Deficiency Guarantee

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The default guarantee is a subtype of guarantee that is accepted as collateral from credit institutions or issued as collateral for bonds by bond insurers as a default guarantee .

General

The BGB known in Germany as a guarantee species only the "ordinary" guarantee ( § 765 BGB), the guarantor for the principal ( § 769 BGB) and the time guarantee ( § 777 BGB). In the case of an ordinary surety, the surety is only liable if the obligee can prove the unsuccessful foreclosure on the movable property. In the case of an absolute guarantee, the surety is not entitled to any objections that initially refer the obligee to foreclosure against the debtor's assets before the surety can be claimed.

Legal basis and content

The default guarantee is not regulated in the BGB, but recognized by the case law of the BGH . In this case, the surety is only liable if the obligee proves that he has suffered a loss of receivables in connection with the guaranteed claim for the realization of any loan collateral and subsequent enforcement in the movable and immovable property of the main debtor . This loss is to be regarded as a failure. Such a default is also deemed to have occurred if the obligee has unsuccessfully carried out foreclosure against the entire assets of the main debtor. The default surety is therefore responsible to the obligee for what he cannot obtain from the main debtor in spite of the care taken . However, the effectiveness of the default guarantee does not depend on whether there is a default. As with the “ordinary guarantee”, it is only a question of whether the risk assumed by the surety will materialize. This is only more narrowly limited in the case of the deficiency guarantee.

The guarantee case is thus triggered in the case of the deficiency guarantee through the evidence that the obligee has unsuccessfully pursued the foreclosure of the principal debtor's assets; an objection to advance action up to unsuccessful foreclosure by the surety is not required ( Section 771 BGB). The obligee not only has to prove the loss incurred, but also to demonstrate and prove that the failure occurred or would have occurred despite the care required in pursuing the guaranteed claim, if he had exercised this care. In the event of negligence , however, the surety is not liable. The failure is a claim-based fact. The default guarantee can only be claimed if it is certain that the use of the principal debtor, possibly also the realization of other securities, does not promise full success.

Types of Deficiency Guarantee

In Germany, a distinction is made between the “normal” default guarantee and the modified default guarantee . In the "normal" performance guarantee of true loss to have occurred if the creditor made the fruitless execution against the debtor and the guarantor has demonstrated. This procedure for proving the guarantee case is time-consuming and expensive for the creditor, so that the modified default guarantee was developed in the Kautelar practice .

The modified default guarantee contains agreements between the creditor and the default guarantor on when the default should be considered to have occurred. The modified deficiency guarantee is an agreement in which a default event faked is. A specific point in time (e.g. "3 months after the loan maturity", "opening of the judicial insolvency proceedings") or an event (e.g. "suspension of payments by the principal debtor", "non-payment of due interest and principal amounts") should be considered default and thus count as a guarantee case.

This form is particularly common for guarantee services from local authorities (such as cities and municipalities) as well as guarantee banks and loan guarantee associations. Even public guarantees of the state come in the form of the modified deficiency guarantee. If the borrower also has to provide collateral, this loan collateral must first be realized. If, in the event of the realization of the collateral (e.g. through an auction of machines, a foreclosure auction of real estate, etc.), a residual credit amount remains open that is not covered by the realization proceeds, the default guarantee can only be used for this outstanding balance .

Limits to liability for default

The essence of a deficiency guarantee is that the surety can only be claimed if the creditor has failed in full or in part with his claim in spite of the timely use of all options in foreclosure and insolvency of the main debtor. This model contradicts general contractual conditions , according to which the default guarantee may be used six months after notification of (alleged) payment arrears of the debtor. This practically released the creditor bank from its obligation to seek recovery of its claim from the principal debtor. This serious deviation from the model of the deficiency guarantee resulted in the Federal Court of Justice declaring this entire clause ineffective.

Recognition under banking supervisory law

General

Collateral in force since January 2014 banking supervisory law as a credit risk mitigation techniques . If loan collateral is recognized as a credit risk mitigation technique by the Capital Adequacy Regulation (CRR) applicable in all EU member states , it leads to a lower level of equity capital for banks than for unsecured loans . As a result, secured loans can be granted with a lower interest rate .

Art. 194 CRR establishes principles for the supervisory recognition of credit risk mitigation techniques, after which loan collateral in particular in all jurisdictions legally effective (english english valid ) and enforceable (english english enforceable must be) sufficiently liquid , over time a stable value and a credit event promptly recyclable must be . The positive correlation between the collateral and the borrower's creditworthiness must not be very high (Art. 194 (4) CRR). A distinction is made between credit risk mitigation techniques “with collateral” ( real collateral ; Art. 4 (1) No. 58 CRR) and “without collateral” ( personal collateral ; Art. 203 CRR).

Sureties / guarantees

Accordingly, guarantees and sureties are part of the personal security. Municipal deficiency guarantees are of particular importance for municipal loans , guarantee banks and development banks , but are not specifically mentioned in the Capital Adequacy Ordinance. They are regarded as guarantees that have to meet additional conditions. Art. 213 CRR requires direct guarantees, according to Art. 214 para. 1 CRR certain counter-guarantees are recognized. In the case of counter-guarantees from states and other public bodies, the secured claims may be treated like claims on the state. Art. 215 CRR stipulates that in the event of default by the borrower, claims can be made against the protection seller (guarantor / surety) without restriction and that there must be no reservation that the institution must first demand the amount owed from the borrower. This criterion would not be met in the case of guarantees with an advance complaint defense and default guarantees. However, if the guarantee includes the right to provisional payment, that does not matter. According to Art. 183 Para. 1c CRR, it must be issued in writing , it must not be revocable by the protection seller and the protection seller's assets must be seizable by an enforceable judgment . Conditional guarantees / sureties, which specify the conditions under which the guarantor may be released from his obligation to fulfill the guarantee, can be recognized with the appropriate approval of the competent authorities. According to Art. 183 (1b) CRR, the same rules apply to recognized protection providers as to debtors (Articles 171, 172 and 173 CRR), so that the economic situation of the liable protection seller must be examined in the same way as that of the borrower as part of a creditworthiness check. To avoid positive correlations must guarantor neither group terms with the borrower ( English cross-garanties also be connected with the bank).

Furthermore, notification and notification obligations under Art. 108 Para. 3 Clause 1 TFEU ​​have to be fulfilled under municipal law so that guarantees in favor of third parties can come into effect legally.

Failure guarantees

Internationally, an investor can insure the issuer risk from a bond with bond insurers against default. This is common especially in the US, where public debt of states and municipalities a risk of insolvency subject. The investor pays an insurance premium for the bond insurer's default guarantee .

See also

Web links

Individual evidence

  1. ^ BGH WM 1978, 1267
  2. ^ BGH WM 1998, 976 ; In this ruling, the BGH describes the deficiency guarantee as the opposite of an absolute guarantee.
  3. ↑ BGH WM 1999, 173
  4. ^ BGH WM 1978, 1267
  5. ↑ Mathias Habersack (ed.), Münchner Comment BGB , 3rd edition, 1999, § 765 marginal no. 102
  6. ↑ BGH WM 1999, 173, 177
  7. ^ BGH WM 1998, 976, 979
  8. ↑ Thorsten Gendrich / Walter Gruber / Ronny Hahn (eds.): Handbuch Solvableness , 2014, p. 175 FN 38
  9. ↑ Thorsten Gendrich / Walter Gruber / Ronny Hahn (eds.): Handbuch Solvableness , 2014, p. 176