German municipalities are open to the capital market


  • Treasurers see themselves well positioned for alternative forms of financing
  • Investors show great interest in municipal notes
  • Number of conventional loan offers for municipalities on the decline
  • Professional financial market communication as a competitive advantage

Cologne/Düsseldorf, 29 September 2015 – German municipalities see themselves well positioned to use new ways of financing offered by the capital market. By contrast, investors are somewhat cautious about the ability of many municipalities to tap the capital market. This is the result of a study on alternative forms of municipal financing conducted by communications agency IR.on AG and IKB Deutsche Industriebank AG.

The survey was conducted among 20 treasurers of the 150 largest German municipalities and 20 investors and financial institutions with total assets between EUR 300 million and EUR 900 million. The aim of the qualitative survey is to screen the motives and requirements of municipalities against those of investors with regard to municipal financing.

The starting point of the study is the considerable debt burden and the notable investment backlog of many German municipalities, which, according to Deutscher Städtetag (German Association of Cities), meanwhile totals approx. EUR 132 billion. At the same time, the financing conditions of many municipalities have deteriorated. Two thirds of the treasurers surveyed stated that banks today offer them fewer municipal loans than five years ago. Highly indebted municipalities consider themselves dependent on the credit market and are therefore open to alternative forms of municipal financing. 

For most of the treasurers, the municipal note loan is the most interesting alternative financing instrument. According to the respondents, the favourable conditions currently offered, in conjunction with longer maturities, and the broader investor base are the most important advantages of the note loan. 90% of the investors participating in the survey have subscribed municipal notes in the past or could imagine doing so.

Public Private Partnerships (PPP) are firmly established alternative project financing instruments for German municipalities. Most of the treasurers surveyed also consider citizens funding to be potentially suitable for the financing of local projects. Although two thirds of the respondents consider citizens funding to be unattractive from an economic point of view, this form of crowdfunding could make political sense with a view to involving citizens in municipal projects.

Municipal bonds: Treasurers dislike the effort required and would prefer shared municipal issues

Half of the treasurers could imagine participating in a shared municipal bond issue or have already done so. According to the treasurers, sharing issues with other municipalities offers the advantage of more easily achieving a marketable volume. By contrast, large municipalities prefer individual bonds. The great effort required to issue municipal bonds is generally regarded as a drawback. While investors from the savings bank sector tend to dislike this instrument, the insurers surveyed are open to investments in municipal bonds. 

When asked about the most important investment criteria, investors mentioned aspects such as the issue amount and the order volume, the maturity and the yield of the municipal investment. The actual financial situation of a given German municipality is not seen as a knock-out criterion by most of the investors, as municipalities are still regarded as being part of the federal liability chain. Even so, investors are increasingly starting to differentiate between individual municipal borrowers based on their specific creditworthiness. If municipalities want to use the capital market, some of the investors surveyed are calling for external ratings to facilitate the assessment of their creditworthiness

Only very few municipal treasurers tend to provide potential investors with ratings, reports or investor presentations such as they are common practice in the capital market. Going forward, however, German municipalities will increasingly be forced to undergo a “beauty contest” for the best terms, which will make effective financial market communications an important competitive advantage.
The study can be ordered via the website of IR.on AG at and from hans-peter.mantsch(at) at IKB Deutsche Industriebank AG.

About IR.on AG
IR.on AG is a consulting company for investor relations and financial communication. The focus is on serving small and medium sized enterprises. We support our clients in ongoing investor relations and communication activities as well as in projects such as capital measures, M&A transactions and corporate crises.

About IKB Deutsche Industriebank AG
IKB Deutsche Industriebank AG supports medium-sized enterprises and private equity funds in Germany and Europe with loans, risk management, capital market services and advisory services.

Florian Kirchmann, IR.on AG, phone: +49 221 9140 97-11, e-mail: florian.kirchmann(at)
Patrick von der Ehe, IKB Deutsche Industriebank AG, phone: +49 211 8221-4776, e-mail: presse(at)