FMS Wertmanagement was founded in 2010 as the Federal government’s winding-up institution for the nationalised Hypo Real Estate Holding AG (HRE Group) with the aim of taking over risk positions and non-strategic operations from the HRE Group and unwinding them. As a financially independent entity under public law, FMS Wertmanagement defines the best possible wind-up strategies in each case and implements them based on the following maxim: seize opportunities for generating income and minimise losses.
Effective 1 October 2010, FMS Wertmanagement took over from both the HRE Group and its national and international subsidiaries and special purpose entities risk positions and non-strategic operations with a nominal value of EUR 175.7 billion as well as short-term funding sources in the corresponding amount and related derivatives for hedging purposes.
FMS Wertmanagement is unwinding the transferred portfolio pursuant to sound business principles in ways that maximise its value. The wind-up plan originally prepared by the HRE Group was designed for a term of ten years. Any portion of the portfolio not wound up by the end of the ten-year period was to be sold at its book value. FMS Wertmanagement has revised the wind-up plan based on the insights it has gained and, in particular, has adjusted it to the long average maturities of the portfolio’s components. The given time horizon allows FMS Wertmanagement to unwind the portfolio whenever it is financially advantageous and thus to achieve the best possible outcome in the interest of the German taxpayer.
Article 2 (1) of the Charter of FMS Wertmanagement: “Functions, transactions, applicability of the German Banking Act”
“The winding-up institution shall take over the risk positions and non-strategic operations ('Transferred Assets') of Hypo Real Estate Holding AG and its direct and indirect German and foreign subsidiaries and special purpose entities (collectively referred to as the 'HRE Group') and both realise and unwind them in a manner aimed at maximising the assets' value for the purpose of stabilising the HRE Group and the financial market.“
FMS Wertmanagement refinances itself on both the money and the capital markets. On the money markets, it uses repos besides short-term, unsecured borrowings. FMS Wertmanagement also issues bonds and promissory notes with medium and long-term maturities.
FMS Wertmanagement is supervised by the Federal Agency for Financial Market Stabilisation (FMSA), which has extensive information, controlling, audit and instruction rights. Among others, FMSA approves revisions of its wind-up plan and is integrated into decisions of strategic importance. Whilst FMSA serves as the legal regulator, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht - BaFin) plays the role of the financial regulator.
The Financial Market Stabilisation Fund (FMS or SoFFin) is obligated without limitation to provide additional funds under Section 8a of the German Law for Establishing a Financial Market Stabilisation Fund (Gesetz zur Errichtung eines Finanzmarktstabilisierungsfonds - FMStFG) for losses incurred in winding up the portfolio.
This is also reflected in Article 7 (1) of the Charter of FMS Wertmanagement: “SoFFin shall be obligated vis-à-vis the winding-up institution and FMSA […] to compensate all losses until the winding-up institution is discontinued.”
This ensures that FMS Wertmanagement will at all times be able to pay its liabilities in full and timely fashion.