Wednesday, 6 July 2011

Finanzplatz Munchen Initiative - Solvency II and Basel III impacts for corporate Germany

Whilst I try to restrict my German exposure to Rammstein and beer (ideally both!), this particular piece of research from the Munich Financial Centre Initiative was too substantial to ignore, covering the likely impact of Solvency II (and Basel to a lesser extent) on corporate financing across Germany (summary here).

It loses a little subtlety in translation, but the research certainly helps draw attention to the lobbying direction of the German contingent in CEA, focusing on the detailed investment strategies of national insurers (favouring the routing of institutional investment via banks, being big in the world of hybrids etc). It draws particular attention to the intra-national differences between Germany versus the French and British on these matters. It also suggests that the threats of Solvency II and Basel III twinned have had a substantial downward pressure on insurer stock prices.

It ends by strongly suggesting the EU trigger a QIS to consider the reciprocal effects of the two pieces of legislation, and push those results to the relevant bodies (EIOPA in our case).

Ultimately, my read would be that of all the transitionals currently on the table, the classification and eligibility of own funds would be highest on their list, and if they could squeeze in any calibration-related changes on long-dated debt all the better

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