Acquisition of financial assets and financing in 2011 Results of the financial accounts by sector
Despite significant price losses on the capital markets, the financial assets of households in Germany rose in 2011 to a total of €4,715 billion at year-end. At the same time, households’ debt increased slightly to around €1,550 billion. Non-financial corporations’ acquisition of financial assets grew by roughly €209 billion and thus surpassed the increase in their external financing, which amounted to just under €190 billion.
Households: price losses on capital markets clearly reduced growth in financial assets; slight increase in debt driven by loans for house purchase
Households’ acquisition of financial assets amounted to just under €149 billion in 2011 (2010: €154 billion). This renewed strong increase was thus well above its long-term average. This is due, inter alia, to a rise in disposable income on the back of positive economic developments and to the stable labour market situation in 2011, both of which encouraged the expanded acquisition of financial assets.
A large share of this growth is again attributable to bank deposits and claims on insurance corporations. Bank deposits (including cash holdings) increased by around €67 billion net. Overnight sight deposits (including cash holdings) were again relatively attractive owing to the low interest rate level in 2011 and continued tension on the international capital markets, and accounted for a large portion (€40 billion) of inflows. Fixed-term deposits recorded an annualised net inflow of funds (of roughly €18 billion) for the first time since the intensification of the financial crisis in autumn 2008. There are three likely reasons for this. First, the interest margin between overnight deposits and fixed-term deposits widened in the period under review. Second, the declining yields on the bond market may have had a positive effect on deposits. Third, improved confidence in the German banking sector among private investors may also have been responsible for longer-term investment. Savings deposits (including savings certificates) also experienced net inflows of a total of around €8 billion.
Bonds (including money market paper) were sold for approximately €2 billion in 2011, predominantly in the second half of the year. This is probably due, inter alia, to declining yields for domestic bonds as a result of intensified safe-haven inflows from abroad. There were also especially heavy outflows out of mutual fund shares, which declined by around €15 billion on balance. Funds open to the general public, including pension funds and mixed securities-based funds, saw particularly high sales. By contrast, the positive developments in shares in recent years continued at a steady pace in 2011 despite significant losses. Purchases of shares totalled around €14 billion. Claims on insurance corporations, which have been rising steadily over the past few years, increased again in 2011, by just over €48 billion.
This transaction-related increase in financial assets was eroded by valuation changes of just under €92 billion. On balance, this led to households holding financial assets of roughly €4,715 billion at the end of 2011.
At the same time, loans (including other liabilities) of around €11 billion on balance were taken up. Loans for house purchase, in particular, experienced significant growth, which is also reflected by buoyant construction activities and rising housing prices. This could be chiefly due to the historically low level of interest rates as well as to positive income developments.
Hence household debt rose again in 2011 in absolute terms and totalled just under €1,550 billion at the end of 2011. The debt ratio – defined as total liabilities as a percentage of GDP – declined once again, to 60% at year-end.
Non-financial corporations: acquisition of financial assets surpassed external financing
The acquisition of financial assets (including intrasectoral flows) by non-financial corporations amounted to roughly €209 billion in 2011 and was thus much stronger than a year earlier (€153 billion). This positive development has most likely been driven by robust profitability and earnings paired with a disproportionately weak increase in gross capital formation. What did rise, in particular, were sight deposits (including cash holdings), by approximately €38 billion on balance in 2011. This contrasted with an outflow of funds for fixed-term deposits amounting to just under €17 billion. This shift may be attributable, inter alia, to high uncertainty with regard to financing conditions which enterprises are countering by increasing liquid funds. At the same time, the capital-market-based acquisition of financial assets was expanded further in 2011. Purchases of bonds and shares amounted to just under €35 billion. A part of this again flowed abroad in the form of direct investment. Lending – especially to other domestic enterprises – amounted to €87 billion in 2011 and is thus slightly lower year-on-year (€95 billion). Trade credits and payments on account went up by roughly €54 billion. The increase in non-financial corporations’ financial assets was also eroded by valuation changes (€145 billion), in particular on shares. On balance, this led to non-financial corporations’ holding financial assets of roughly €3,302 billion.
The increase in external financing, at just under €190 billion, was considerably stronger than in 2010 (€121 billion). Loans from domestic non-banks (€93 billion), primarily inter-company loans and loans from insurance corporations, were the main source of financing. Trade credits and payments on account, at €53 billion, were also once again strong. Although loans to credit institutions were repaid on an annual basis (€3 billion), such lending went back up in the second half of the year. By contrast, as already seen in recent years, market-based financing played only a minor role in corporate funding. Outflows of around €4 billion were recorded for bonds. Issues of shares amounted to €7 billion net. The debt ratio – defined as the sum of issued bonds, loans and company pension commitments over GDP – increased by 2 percentage points in 2011 to 78%.