The Tubingen Regional Court recently held that negative interest on a consumer's existing cash deposits imposed by a German bank by unilaterally changing the bank's general terms and conditions was unlawful. According to the court, the defendant bank violated the rules of the general terms and conditions regime because it did not differentiate between existing deposits and newly deposited cash.
As of January 2018, the EU regulation which established a new European Account Preservation Order (EAPO) procedure will have been effective and in force for one year. In Germany, the most important conclusion which can be drawn from the past year is that the German courts are adopting EAPOs. However, as the procedure is still fairly new to the courts, it has taken time and effort on the part of creditors.
The Federal Court of Justice recently issued two rulings declaring that processing fee clauses in standardised commercial loan agreements are invalid as they unreasonably disadvantage borrowers. Previously, the majority of lower German court rulings had upheld the validity of such clauses in commercial loan agreements. Going forward, lenders have a number of options to deal with the issues raised in these new court decisions.
The act implementing the EU Alternative Investment Fund Managers Directive recently entered into force. The directive requires that a depositary be appointed for each alternative investment fund, which will open new business opportunities for depositary banks. The field of acting as a depositary has also been opened to entities not qualifying as credit institutions, which may counteract business opportunities for depositary banks.
The Federal Financial Supervisory Authority (BaFin) recently published a revised version of its Circular on Minimum Requirements for Risk Management for banks and financial services institutions. The circular sets forth BaFin's interpretation of the Banking Act provisions regarding risk management, which are based on Pillar II of Basel II. The circular will be subject to continual updates in the future.
Until recently, savings banks, cooperative banks and private banks used general terms and conditions of business, including a clause giving them the right to charge expenses. However, in two judgments issued on the same day, the Federal Court of Justice changed its previous position and held that such clauses were not only subject to review under the Civil Code, but were also invalid when they imposed expenses.
In insolvency scenarios, banks and other creditors must examine their options carefully before taking any legal action. Restructuring may be achieved by selling certain parts of the debtor's business or some of its assets. Secured creditors must know whether their security interests are insolvency-proof under the law. A recent decision provides guidance to banks that consent to a sale of the insolvency debtor's collateral assets.
The new Act on the Optimisation of Money Laundering Prevention caused considerable controversy during the legislative process. However, the amendments are generally to be welcomed, particularly the removal of the requirement for distributors of e-money issuers to appoint a money laundering officer, and the introduction of a de minimis threshold for the distribution of e-money products.
The Federal Court of Justice recently ruled on two parallel proceedings on the extent of information that banks must provide to investors when selling certificates. Investors sued a bank that had sold them certificates of a Dutch subsidiary of US investment bank Lehman Brothers Holdings Inc, which became worthless following the Lehman collapse.
The Federal Court of Justice has recently issued two judgments in relation to the assignment of loan receivables and land charges. In the first judgment, the court confirmed that the assignment of loan receivables to a non-bank is valid. In the second decision the court ruled on an assignment of the land charge and the issuance of a so-called 'execution clause' to the assignee.
The new e-money regulatory law affects not only e-money issuers but also, for the first time, intermediaries of e-money issuers involved in the distribution or redemption of e-money. A kiosk or supermarket operator which sells or charges pre-paid cards for an e-money issuer will be classified as an 'e-money agent'. Under the new law, these intermediaries will be subject to a regulatory regime of their own.
The Restructuring Act is due to come into force by the end of 2010. It is intended to provide system-relevant banks with several instruments to combat crises without endangering the stability of the financial system. In addition, it should ensure that equity and debt capital providers bear the cost of dealing with the insolvency themselves as far as possible.
The Federal Supreme Court has authorised banks to amend their general conditions to the effect that all payments based on direct debit authorisations are insolvency-proof. Thus, banks and insolvency administrators now have guidelines as to how they must proceed with regard to direct debits in insolvency cases during the transition period.
In response to the financial markets crisis, the Basel Committee on Banking Supervision formulated various new banking regulatory rules, which the European Union compiled in the EU Capital Requirements Directive II. Germany is determined to implement the directive by December 31 2010, despite recent signals from the committee that member states will be allowed more time.
The Act for the Further Development of the Financial Markets Stabilization – often referred to simply as the 'Bad Bank Act' – recently came into effect. The act provides the opportunity for short-term relief of bank balance sheets, thus promoting lending to the real economy. The act is targeted at financial institutions, financial holding companies, their subsidiaries and special purpose companies.
Parliament has passed the Supplementary Financial Market Stabilization Act, which includes some improved and some new tools for stabilizing the financial markets, but which is primarily intended to provide the foundation for the nationalization of the real estate financing company Hypo Real Estate AG. The act is likely to take effect in Spring 2009.
German banks will shortly be able to refinance loans granted for aircraft on more favourable terms than previously as the federal government intends to issue aviation bonds to secure German banks' leading position on the market for the financing of aircraft. The Law on Development of Bonds is intended to create a better framework for German bonds without relaxing the associated high collateral requirements.
Judicial decisions are often rooted in the simplest of facts. In a recent case a couple who had defaulted on a loan argued that bank secrecy and data privacy principles created an implied prohibition on transferring that loan to a third party (in this case, a collection management company). The Federal Supreme Court conclusively resolved the issue of whether such an implied prohibition exists.
The lower instance regional court in Frankfurt recently rejected a theory espoused by the Frankfurt Court of Appeal that bank secrecy implies an agreement between the bank and the customer that loan receivables may not be assigned without the customer's consent. At least where the customer is in default, this would unduly restrict the bank's ability to realize its rights.
The Frankfurt Court of Appeal recently delivered a judgment on how bank secrecy may affect the assignability of loan claims. The court held that bank secrecy rules effectively imply that a loan claim may not be assigned without the borrower's consent where the borrower is a consumer.