Back-to-back financing
The back-to-back financing is a financial instrument in which a company a credit institution , a financial investment provides that the bank is congruent to the company or its subsidiary forwards.
origin
Back-to-back financing was an early method of money laundering in the United States in the 1930s, the founder of which is believed to be the mobster Meyer Lansky . With the help of parallel loans , he tried to transfer his illegal assets located abroad back to the USA for consumption purposes. The illegal assets served as security for a loan that could be used legally.
Case constellations
So-called back-to-back loans represent a cross-border modification and further development of the parallel loan . A typical case constellation for back-to-back loans is when a German company intends to grant loans to its foreign subsidiary, but because of the foreign legislation ( foreign exchange restrictions ) is prevented from doing so because of the prohibition of shareholder loans in private international law . Instead, the German company engages a bank and provides it with a financial investment that the bank forwards as a bank loan to the foreign subsidiary - with a credit margin for the bank.
Multinational corporations vary this cross-border back-to-back loan through different currencies , the exchange rate risks of which are hedged by currency swaps. These currency swaps were originally created from back-to-back loans.
Loan protection
The lender bank secured usually their back-to-back lending to the foreign subsidiary by pledging the deposited by the parent company investment. In doing so, it must be ensured that collisions with international private law are avoided and access to the pledged deposit is possible as soon as the subsidiary no longer serves the back-to-back loan in whole or in part . In addition, there must be no offsetting situation between the financial investment and the loan to the subsidiary at the bank , because both transactions that extend the balance sheet are economically related. If the bank is exposed to a political risk when lending to the foreign borrower , the domestic parent company must ensure that the risk is balanced out (e.g. in the context of a loan application ).
Circumvention
Back-to-back financing is particularly important in tax law as circumvention arrangements , for example when applying the final withholding tax that has been in force since 2009 ( Section 32d (2) No. 1c EStG ). According to this, the interest income from the investment is not taxed with the flat-rate withholding tax, but with the individual income tax rate of the investor.
See also
Individual evidence
- ↑ Alexander Bittmann, Washing program - crime is worth it , 2003, p. 86
- ^ A b Andreas Oehler , Matthias Unser: Finanzwirtschaftliches Risk Management , 2002, p. 124.
- ↑ Susanne Czech-Vinkelmann: Handbuch International Business , 2008, p. 321.
