In fiscal year 2017, the Public Sector portfolio was reduced from EUR 44.3 billion at the beginning of the year to EUR 40.6 billion at yearend. In addition to scheduled repayments, the reduction in the portfolio is also due to active sales where the portfolio managers were able to take advantage of favourable market conditions. This applies especially to individual exposures in Italy, Poland, Austria and Japan. The three largest scheduled repayments related to exposures in Hungary, Spain and South Korea. The Public Sector segment now accounts for almost 53% of the overall portfolio’s nominal volume. When the portfolio was transferred from the HRE Group to FMS-WM on 1 October 2010, the Public Sector segment was the largest in the portfolio, making up around 49% with a nominal value of EUR 86.6 billion.
The borrowers and issuers of securities are state and regional governments, municipalities, public law entities and semi-public companies. Receivables from European Union member states account for the majority of the portfolio, with a large percentage of this comprising exposures with very long remaining maturities. Approximately 65% of the entire Public Sector portfolio will not mature until after 2030.
The options for speeding up the unwinding of segment exposures are limited. The loans and securities were all extended or issued before the financial crisis broke out, at a time when the market accepted much lower margins. Therefore, in the current market environment, with potential buyers expecting higher returns, they could only be sold at a heavy loss. In addition, many of the exposures held are very illiquid, which would lead to further price discounts were they to be sold early.