September 2021
MONEY AND SHIPS MAKES THE WORLD GO ROUND Katerina Stathopoulou, Executive Director, Investments & Finance.
Allow me to begin with three basic but very important facts: 90% of the world’s trade is carried on vessels Shipping is a Capital-Intensive Industry and in today’s world, it is also Human Capital Intensive Shipping is a cyclical industry based on supply and demand factors Over the past 100 years, the maritime industry has faced numerous turbulent waters. The crises that the industry has navigated through over this period have been – 2 World Wars 1 oil crisis between 1970 and 1973 3 financial crisis – 1929 Wall Street crisis, 1997 to 1999 Asia crisis, 2008 until today Lehman Brothers The oil and economic crisis of the 1980’s (1981-1985) coupled with a very high interest rate environment and supply and demand imbalances COVID However, the crisis that decimated the Banks worldwide was Lehman Brothers. Today, 13 years later, the maritime industry is still facing its’ financial repercussions. Shipping is a Capital-Intensive industry and in September 2008 (before Lehman) the top 40 Banks worldwide had a total loan
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portfolio of about $950 Billion to the industry. Today, the top 40 Banks worldwide have a total loan portfolio of about $350 Billion. What is important to note is that these 40 Banks today are NOT the same as the 40 Banks of 2008! Lehman sparked stricter regulation of Bank financing through Basel rules. This led to Banks reassessing their loan portfolios and risk assets with stricter criteria and as such, changing their financing policies. Traditional shipping finance Banks have closed/sold their shipping loan portfolios, as shipping loans are too expensive for the Banks to maintain on their Books, based on the Basel rules risk assessment and capital reserve requirements. Basel rules along with ESG regulation (Environmental, Social and Governance criteria) being applied by the Banks in order to risk assess the shipping company and the shipping asset under financing
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