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The Effect of the Financial Crisis on Corporate – Bank Relationships

by Dr Jochen Stich, Group Treasurer, Porsche Holding GmbH

The financial crisis has at least taught people in finance, besides a couple of other very valuable aspects, three major lessons:

  • Nothing is ‘too big to fail‘
  • Even banks can go bankrupt
  • The relationship between corporate and bank has very well-defined limits

But previous experience should have taught us something including the failures in the early 70s of Herstatt in Germany and Barings in 1995 in the UK. At the beginning of 1990 Ulrich Cartellieri of Deutsche Bank stated that “the banks are the steel industry of the 1990s“, and in July 2007 Jochen Sanio, president of the German financial supervisory board (BaFin) said that we were threatened with the worst banking crisis since 1931. From all this we should have deduced that in an environment where the desire for ‘pick-up yield‘ was all that mattered, and the pure availablity of liquidity was never questioned, something was definitely amiss.

When we at Porsche Holding GmbH, Salzburg/Austria, placed the last ABS transaction in 2006, at 5 bps (!) above EURIBOR, we wondered why people should read through all the documentation needed in an ABS transaction to identify what risk you are paid for as an investor and then to take on that risk at such a price.

But it was just that experience which made us rethink our banking relations.