Loanboox on SRF: The curse and blessing of negative interest rates

Loanboox on SRF: The curse and blessing of negative interest rates

Negative interest rates are becoming more and more of a nuisance, especially for savers who want to leave their money in the account. Those who take out a loan, on the other hand, benefit from the historically low interest rates.  CEO and co-founder of Loanboox Switzerland Andi Burri explains in an interview with Swiss radio and television SRF what this means for Swiss communities in concrete terms.

Since the introduction of negative interest rates, the average interest costs for cities, municipalities and cantons have dropped significantly. Through Loanboox alone, they have earned 23.2 million Swiss francs through negative interest since the platform was founded four years ago. This corresponds, for example, to the costs for the compulsory schooling of 1,081 pupils – we have already reported on this in detail in our blog. Especially municipalities with a good credit rating benefited from this development, according to Andi Burri in an interview with SRF’s Heute Morgen Journal.

But which municipalities have earned the most from negative interest rates? And how do they benefit the Confederation in its capital procurement? Find out the details in the radio report.

 

 

 

SRF 1 Economy: Municipalities benefit from negative interest rates

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You cannot listen to the audio file? You can read the SRF report in text form here.

Saving 15’000 francs of taxpayers’ money? The municipality of Niederwil explains how to do that.

How do Swiss municipalities finance themselves and what is important to them when raising capital? We asked Jessica Meili, Head of Finance at the Niederwil municipality.

How does capital raising work in the municipality of Niederwil?

Ongoing investment and financial planning is used to determine the municipality’s capital requirements for the coming years. Depending on the liquidity needs, short- or long-term loans are then taken out. In each case, several offers must be obtained for comparison.

What is important to you when raising capital?

In addition to favourable conditions and a wide range of comparison options, we attach great importance to an uncomplicated and efficient process.

How can Loanboox help you with this?

With just a few clicks and within a very short time, we receive a large number of interesting offers. In addition to saving an enormous amount of time, this allows us to find the most suitable offer for us in a clear and transparent manner. We will continue to use the Loanboox platform to raise capital in the future.

 

“Thanks to Loanboox, Niederwil is saving tax money to the tune of 15,000 francs.” 

 

– Jessica Meili, Head of Finance, Niederwil Municipality

Would you like to find out at what conditions Niederwil has already financed via Loanboox? Read more in the case study.

 

The World in Covid 19 Shock – The Big Picture Special with Mark Dittli

The World in Covid 19 Shock – The Big Picture Special with Mark Dittli

How is the world – and Switzerland in particular – coping with the Covid 19 shock? How great is the economic damage? These questions were the focus of an exciting virtual Loanboox panel discussion with business journalist and “The Market” editor-in-chief Mark Dittli.

The bar chart makes it clear: 2020 was a disaster for most countries in economic terms. A single, red bar in the annual overview points steeply downwards. On another presentation slide, a heat map shimmers in shades of yellow, red and green. It shows a global comparison of how far the economic recovery has progressed in the individual countries – or not. “The Market’s editor-in-chief Mark Dittli explains the details and background so logically and comprehensibly that it is simply fun to follow his explanations.

Comprehensive market knowledge compactly packaged

In his 20-minute talk, the economic journalist looks at how the rapid rise in interest rates in the USA will affect the markets and Switzerland in particular. He takes a close look at economic and industrial sectors that have been the quickest to get back on their feet after the Covid 19 shock. In doing so, Dittli pays particular attention to the investor perspective. The intensive Q&A session afterwards showed how much he struck a chord with the participants. All in all, a successful start to an exciting series of expert talks.

Curious? You can watch Mark Dittli’s presentation here.

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Further expert talks and assessments on topics related to the economy, financial markets and digitalisation can be found here.

Interest rates and inflation – Daniel Stelter’s economic forecast

Aktuelle Neuigkeiten zu Loanboox Blog Bild Radio und Kopfhörer

How do cities and municipalities get through the Corona crisis? What do capital providers and investors need to be successful? And what advantages does digitalisation bring? In the loanboox.asks. series, we talk to experts about topics like these. Daniel Stelter kicks off our audio talks.

The forecasts for 2021 are mixed. On the one hand, highs on the stock market – on the other hand, dampened economic expectations due to the ongoing Corona pandemic. And on top of that, central banks are pumping massive amounts of money into the markets and keeping interest rates low. In loanboox.asks. we talked to the economic expert and author Daniel Stelter about how all this is connected. He says:

The economic consequences of the Corona crisis will keep us busy for a very long time.

Listen to his assessments in the following audio:

Niedrigzins und Inflation - ein Ausblick auf 2021 mit Daniel Stelter

by Simone Franzke

About Daniel Stelter:

Daniel Stelter is a macroeconomist, strategy consultant and author. In his podcast “Think beyond the obvious” he looks behind the scenes of economic and financial policy and explains important connections.

No time to listen to the audio? Then simply download the article.

Study on community financing in Switzerland. Part 3:      The impact of the Corona-crisis

Study on community financing in Switzerland. Part 3: The impact of the Corona-crisis

Hardly any changes in the credit volume and a still good credit rating – this is how the financial situation of many Swiss municipalities looked until the beginning of 2020. But now the effects of the Corona crisis are likely to make themselves felt. In the third part of our blog series on municipal finance in Switzerland, we take a closer look at this aspect.

Since 2003, the Lucerne School of Economics (HSLU) has been providing reliable and detailed answers on the topic of municipal finances. In its most recent study, it also took a close look at maturities, interest rates and financing partners. In the study presented in summer 2020, the experts conclude, among other things, that the average loan volume of the municipalities has only increased slightly compared to previous years. It finds that about half of the municipalities have been able to greatly reduce their debt since 2016, but the other is significantly more indebted.

An account with many unknowns

But will this change due to the ongoing Corona crisis? Prof. Christoph Lengwiler, head of the study, dares to make a cautious assessment, even though it is still difficult to predict the overall development. Last spring, one of the most important goals was to prevent a second wave of contagion, says Lengwiler. “But unfortunately we did not succeed”. Now it is a matter of doing everything possible to block a third wave. Economic experts agree that this will have a significant impact on further economic development in Switzerland.

The effects become visible with a delay

But it is already clear that the municipalities are feeling the crisis, he says. On the one hand, the municipalities have saved money because projects could not be realised, but on the other hand, they have already had significantly higher additional expenses in the short term.
Prof. Christoph Lengwiler summarises the outlook for the municipalities as follows: 

 

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All of this will tend to keep the financial situation of the municipalities tense and increase debt, Lengwiler continues. He therefore assumes that additional or alternative financing measures will be necessary.

Details about the study and the participants

In 2003, the Institute of Financial Services Zug (IFZ) at the Lucerne School of Business under the direction of Prof. Dr. Christoph Lengwiler, conducted its first survey of the financing market for medium-sized municipalities in Switzerland. The study has been conducted six times since then – most recently at the end of 2019. The focus is on municipalities with 4,000 to 30,000 inhabitants. In the most recent study, a total of 470 municipalities were requested and 238 provided their data – this corresponds to just under eleven percent of all municipalities in Switzerland. With a participation rate of 50.6%, the survey can be considered largely representative. For the first time, Western Switzerland was also included, which is reflected in the credit volume with an increase of almost 30% compared to the 2016 study.

 

Read also Part 1 and Part 2 of the blog series on municipal finance in Switzerland.

Study on community financing in Switzerland. Part 2: “Intermediary platforms benefit everyone”.

Who are the preferred financing partners of Swiss municipalities? And why are online platforms also becoming increasingly interesting for investors? In the second part of our blog series, we take a closer look at these aspects and let economist Prof. Christoph Lengwiler have his say.

Since 2003, the Lucerne School of Business has regularly examined the financing structure of medium-sized municipalities in Switzerland – most recently in 2019. In the study published this summer, it concludes that the market has changed significantly in recent years.

With whom?

Especially with regard to financing partners, there is movement. With 51.3 percent of the recorded credit volume, banks are still the most important partner of the municipalities, but the market share is almost 11 percent lower than in the 2016 study. On the other hand, pension funds seem to be becoming an increasingly attractive financing partner: They are recording an increase of a good 10 percent. Almost half of the credit volume is thus no longer financed by banks.

But the weighting has also shifted within the banks. PostFinance and the Raiffeisen banks have maintained their position in the market compared to the previous study, but the cantonal banks and the other banks (UBS, CS, etc.) recorded lower market shares at the end of 2019. The same applies to insurance companies, which have almost completely withdrawn from the market in recent years. Obviously, municipal financing, although highly rated in terms of creditworthiness, is not attractive enough due to the low margins.

Mediation platforms are used more often

And what about alternatives to the classic loan brokerage via the house bank advisor? According to the study, more than half of the surveyed municipalities (60%) now work with service providers such as loan brokerage platforms or brokers. In 2016, it was only just over 41 per cent. But the platforms are not only attractive for borrowers, says study leader Prof. Dr. Christoph Lengwiler, but also for potential investors.

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Quality before quantity

A certain consistency seems to be important to the municipal finance directors: The number of brokers and platforms used by the municipalities decreased compared to the last study. This is evidence of a concentration on certain service providers. In the ranking of which service providers the municipalities use for their loan requests, Loanboox takes second place with 33% after only three years in the market.

Details about the study and the participants

In 2003, the Institute of Financial Services Zug (IFZ) at the Lucerne School of Business, under the direction of Prof. Dr. Christoph Lengwiler, conducted its first survey of the financing market for medium-sized municipalities in Switzerland. The study has been conducted six times since then – most recently at the end of 2019. The focus is on municipalities with 4,000 to 30,000 inhabitants. In the most recent study, a total of 470 municipalities were requested and 238 provided their data – this corresponds to just under eleven percent of all municipalities in Switzerland. With a participation rate of 50.6%, the survey can be considered largely representative. For the first time, Western Switzerland was also included, which is reflected in the credit volume with an increase of almost 30% compared to the 2016 study.

Read also part 1 of the blog series on municipal financing in Switzerland.