GERMANY Law and Practice Contributed by: Michael Josenhans, Lucas Lengersdorf and Karl Kuhn, Freshfields
2. Regulatory Environment 2.1 Licensing and Regulatory Approval In Germany, the granting of loans is subject to a banking licence requirement. Foreign lenders are considered to engage in such granting of loans if they offer their services to customers who are considered German residents. An exemption applies if the customer seeks out the foreign lender explicitly and such lender does not market its services to German cus - tomers (“reverse solicitation”). This exemption is generally applicable to both foreign EU lenders and non-EU lenders. However, for EU-regulated lenders, an exemption from the requirement to hold a banking licence applies. Further, no licence is required for the acquisition and hold - ing of loan claims, but there is a very fine line between mere “holding” and other actions in respect of those claims (eg, extensions) that trigger a licence requirement. Non-banks may co-operate with credit institutions in order to be involved in the loan business (the “fronting-bank model” or “white label model”). Banking licences for domestic lenders are grant - ed by the Federal Financial Supervisory Authority ( Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) and, if combined with a deposit-taking licence, the European Central Bank (ECB). EU lenders also require a licence, except where they hold a banking licence in their home jurisdiction and are supervised by competent authorities in their home EU jurisdiction. These institutions may passport their banking licence to Germany if they fulfil the relevant requirements. The receiving of security or guarantees is gener - ally not a licensable business in Germany.
• eligible for professional and semi-professional investors only, • concentration limit per borrower of 20% of commitments, net of cost, • leverage limit of 30% of commitments, net of cost, • no consumer loans. In contrast to other EU investment funds, Ger - man credit funds have also been subject to rath - er restrictive risk management requirements for the origination of loans and direct investments in unsecuritised loans since they were permitted to originate loans to German borrowers in 2016. Non-EU funds, meanwhile, are not allowed to originate loans to German borrowers until the Alternative Investment Fund Managers Directive (AIFMD) passport extends to non-EU jurisdic - tions, which is unlikely in the near future. The revised AIFMD (“AIFMD II”) will impose addi - tional risk management obligations on loan-orig - inating funds (LOFs) across the EU, aligning the requirements for German and other EU funds. Further, the government is proposing to prohibit alternative investment funds from granting con - sumer loans within the meaning of the EU Con - sumer Credit Directive. Moreover, the European Commission has kicked-off a public consultation that aims to identify the vulnerabilities and risks of – and to map the existing macroprudential framework for – non-bank financial intermediaries, includ - ing private credit funds.
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