An additional set of tasks in 2012
The total volume of the so-called refill was EUR 124.4 billion. In 2012 the EAA, which by then had nearly reduced by half its original portfolio, received additional responsibilities: more loans, industrial holdings and financings, amounting to EUR 72.3 billion in total. In addition, it assumed a trading portfolio of derivative contracts with a book value of EUR 52.1 billion. Expertise in new areas of responsibility was therefore needed.
A one-trillion-euro task: winding up derivatives efficiently
Derivative financial products are sometimes based on complex agreements that are generally linked to an underlying transaction (underlying), for example a loan, and which hedge the associated interest rate or currency risk, for instance. The notional volume of these underlyings in the EAA’s trading portfolio, at around EUR 1 trillion, was far higher than their book value.
The EAA had to build up additional expertise. The risks of these new products had to be reduced while at the same time wind-up strategies for the global market of the derivatives needed to be developed.
Project financings: an energy transition for the EAA
The wind-up of project financings was just as challenging, in part because this was largely a new area of activity for the EAA. These projects have very long maturities and are strongly dependent on the political environment. With a notional volume of roughly EUR 5.3 billion, energy projects were the largest sub-portfolio. The EAA became involved in the European energy transition virtually overnight, and now had to take on the task of gaining new expertise without inflating its bureaucracy.
More countries, additional currencies, different regulations
While the EAA’s initial portfolio included exposures from nearly 58 countries, its scope of responsibility expanded regionally in 2012: it was now active in 100 countries – on all continents.
This required an enormous effort. Instead of just 25, the EAA’s IT systems now had to handle 60 different currencies. And more countries mean different business practices and languages and, most importantly, new legislation to adhere to.
in EUR billion
Notional volume in exchange rates as per 31.12.2011
Book value as per 30.06.2012