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free deposits – however – one receives presently no interest rate return or one must even
accept a negative interest rate.
This is not about to change soon?
No, in the financial markets things remain turbulent. Not only the European Central Bank is
printing money, also the Chinese Central Bank is opening its floodgates. The national
economies are trying to achieve advantages by way of devaluations, but this has negative
consequences, among them negative interest rates.
Do you see that corporations are investing into higher risks with their hunt for return?
Industrial corporations are shying away from negative interest rates as they are also shying
away from high risks. Thus, the investment decision becomes a balancing act. But we cannot
recognize a trend that corporations accept higher risks now, in order to improve the return on
their investments. They live with the low interest rate scenario and they try to find other uses
for their cash.
Which are?
The possibilities can be found in the area of capital expenditure, but partly in alternative
investment possibilities as well, for example in the support of start-up companies or venture
capital. But we cannot deduce a trend, however.
But this would mean longer-term investments, however?
Absolutely. Often, there remains a deposit in the cash-box, a strategic reserve which is used in
another way with respect to the interest rate environment. In the short-term area the deposits
and money-market funds are the customary way of investing.
In the world, there are still regions with higher interest rates. Do corporations move
their cash for the short-term into these regions?
This is often a naïve assumption. In countries with higher interest rates, one must also regard
higher credit risks and eventually a currency risk, so one has to hedge against this. This is
removing the interest rate advantage and is a zero-sum game. Higher returns go along with
currency and credit risks. Naturally not everyone is looking for a solution by way of investing
in central government bonds or in a single A bond. But I do not recognize a trend to enter into
higher risks below an investment grade rating.
Does a corporation with its own banking licence have more leeway?
This has been a short hype during the financial crisis 2011/2012. At that time, there was much
discussion about this subject. In the foreground, there was the question to park ones money
safely. Investments in the area of German Bundesbank or the European Central Bank were
wanted which would have been done by a bank. Now, there is less excitement about that. The
corporations do not see a banking licence as a necessity in order to park money outside the
banking system.
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