GERMANY Law and Practice Contributed by: Michael Josenhans, Anouschka Zagorski and Christina Banz, Freshfields
1. Loan Market Overview 1.1 The Regulatory Environment and
1.2 Impact of Global Conflicts As mentioned in 1.1 The Regulatory Environment and Economic Background , in spite of the strict banking regulations, there has been an improvement in the economic climate, which is reflected in the modest growth of the loan market. In addition to the ongoing trade conflicts of recent years which continue to have significant effects on supply chains, the change in US administration in Jan- uary 2025 and its economic agenda now play a key role in the current market environment. The aggressive trade and deregulation policies of the new US admin- istration are leading to notable shifts in the global loan market. A central element is the introduction and expansion of unilateral US tariffs, particularly on European and Chi- nese goods. These measures are once again causing disruptions in international supply chains, driving up costs and increasing economic uncertainty, especially for export-oriented companies. As a result, volatility in the capital markets has risen, and many investors are withdrawing from riskier assets or demanding higher risk premiums. Moreover, the deregulation of banking in the USA is affecting the competitive situation for European credit institutions: US banks are increasingly able to act more aggressively and flexibly in the European market, including through their European subsidiaries. This is increasing competitive pressure on European banks and necessitating structural adjustments on the supply side. The growing uncertainty, exacerbated by the unpre- dictable US economic policy, is also dampening investment activity. Companies remain cautious, with only certain sectors such as energy infrastructure and digitalisation currently showing robust demand. On the borrower side, companies continue to seek to refinance existing loans in order to secure lower inter- est rates and better financing terms whenever pos- sible. However, companies operating in particularly affected sectors are frequently engaged in lengthy negotiations with their lenders – for example, regard-
Economic Background Regulatory Environment
In recent years, developments in the German loan market have mainly been shaped by the Capital Requirements Regulation (CRR) and the UCITS V Implementation Act. Since January 2025, the CRR III has also been appli- cable in Germany. Based on the Basel III framework, the CRR III imposes strict capital requirements on banks and obliges them to comply with specified lev- erage ratios. Ongoing interest rate cuts by the European Central Bank (ECB) have also improved lending conditions for companies. After seven consecutive rate cuts, the key interest rate as of August 2025 stands at around 2%. Furthermore, the cost of borrowing for companies decreased by 60 basis points between September 2024 and February 2025. Nevertheless, German borrowers’ interest in alterna- tive lenders continues to grow. Impact of Recent Economic Cycles In recent years, strict regulation under the CRR has led to more cautious lending practices among regu- lated lenders – particularly banks. However, a slight economic recovery is emerging in 2025. Banks supervised by the ECB are currently able to meet the stringent capital requirements and are well above the prescribed minimum thresholds. There is there- fore cautious optimism that lending will continue to increase: credit growth accelerated in early 2025, and the previously weak demand for credit – especially in early 2024 – is recovering, albeit slowly. Nevertheless, caution remains warranted: consid- ering aggressive US trade policies and the ongoing strict requirements of the CRR, banks remain cautious in granting loans, and companies are hesitant with investment decisions.
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