Contents
The daily newspaper “Bild” recently published a list of Signa Group’s creditors. Various Swiss financial institutions can be found on it, including small cantonal banks. Although the loans are supposed to be secured with properties “in prime locations,” there is a risk of long, costly legal proceedings.
It is well known that the interest rate environment has been poor over the last decade. This particularly affected the cantonal banks in their core business. In other words, the transaction in which they accept money from people in the canton and lend it out at higher interest rates, for example as a mortgage. It is considered a safe transaction because the cantonal banks can easily assess the risks in the cantonal area due to the geographical proximity and the real estate, the properties financed by the mortgages, also serve as security for them.
If your core business brings in less and less money, you look for another, better one. Even outside the core area. This is probably what happened with the cantonal banks when they distributed loans to René Benko and his Signa Group. The lending business is very lucrative because it generates high interest profits, but it is also risky because of the large sums and the resulting cluster risk.
Failure should be manageable
In addition, risks for loans to foreign companies or individuals are more difficult to estimate and require particular caution. For business law professor Peter V. Kunz, one thing is clear: most cantonal banks lack the expertise when it comes to foreign constructs and debtors. “We’ve leaned a little too far out of the window here.” The result: The Signa Group, teetering on the financial brink, owes millions to various cantonal banks.
For example the Obwalden Cantonal Bank. Benko’s group has outstanding debts of around 25 million euros. Not a small amount for a small, cantonal bank, but with equity capital of over 500 million, it would probably be manageable even in the event of a total failure. Ivo Herzog, President of the Supervisory Commission of the Obwaldner Kantonalbank, also points out: “The claim is secured by a large property in Zurich.”
This probably means the globe at Löwenplatz. According to estimates, the value of the property is more than half a billion francs. So it’s not a problem? Not necessarily, says Kunz, because it is often only clear after long, expensive legal disputes whether the security is sufficient. Even if the claim were covered, the bank would incur enormous expenses and its reputation would also be damaged.
Small bank finances real estate empire
In Obwalden, Ivo Herzog currently sees no need to change the strategy. “It doesn’t look like the strategy was completely wrong.” For him, it is not unusual that the Obwaldner Kantonalbank also grants loans outside of the canton. However, these only made up a small part, as 93 percent of all loans were granted in the region.
Legend: René Benko: His real estate empire owes the Obwaldner Kantonalbank around 25 million euros. Keystone/APA/HELMUT FOHRINGER
In fact, it is not unusual for cantonal banks to also grant loans outside of the canton. Particularly since large cantonal projects can sometimes only be financed by several cantonal banks together in a consortium, so that no excessive risk of default arises. Nevertheless, it is unusual for a small cantonal bank with a state guarantee to be at risk from an Austrian real estate empire. In addition to Obwaldner, the Aargauer, Valais and Zürcher Kantonalbank have also granted loans to the Signa Group.
One positive thing for the cantonal banks is that things are likely to improve again in their core business due to the current interest rate situation. And so, in order to make profits, they have to take less risk again.
2024-01-19 19:16:19
#Loans #worth #millions #cantonal #banks #looked #money #ended #René #Benko
