When the transfer took place on 1 October 2010, the Public Sector segment was the largest segment of the portfolio, making up 49.3% with a nominal value of EUR 86.6 billion. By the end of 2015, it had been reduced by 45% to a nominal value of EUR 47.6 billion.

The borrowers and issuers of the securities are state and regional governments, municipalities, public law entities and semi-public companies. European Union member states account for the majority of the portfolio; with a total share of 46%, Italy is by far the largest debtor among them. The sub-portfolio has a large percentage of exposures with very long remaining maturities. Approximately 58% of the nominal value will not mature until after 2030, for example.

Accounting for receivables with a nominal value of EUR 23.9 billion, Italy represents the largest concentration risk in the entire portfolio for FMS-WM. Although many of these exposures are very illiquid and could only be sold early at a substantial loss because of the low margins despite the extremely long maturities, the portfolio managers take every opportunity to wind them up in a way that maximizes value or to reduce risks. Approximately EUR 470 million of securities issued by Italian debtors were sold in 2015, for instance.

In doing so, FMS-WM used a buyback programme operated by the Italian finance ministry for regional bonds to sell securities amounting to EUR 237 million. The extremely illiquid and long-dated securities were sold at a price well above Italian government bonds. A further nominal amount of EUR 100 million was swapped for the same type of risk. This transaction improves interest income and reduces residual risks.

 

20160425 Übersicht FMS WM Public Sector Segment EN