sheets.
We have returned to our normal programmes for quite some years now, providing through the banking sector long-term credit where the banks maybe feel that can’t provide the maturities or, as I said, to environmental protection.
I don’t see any programmes that we run today that I would attribute to the GFC [global financial crisis]. That was basically for one to two years after the financial crisis, but today we are absolutely back to normal, which doesn’t mean that the banking sector still has its issues.
I think the major point for banks is more the regulation that came after the financial crisis that banks are still struggling with, but it’s not so much that they don’t want to take the credit risk anymore.
Even though you work carefully with the private sector, do you think that the presence of KfW and the competence of KfW is a disincentive for the government in Germany to push for a restructuring of the banking sector, because it knows you’re there?
FC The simple answer is no. I don’t think that this is the case. First of all, we are not providing the normal services of banks. We don’t provide current accounts or retail loans and all this stuff.
So, the public has to rely on the banks, and we really supplement the banks, we cooperate with the banks. Historically, Germany has never been very active in structural banking policy, and I don’t think that this is particularly tied to KfW.
So you are not crowding out commercial providers of credit in any sector, despite what some critics say?
FC About 15 years ago the European Commission had a deep look into the structure of KfW and found some areas where we did a little bit too much in the commercial banking space. We settled this through the creation of a subsidiary commercial bank, KfW Ipex.
You can always debate these issues. I don’t personally see them. You have to see the banks are sitting, actually, on our supervisory board – all three sectors – so they are taking, together with the other members also, decisions with regards to KfW’s policies.
State involvement in lending often leads to non-performing loans, through policy needs subordinating economic rationale. How does KfW avoid this?
FC The management boards of KfW, Ipex and DEG take independent risk decisions and they bear responsibility for the risks taken. The governance of KfW Bankengruppe prevents third parties, including the government, from determining risk-taking by the bank. And in almost all of our domestic activities, KfW acts as a ‘bank behind the banks’.
Only to a limited extent are we allowed to grant financings directly to the ultimate borrower, such as financing for municipalities. By lending to commercial banks, we insulate ourselves from credit exposure to the ultimate borrower and, more important, gain the benefit of the commercial banks’ knowledge of their customers. This clear principle, which we have followed since our inauguration more than 70 years ago, safeguards the economic rationale of our domestic lending.
KfW has been a very useful tool over the years for special situations such as helping with the privatization of Deutsche Telekom, Deutsche Post and bailing out IKB. You recently had money back from Air Berlin that you helped bail out.
These are all understandable government initiatives but seem to go beyond the remit of a traditional development bank. What is the rationale for the government to use KfW for those kinds of actions?
FC I think there are important differences in the cases that you mentioned. IKB was a very special case. You know that KfW had decided – and one can question the wisdom of that decision but I won’t comment on that further – to purchase 33% of IKB.
The argument at the time was that IKB was in a booming financial sector, was a very highly rated bank, was very much focused on small and medium-sized enterprises and there was a danger that was perceived that IKB would be taken over by another bank. Two major shareholders wanted to get rid of their shares, and so KfW purchased them with the argument that we helped to safeguard the financing infrastructure for small and medium-sized enterprises.
When IKB then defaulted and came into difficulties because of their activities in the securitization and conduit areas, we had to take a decision. We had loans outstanding to IKB. Our actions were to safeguard our own interest.
It’s fair enough to say we didn’t expect this to become that difficult, but that was the original logic. So there was not a request from the government. You can’t blame the government on that one.
The others?
FC On the other cases, we are the bank of the Federal Republic and that’s that. And, so the Federal Republic can entrust us with business that it wants to pursue, provided that it takes the risk and provided that it is in conformity with, for instance, competition law and so on. So, the logic in Deutsche Telekom, Deutsche Post, Lufthansa was that we have the capital market expertise.
The government, in certain cases, needed the funding, but they always took over the complete risk. We had never any market risk and we were basically, in this, an agent for the government. It is always clear that the government is in the driving seat and the risk owner of the structure. And, no other bank could do that because no other bank has this access to capital markets.
So we lent to Greece as part of the consortium in the first loan, and that is again as our function of the bank of the Federal Republic, but the Federal Republic, again there, took over the guarantee. We were not the principal.
This principle is crucial to KfW’s longevity. There’s not somebody coming and saying: ‘I want you to take this risk, but I’m not going to give you cover for that.’
I can’t think of an institution like that anywhere else in the developed world.
FC It’s all a little bit different. We have OeKB in Austria, which actually does a number of even more public-sector functions. It’s a very different structure but the same idea.
We have ICO in Spain. We have EIB on the European level. I think it’s comparable. Also the World Bank. These are actually institutions that are comparable in this long-term policy-based approach, with an independent assessment of the risks that they take.
But they don’t have this special situations mandate.
FC I think one has to see that these Zuweisungsgeschäfte [business mandated by the government, foreseen in the original law founding KfW] are not a regular feature of our business. These are exceptional cases and a relatively minor part of our activities.
Your supervisory board is made up of a series of ministries. Not just finance and the economy, but the foreign ministry, food, transport and others.
FC Yes. Sometimes we say we have everybody except for the churches.
How are the relative interests of those ministries balanced and then represented in your credit activities?
FC This is an elaborate, intensive programme. Take, for instance, development aid, which is run by the ministry of economic cooperation and development, BMZ. They administer and manage the mandate that we have in the area of financial cooperation. They negotiate with the countries. They do intergovernmental agreements on which basis KfW operates in these countries. So, that would be in this field.
Export finance is managed in KfW Ipex; that’s more privately organized, although we have representatives from ministries also on the Ipex board.
There is a clear focus on German and European exports, but it always has to have an economic advantage. The ministries can express political wishes, but at the end of the day, the supervisory board, here in the case of KfW, and at Ipex and the management board, have to look solely at whether it’s economically feasible or not.
Do you worry that one day, a politician might be in a position of power to question the need for KfW?
FC There is a broad consensus. I think our biggest crisis was the payment to Lehman Brothers [the day the latter went bust in 2008] and there was some criticism of KfW, but in terms of its economic function, I have not seen a single party or minister, really putting KfW into question. There’s nobody who has said we need to abolish KfW.
We are a public institution. So, therefore, we have to be answerable to parliament. Our job is to focus on credit risk, market risk, board contracts, god knows what, but there is no fundamental question that is asked.
We have, with the ministries, once in a while, discussions whether a particular programme is still necessary and we, from time to time, stop programmes because we think they are no longer necessary or maybe they have achieved the aim that we originally intended. So, these kinds of discussions are taking place, stopping one programme, opening a new programme, but the fundamental question is not.
When the government seeks KfW’s advice, what is it about?
FC There are periods when we are asked non-stop and then there are periods when we are asked less. But, this is something that is always there. This is a two-way dialogue. The government relies a bit on the fact that we have, on certain technical matters in the financial sector, a better view of how it works in practice. We are not an adviser, we are not a consultant boutique for all kinds of purposes. The relationship is about how the government sets certain priorities and then we design products, programmes, loan programmes, or modify around these priorities.
It also goes the other way round. If we anticipate the government achieving certain aims, if we know the government has certain priorities, we can go to the government and say we have an idea that this is the way that we could structure an economic impact, where we have programmes with an economic impact.
Do people at KfW think they work for the government?
FC No.
How does it feel, then?
FC It’s interesting. I see a lot of people who either have started at KfW, or at interview who are just about to enter. And I think people that work at KfW normally have a kind of finance background in development aid, a development aid background, but what their interest is – and that is with the majority – is to do banking with a purpose.
They appreciate the public mission of KfW. They think finance is interesting, but they don’t want to work in a bank where you deal with money purely, if I may say this, for the sake of money, but they think that the relation to the activities that they do has some purpose.
When I started here, I shared an office with a colleague. We were both responsible for projects in Pakistan at the time. His daughter said: ‘Daddy brings power and water to Pakistan’ and I found it interesting. But, this is how I think there is more this purpose of what you do, rather than the pure banking.
Definitely people regard themselves not as public servants, nor are they purebred bankers. We don’t pay like banks do. You don’t need to break out in tears. We earn our income, the board members get around €600,000, and, I might add, did so at the height of the finance boom, and everybody else here earns significantly below this.
ESG [environmental, social and governance criteria] is very popular in the commercial banks currently. How do you regard their involvement in these themes?
FC It’s very, very positive. We are not there yet. We still have some way to cover because we have some really, really big challenges ahead of us. The biggest one, I would say, is climate change, and so therefore we need to talk more and conceptualize. And we can contribute something in the financial sector, and they are very positive developments.
Promoting the environment. Since 2002, the solar clock in KfW’s headquarters shows the building’s CO2 savings
Do you regard the commercial banks’ engagement in ESG as authentic?
FC Some are more authentic than others. I wouldn’t generalize here, but I see very positive examples and I see examples from my perspective where I would say a little bit more would be helpful.
As the government bank of a country whose economy is distinctly export-driven, do you worry about the potential decline of globalization?
FC It’s not our job to have a view on this. I think in some quarters there was more optimism on the openness of other economies, and now you see that not all economies are open, and so you think about what to do in order to protect yourself.
In July 2018, KfW was used by the government to protect the energy company 50Hertz from being acquired by a Chinese state-backed company called SGCC. Do you expect KfW to be used for transactions like that more frequently in future, given the direction of protectionism at the moment?
FC I can’t see it. That was an individual case. I can’t exclude it, but I don’t see currently that this is standing government policy, which is repeated every year or so. That was a very exceptional case.
What was exceptional about it?
FC As you say, it was the interest of the government to protect the European shareholder structure and to safeguard a certain shareholder structure, and we have not had such a case before. I think it was also in a sector which is very heavily discussed in Germany – the energy sector.
You know that after the Fukushima nuclear disaster in 2011 we had the so-called energy turnaround, Energiewende. And the Energiewende has two major focuses: one is energy production and the movement to renewable energy. And the wind energy production on land has somehow reached its limits, so we have gone offshore.
There are more wind parks, but that raises the whole question of energy distribution, the energy networks; and that was 50Hertz.
And so politically it’s a high priority area, the whole energy sector, and probably rightly so for an industrialized country.
So, I don’t think that this will repeat itself any time soon.
When the European Commission was looking at KfW in 2002, embedded in its thinking was the idea that markets have the answers for most things. Is that idea out of date?
FC Most people don’t realize how regulated capital markets were at one point. Now, we are used to doing whatever we like, say, issuing bonds, but you actually had to queue and get approval for a bond issue. It is not something that has been there all the time.
The basic principle of the European Commission isn’t that there should be no government involvement in anything. The European Community has its own policy bank and they run the Juncker Plan, for example.
They also have instruments in public involvement. How I see this is that the European Union wants to make sure that there is a level playing field, so that there is no one government trying to give an advantage to its own industries or own sectors. This is more the focus and therefore I would question your assumption that the policy of the European Union is that it is all about free markets.
Having said that, the idea which we had at one point – that the private sector will deal with everything – has taken some severe beatings in the great financial crisis. So, that people think a little bit differently about this is absolutely a fair point.
If KfW didn’t exist, how would the German economy be different?
FC This is very hypothetical. I think we would miss an institution that initiates and helps to manage change and, as a consequence, I think the Germany economy would be not as well off as it is today.
Do you think that other institutions would have organically filled the gap if you weren’t there?
FC It’s interesting. No one has done any real study. If you think about the structure we have had in Germany, KfW is not the only promotional bank. On the federal level, we had DtA which was taken over by KfW. We still have Rentenbank. We have for international, DEG. Then we have on the sub-sovereign, Länder level, NRW.Bank and the like.
I think probably somebody else would have taken all of this. The principal idea of German banking is that there was always a public element, such as the Sparkassen. And, so the idea that, in the finance sector the public sector has to play its role is ingrained into the Federal Republic of Germany.
The structure of the German banking market does not rely on the existence of KfW. We have, through our management or priorities, evolved into the biggest of all the German development banks. Maybe somebody else would have, but I don’t think the structure necessarily relies on us.
Do you think KfW will be here in 70 years’ time?
FC Absolutely.
It won’t have become part of the EIB?
FC Absolutely not.
What is the thing that you’ve most enjoyed in your time there?
FC It is this – and I think I’m not too far away from most of my colleagues. It is this interchange between politics and financial sector, which I find extremely interesting and helps to do sensible things.
Would you recommend other countries designed their own KfWs?
FC It’s not for me to advise other governments or other countries what they should do. I would just say we see a lot of interest from all parts of the world. We get a lot of requests from people that want to come here, want to look at our structure. The design of public institutions is a decision of each individual country. Each has to find its own way to execute economic policy, so I’m not there to advise any of them.
It can help to execute government policies in an efficient way if it is rightly structured. I think what we have demonstrated here is that it can work, it can help; but every country has its own history, its own priorities, has to take its own decision.
As a general statement, there are big issues that we have on the agenda. We talked about climate change. There are other social issues. I’m not so sure that all of that can be financed out of the private sector, so we probably need some public involvement.
In one sentence, how would you describe the essence of what KfW does?
FC To help to assist the German economy and the economies of developing countries to achieve their economic and social goals.
A changing mandate?
For more than 20 years KfW has undertaken special ‘mandated transactions’, or ‘Zuweisungsgeschäfte’, on behalf of the German government. Is the frequency of such interventions increasing?
2018
Acquisition of shareholdings in Eurogrid/50HertzKfW acquires a 20% shareholding in Eurogrid International CVBA/SCRL to prevent Chinese acquisition. Eurogrid International CVBA/SCRL indirectly holds all shares in the German transmission systems operator 50Hertz Transmission GmbH.
2017
Loan to Air BerlinKfW arranges €150 million loan facility to Air Berlin to mitigate disorderly bankruptcy. Subsequently repaid.
2010
Loan facility to GreeceKfW participates in the EU-wide bailout of Greece. As of December 31, 2018, the total amount outstanding is €15.2 billion. Guaranteed by the Federal Republic.
2007 & 2013
Acquisition of shareholdings in Airbus (formerly EADS)In 2007, KfW was part of a consortium acquiring 7.5% of EADS from DaimlerChrysler group. Economic interest held through SPV ‘Dedalus’. Government regards EADS ownership structure ‘as a matter of strategic interest’. In 2013, KfW participated in a new ownership vehicle, GZBV, through which it now owns 9.31% of Airbus (EADS renamed), after discussions with France, Spain and EADS allowing German government ownership of up to 12% directly or indirectly.
1997 to present day
Shares in Deutsche Telekom & Deutsche PostSince 1997, KfW has acquired and sold shares of Deutsche Telekom and Deutsche Post via IPOs, private placements, block trades, exchangeable bonds and other transactions as part of the privatization process for the government, which retains the market risk.
The agreement gives KfW a percentage of any market value increase in the shares acquired and sold, plus a service fee. KfW now has a 17.4% stake in Deutsche Telekom and 20.5% in Deutsche Post, both expected to reduce in the medium term. As per the agreement, the holdings are financially reported as ‘loans and advances to customers’.
