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Georges Hübner

  • From the New Normal to New Abnormal World: Banks' Risk Profile Shifts in the New Socio-economic Landscape

    Donderdag 22/6/2023
    Georges Hübner

    After a long period of low interest rates, many European banks have let their business model evolve towards a greater diversification of revenues and lower interest rates protection. The sector has proven its resilience during the Covid-19 and the geopolitical crises. Nowadays, with the simultaneous surge of inflation and consciousness about environmental dangers, banks are confronted with an unprecedented challenge. They have to cope with re-emerging or original sources of financial risks. These include stock market risks (due to their off-balance sheet asset management activities), funding risk (due to the pass-through of the rising interest rates on liabilities), ESG risks (on the valuation of the banks’ assets), and credit risk (due to the cost of the climate transition and the tension between the ‘E’ and the ‘S’ dimensions). This will increasingly lead banks to move away from comfortable risk management tools, and develop competences and approaches to deal with uncertainty, potentially for a long period of time.

  • Comment créer un fonds de solvabilité avec l’épargne collective ? Avec un peu d’imagination !

    Maandag 17/5/2021
    Georges Hübner
    Georges Hübner

    The coronavirus crisis has created two bottlenecks in the financial circuit. On the lending side, there is a surplus of idle household savings for many - but not all - households, while there is a potentially large unmet need for capital increases at affordable conditions for those companies that have suffered from the crisis. To redirect savings into an alternative financial instrument, the latter must be (i) safe, (ii) liquid, (iii) non-loss-making, and (iv) socially meaningful. To persuade companies to open their capital to external investors, they should be able to issue securities that are (i) equity-like, (ii) non-diluting, (iii) non-voting, and (iv) self-destructing. It is not easy to link these two incompatible needs, but we believe that, thanks to the current economic conditions with low interest rates but a positive expected economic growth rate, some adequate financial engineering could bridge the gap. For households, we advocate the issuance of liquid bullet bonds with a variable coupon and guaranteed capital. On the corporate side, the proceeds of these bonds would be invested in callable, cumulative, convertible preferred shares. A proper asset & liability management governance can ensure a smooth management of the maturity, credit and liquidity risks of the structure. Based on the feedback of many knowledgeable actors of the Belgian economy, we list several potential hindrances that need to be overcome to succeed with this project, but we believe that none represents a crippling obstacle.  

     

  • Efficient Resource Allocation in the Context of the Coronavirus Crisis: Towards a Private Equity Fund Financed by Collective Savings

    Woensdag 6/5/2020
    Georges Hübner
    Georges Hübner

    With the coronavirus crisis, we anticipate an aggravation of the inefficiency of the allocation of financial resources in the Belgian economy, with excess idle savings from households and an increasing shortfall of equity for many companies impacted by the economic downturn. We discuss the conditions under which, on the one hand, the savings surplus could be mobilized, and on the other hand, the corporate world could accept the infusion of outside equity capital. The proposed solution, following standard Asset & Liabilities Management (ALM) principles, is the setup of a private equity fund offering callable, convertible and cumulative preferred shares, funded through the issuance of either (i) a popular bond with floating coupon assorted with the government guarantee, or (ii) an asset backed security with a senior fixed coupon and a junior equity tranche, with the collaboration of the financial sector.

  • Will robo-advice make wealth management tasteless?

    Donderdag 15/11/2018
    Georges Hübner

    The fast development of robo-advice has responded to a growing demand for automation and enhanced capabilities to industrialize investment advisory (IA) solutions in the FinTech landscape. Until recently, the first generation of robo-advisors have naturally focused on the low-end segment of the IA market, mostly thanks to a rather low sophistication of the portfolio allocation systems based on simplistic versions of Modern Portfolio Theory, leaving wealth managers with no serious competition from fully digitized solutions. Nowadays, the second generation of robo-advisors is more ambitious, both from a scientific and an ergonomic point of view. Even though we are not yet witnessing the age of industrialized big data or machine learning fully automated investment advisors, the maturity level of today’s robo-advisors is sufficient to accommodate behavioral sources of complexity like mental accounting or loss aversion at the investor’s level. The pressure on margins induced by regulation and digitalization gradually increases the competitive advantage of robotized IA in the mass affluent and private banking segments, making them a serious threat to those incumbent firms that cannot adapt with proper tooling or niche offering. In the near future, the mature generation of robo-advisors, with full deep learning and data treatment capacities, will presumably coexist with those firms that have been actively preparing today, that will use performant tools besides human expertise, but in a world in which fees will presumably have largely decreased and service quality will have been improved, at the benefit of the customer.