Major market developments in 2017

2017 was a year that can be regarded as a year of "splitting", especially in light of global political developments. An observation that applies to various events throughout the year, on both sides of the Atlantic.

On 20 January 2017, after eight years, Barack Obama handed over his office to his dissimilar successor Donald Trump. What was already clear during the US election campaign last year continued after the inauguration of the new US president: The trend towards a return to national interests, a trend towards renationalisation, coupled with the abandonment of supranational agreements. In November 2016, Trump announced his country's exit from the TPP Transpacific Free Trade Agreement – an announcement that sparked strong irritation among US trading partners in Asia. Trump applied his sharp words in practice in early 2017. In January, he signed a decree on the TPP exit, thus implementing one of his key campaign pledges. [1]

From the pursuit of independence to political uncertainty and division

In the midst of the extremely tough Brexit negotiations between the EU and the UK in 2017, a first ray of hope emerged in December: A notification from the European Council confirmed that the exit negotiations had progressed sufficiently in the first phase, paving the way for phase two – negotiations on future trade relations. A so-called "hard Brexit" could be avoided through transitional regulations until the withdrawal on 29 March 2019 and a subsequent free trade agreement. However, it is conceivable that this outlook will also lag far behind today's standard of integration. Both negotiating partners are still far from reaching an agreement with their ideas. [2]


In mainland Europe, Catalonia's separatist ambitions caused considerable political discomfort within the EU. After the declaration of independence in autumn, which is illegal under the Spanish constitution, and Catalan regional elections in December, the population is divided and the political situation remains tense.

With regard to German politics, we face a significantly changed party landscape after the 2017 parliamentary election. Instead of five, there are now seven parties sitting in the federal parliament since the election: CDU, CSU, SPD, FDP, Green Party, Left Party and AfD. [3] The era of major popular parties seems to be over, political reporters wrote in 2017, and there has been talk of a threat of permanent political fragmentation ever since.

However, 2017 was again a "year of geopolitical concern", characterised by terrorist attacks, fear-ridden debates and newly inflamed areas of conflict, such as the smouldering nuclear conflict with North Korea, which was aggravated by the provocations from Washington and Pyongyang 2017 more than it had been for years.

All of these economic policy challenges did not constrain global economic growth nearly as much as one might have expected. However, 2017 showed that political uncertainties are continuing to increase.

Economic framework conditions and consequences for the trade finance market

With regard to purely economic developments, 2017 turned out to be less spectacular: Considered globally, the economy grew by 3.7 % in 2017 – in October the IMF had expected 3.6 %. [4]


As in 2016, prices for crude oil and natural gas also developed much more dynamically in the past year. The HWWI commodity price index rose in November 2017 for the fifth month in a row, with the highest annual growth rate. In the process, average prices of all commodities included in the index rose by 7.4 %. The increase in energy commodities was particularly pronounced. Their index climbed by a total of 8.5 % at the end of 2017. This is contrasted by the development of food and beverages, whose prices remained virtually unchanged in November 2017. [5]

The positive economic developments in 2017 are certainly also due to the continued positive liquidity situation – which is determined by a high supply of liquidity.

While the US Federal Reserve reacted to the positive economic development in the USA at the end of 2017 by raising key interest rates by 0.25 %, the European Central Bank remained largely faithful to its direction adopted in 2015 and pursued in 2016. In 2017 (with the announcement that it would only buy bonds worth EUR 30 billion per month starting in January 2018), it merely initiated a cautious turnaround in monetary policy.

The high liquidity resulting from the monetary policy also led to a further decline in EURIBOR rates in 2017. As a result, the average 6-month Euribor experienced a further significant reduction during the course of the year to its current level of -0.26 %. [6]

Regarding US interest rates, a different situation could be observed in the course of 2017: Continuing growth became apparent here with an exemplary 6-month USD LIBOR rising from around 1.318 % at the beginning of the year to 1.837 % at the end of the year. [7] Overall, the markets continue to be noticeably under the effect of high liquidity.

Compared to 2016, the global market for syndications rose around 12 % in 2017 to USD 4.6 trillion, contrary to the trend of recent years. [8]

A development differentiated by regions became apparent in the EMEA market for syndicated loans, which continues to be primarily relevant for AKA. While volumes for the region of Western Europe exceeded the strong 2015-level in 2017, volumes in Eastern Europe, the Middle East and Africa declined again compared to the previous year. [9]

The volume of coverage of Hermes cover again declined significantly in 2017 by around 18 %, thus falling back to pre-financial crisis levels. The reduction in Hermes cover was driven particularly by the decline in individual cover. While ship covers remained constant in volume, there were again no aircraft covers in 2017.

In terms of the Russian market, which is historically important for AKA, there was a significant loss of dominance of pre-export financing (PXF for short) in 2017. As a result, the number and volume of unsecured transactions in the Russian market increased significantly over the course of 2017, and the volume of PXF transactions declined accordingly. Therefore, the trend in margin reduction, which began in 2016, continued with increasing proportions in 2017.

Sinking margins are probably partly to be regarded here as a market correction. PXF pricing once doubled when sanctions took effect, but this was partly due to volatility in the commodity markets. But mostly, the effect can be deduced simply from the fact that PXF offered the only international option for dollar loans for Russian borrowers: The volume of Western ECA-covered project financing collapsed and the emerging international market of unsecured lending to non-sanctioned Russian companies disappeared almost entirely. [10]

AKA is maintaining its position despite negative market trends

In light of the developments outlined, 2017 can nevertheless be described as a very good year for the AKA.


Once again, and despite the trend of the markets primarily relevant to AKA, the bank succeeded in maintaining the level of activities in the syndication market. Despite the significant changes in the volume of Hermes cover, particularly in the secondary market, AKA succeeded in operating successfully and significantly expanding its volumes in the ECA segment. As a result, the apparent countertrend in AKA's business development is not as pronounced as the volumes might initially suggest. However, even taking into account these secondary market purchases, AKA clearly exhibited a positive business development in this important segment in 2017.

In the segment of structured finance, the fiscal year of 2017 presented a differentiated picture for AKA:

The positive development in structured financing, both in terms of closing volume and income, is offset by a downgrading in transactions and commitments in the receivables segment due to a very high degree of competition and thus conditionality due to market conditions.

Considered from a different perspective, AKA has made good use of the favourable market conditions for borrowers in 2017 to move forward much more actively in both the money market and the medium to long-term borrowing market, and to secure attractive terms in the maturity band of up to 10 years.

The market-related challenges also made it increasingly clear in 2017 how important it is to place AKA on a broader footing as part of its development and growth opportunities.

Already in the course of the past year, AKA's core business was characterised by a stronger focus on ECA-covered project financing. On the one hand, AKA began to invest in training and on the other hand, it started to make its first investments in the market. In 2017, AKA took the first steps to build up expertise in this segment directly by accompanying several transactions. The activities in ECA-covered project finance market are a particularly important development area for AKA, as this market generates substantial potential volume on the one hand, and has weaker competitive effects on the other due to the smaller number of market participants. Without putting quality standards at risk, there are visible opportunities here for securing a better price level.

In addition, AKA began to intensify its cooperation with non-shareholder banks in 2017, which already had active relationships within the FI-Desk business.

Finally, a topic being an increasing focus of attention already during the year 2017, needs to be emphasised here as it will become even more important in the course of the new year: Dealing with sanctioned regimes. The coverage instrument will need to evolve in response to changing challenges and risks. This year's guest contribution by Dr Kurt Dittrich, Partner and Head of Finance Division Germany at Linklaters, sheds light on the issue, especially in terms of the potential for conflict that results for banks and companies in dealing with sanctioned regimes under German foreign trade law.

(1) Trump terminates the Free Trade Agreement TPP. In: from 23.01.2017.

(2) Dr Aberle, Lukas, Dr Soltész, Ulrich: A Downgrade is Imminent.

(3) Herden, Tim: Parties Under the Plow. In: mdr aktuell Nachrichten from 20.12.2017.

(4) Chassot, Sylviane: Lagarde warns against complacency. In: Neue Zürcher Zeitung from 22 January 2018.

(5) Press release: Crude oil prices continue to rise in November. In: Hamburgisches WeltWirtschaftsInstitut from 07 December 2017.

(6) Euribor interest rates in 2017. In:

(7) US dollar LIBOR rates 2017. In:

(8) Syndicated loans review 2017: Top 25 firms, Thomson Reuters. In: HITC from 03 January 2018.

(9) Loan Radar, 2017 – EMEA deal pipeline – week commencing 08 January 2018. In:

(10) Burroughs, Callum: Russian PXFs: Has the post-2014 bubble burst for good? In: TXF news from 20 Nov. 2017.

Read more in our latest annual report

Annual report 2017