Consolidation (stengthening)

The achievement of normal conditions of supply and demand after periods of exceptional market conditions. – The inclusion in the balance sheet of companies that are under the controlling influence of the reporting company, i.e., the reporting entity (the results obtained on balance sheet when the accounts of a parent company and its subsidiaries are combined to mirror the financial position and operating results of the group as if it operated as a single entity). – As a rule, only a majority of voting rights (voting control) was assumed for a long time – even under IFRS. As a result, banks were not required to consolidate their special purpose entities, even though the originator ultimately bore the liquidity and insolvency risk of the conduit via various channels – and especially in the course of credit enhancement via irrevocable loan commitments. – It was only occasionally during the subprime crisis that these deficiencies suddenly shone glaringly. Special purpose vehicles now had to draw on the facilities when sales of asset-backed securities stalled. This put some of the originating banks in distress and forced central banks to provide liquidity in special operations to avoid the complete drying up of the short-term lending market. – The consolidation of business processes or business units at a bank with the main objective of achieving a reduction in fixed costs. Ways to achieve this are mainly – mergers and acquisitions, – outsourcing and insourcing, – cooperation between banks, and – rationalization within an institution. – With regard to members of the euro zone that are unwilling to reform, consolidation means necessary structural reforms in order to return to macroeconomic equilibrium in one’s own country and not to endanger the monetary union. – See activity shift, on-balance sheet, call center, fairness opinion, market shakeout, banking, voting rights criterion. – See ECB Monthly Bulletin of November 2007, pp. 18 ff. (Effects of the subprime crisis; overviews), ECB Monthly Bulletin of December 2007, pp. 32 ff. (Liquidity management through minimum reserve policy during the subprime crisis), pp. 45 ff. (Survey on lending in connection with the subprime crisis; overviews), ECB Monthly Bulletin of January 2008, pp. 16 ff. (ECB liquidity assistance), Deutsche Bundesbank Monthly Bulletin of January 2014, pp. 21 ff, p. 48 ff. (consolidation in peripheral EMU countries).

Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent!
University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/