Investment Guidelines of German Municipalities in Practice

Agencies, Marketing, Regulations

US rating agencies remain at an advantage over their European competitors. As the practical example of regulation in Hesse shows, the investment guidelines for municipalities cement the dominant position of the US rating agencies for every rated investment.

Even the German rating agencies are out of the question for most communities. Since the ratings of the leading US agencies are prescribed in the communities, the services of the German agencies are – from this point of view – dispensable. Since the municipalities have to set their own investment guidelines and do not think about the local agencies, the smaller competitors of the US market leaders are left out.

Section 108, paragraph 2 of the Hessian Municipal Code (HGO) obliges the municipality to ensure sufficient security in the context of the careful and economic management of its assets when investing money, whereby it should bring in an appropriate return.

In doing so, the municipality has to minimize financial risks; speculative financial transactions are prohibited. They are legally obliged to do so in accordance with section 92 (2) sentences 2 and 3 HGO. The financial budget of the municipality is to be managed thriftily and economically. The community has to minimize financial risks. Speculative financial transactions are prohibited.

Deposits are compatible with Section 92 (2) HGO and Section 108 (2) HGO if the municipalities ensure that the security takes precedence over the possible return. The assets are to be managed carefully and economically and properly accounted for. Sufficient security is to be ensured for financial investments; they should bring a reasonable yield.

This principle must also be observed in times of low and negative interest rates. As of October 1, 2017, municipal deposits will no longer be protected by the voluntary deposit protection fund at private banks. Deposits existing as of October 1, 2017 are grandfathered.

The deposit protection instruments of the Savings Banks Finance Group and the cooperative banks also do not offer any protection for public sector deposits. Nevertheless, there is a lower risk here due to the institutional security. With the abolition of grandfathering, deposits at private banks have become less secure. However, they are not to be described as speculative.

The Hessian municipalities have to issue investment guidelines for investments before they are deposited. These regulate the security requirements, the administration of financial investments by the municipality and the regular reporting obligation.

The guidelines are to be decided by the local authority and are to be made known to the supervisory authority. The investment guideline of a Hessian municipality is only valid for investments that are made after the entry into force. Existing financial investments made on the basis of the investment guidelines of the Hessian Ministry of the Interior and Sports on municipal investment transactions and derivative financial transactions (StAnz. 2009, p. 701), which have expired, remain unaffected by these provisions.

As the State’s highest-ranking administrative authority, the Ministry is not only involved in government activities, but is also in charge of the legal and technical supervision of the States institutions that come under this department. The tasks of the Ministry of the Interior comprise for example the departments of security, municipal affairs and general affairs of the Interior and Sports.

Due to these requirements, the municipal statutes for investing their liquid funds are based on model guidelines, which usually contain the following provisions:

If the municipality intends to invest in credit institutions that are not subject to any deposit guarantee or institution protection, it must inform itself particularly carefully. In particular, the credit institution’s rating should be used as a guide.

When it comes to investing liquid funds, the municipality generally limits itself to the following forms of investment:

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Standard & Poor’s. But “S&P Global Ratings”, Who?

Advertising, Agencies, Marketing

Standard & Poor’s gave away a strong name

“Landor announced that it has provided brand strategy and design services to McGraw Hill Financial for the company’s bold new brand identity as S&P Global. Landor partnered with the company to create a new name and design system that confidently marks S&P Global as the leader in delivering essential intelligence to companies, governments, and individuals.” The press release of May 3, 2016 introduced the text about the rebranding. What about the acceptance of the new brand name five years later?

Despite owning Standard & Poor’s, the S&P 500, the Dow Jones Index, and Platts – some of the most iconic benchmarks and market intelligence brands in the world – McGraw Hill Financial (MHFI) was commonly perceived as a textbook publisher. With a clearly established business strategy, Landor helped MHFI “define its true value and claim its unique position in the market. As S&P Global, the brand tells a new story and opens an auspicious chapter in its impressive history.”

Founded by Walter Landor in 1941 and today a global leader in brand consulting and design, Landor helps clients create agile brands that thrive in today’s dynamic, disruptive marketplace. Their work shall enable top brands—from Barclays to BMW and Tide to Taj – “to stand for something while never standing still”.

Benchmarks and essential intelligence form the backbone of the financial ecosystem, with credit ratings and indices constantly referenced to bring context and clarity to investment decisions. Landor focused the new brand on the pivotal role S&P Global plays as the common denominator in the world of finance, providing this essential intelligence to investors.

There was a sophisticated argument behind the renaming of the group of companies. In practice, however, the new company name is still a long way from establishing itself. For the credit rating agency in particular, S&P is still struggling globally to enforce the new name, even though it is actually to be used in a legally binding manner. The rating agency is regulated in many jurisdictions around the globe.

Ratings and rating agencies are quoted by many issuers and named on their websites. Here are some examples of how the agency’s new name is still ignored after half a decade (access to all of the websites below from September 3, 2021):



Deutsche Lufthansa

Fnac Darty 


Merck KGaA






The selection of these issuers was purely random, regarding the question of how S&P Global Ratings is presented. In the sample, none of the issuers gave correct information about the agencies by which they were assessed. All of them used the old name and not the new brand identity developed by Landor.

The European issuers would actually be obliged to name the credit rating agency correctly, as the rating agency is subject to regulation by the European Securities and Markets Authority (ESMA). The correct name of the European subsidiary of the US rating agency is not “Standard & Poor’s”, but “S&P Global Ratings Europe Limited“.

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