Have you already got your first analysis?

The interest rate indicators for variable-rate financing have generally reached negative levels beginning with March 2015. Unfortunately, this situation, which is generally favorable for municipalities and companies, is clouded by the fact that many of the advantages of low or negative interest rates (hereinafter “negative interest rates”) are not passed on to the municipalities.

First judgments are available …

In this context, some lawsuits have been filed against banks. The first-instance judgments were last ruled on a regular basis in favor of the borrowers. In practice, however, one encounters very different legal starting situations that have to be taken into account in individual cases. It can therefore be assumed that the present judgments are currently unable to provide clarity on the overall legal situation and can not. The affected borrowers will thus ultimately not be spared an individual intervention, so that both the borrowers and the banks continue to seek solutions in the comparison path.

Comparative solutions through the involvement of experts …

We have already accompanied and concluded a large number of individual comparisons by negotiation on negative interest rates. Not least because of the “inclusion of the future value in the damage assessment”, the economic results of these comparisons are far above the “historical losses” (the historical loss is the amount that the bank has been achieving since the negative values ​​of the interest rate indicators overcharged too much).

This is made possible by a mathematically correct valuation of the “interest floor” collected by the bank. This can be used to measure the value of the interest rate floor claimed by the bank. This forward-looking value is surprisingly high on a regular basis. The settlement solutions achieved are thus significantly above the historical loss.

… lead to attractive solutions

In addition to the repayment of overpaid interest and the recognition of the negative indicator for the future interest settlement, there are also solutions in which the terms of existing financing can be significantly reduced in the future and the credit premium for the future is legally secured. This means that the premium can definitely no longer be increased until the end of the repayment term and any “legal backdoors”, for example, in the banks General Terms and Conditions are closed.

Such forward-looking, legally compliant solutions also make sense because it can not be ruled out that the banking sector will ultimately respond to banks’ negative judgments with a market-wide increase in credit spreads. We are already setting this up and negotiating such agreements that will ensure a sustainable result for the customer.

 Free initial analysis …

If the municipalities submit the proof of debt from the clearance of accounts 2018 electronically, we give a first free feedback on possible damages, also for the future. In addition, the proof of lease can also be transmitted. This also applies to the debts of units associated with the community.

The information on whether there are fixed interest rates or whether the interest rate in the Interest Rate column is equal to the markup and the indication of the current markup would be very helpful for the efficient processing of the initial analysis (like handwritten debt check and scan).

As part of this free initial analysis, we inform the communities at short notice whether they are affected by the issue of negative interest rates and how high any possible total damage could be. Afterwards the community representatives can make an informed decision about the further steps as well as a possible assignment of our society.

In addition to the initial analysis, we will gladly send the municipalities an offer including a service catalog as well as a list of which documents are required. When ordering, we are always interested in partnership and sustainable solutions.

Especially with the free initial analysis, the municipalities can significantly reduce their risk in terms of their legal position, the time required for the compilation of documents and any costs.

As a result, we are also available for ongoing care of the communities as part of our financial controlling for municipalities incl. Tendering service.

We are convinced that herewith we can present an attractive package for the communities in Austria.

About The Author

Heinz Hofstaetter
Over 20 years of international experience in senior management positions in the areas of consulting, banking, finance, asset management, valuation and Real Assets.