Since October 2010, FMS-WM has reduced the portfolio taken over from the HRE Group with a nominal value of EUR 175.7 billion to EUR 76.8 billion as at the end of 2017. The remaining portfolio of EUR 76.8 billion contains the exposures of EUR 6.1 billion acquired in the context of the DEPFA Group’s accelerated wind-up strategy. Without these, the remaining portfolio would have fallen to around EUR 70 billion as at the end of 2017.
As in the fourth quarter of 2016, DEPFA Group debt instruments (DEPFA liabilities) purchased by FMS-WM on the market were sold to the DEPFA Group and then extinguished in November 2017. In return, FMS-WM acquired assets held by the DEPFA Group in the cover pool. After exposures with a nominal volume of EUR 5.2 billion were purchased from the DEPFA Group back in 2016, FMS-WM bought a further EUR 2.0 billion of assets in 2017. These measures serve the DEPFA Group’s accelerated wind-up and have a positive impact on the DEPFA Group’s wind-up result due in particular to the more favourable funding options available through FMS-WM.
The number of counterparties in the portfolio as a whole showed a further decline of 7.2% in 2017 to 915. Originally, there were 3,191 counterparties in the portfolio. The number of remaining exposures has dropped by almost 73% to 1,923 since 1 October 2010.
The individual exposures are located in 48 countries, with significant concentrations in Italy, the United Kingdom and the USA. These three countries now make up around 71% of the total portfolio.
The high proportion of illiquid exposures with very long maturities continues to pose a particular challenge in winding up the portfolio in a way that maximises its value. In the short or medium term, these exposures can only be wound up at a relatively large loss. The bonds and securities are usually part of an asset swap package in which they are attached to derivatives that are used to hedge interest rate or inflation risk. If exposures were sold prematurely, those derivatives would have to be closed ahead of the maturity date and would still cause heavy losses despite the improvement in market conditions. This is illustrated by the still very high negative balance of hidden losses and hidden reserves for securities and derivatives of EUR 16.8 billion in the portfolio.