Creditworthiness

from Wikipedia, the free encyclopedia

Credit (from Latin bona , "assets", from this Latin bonitas "excellence") or credit is in the financial sector of the ability business entity ( individuals , companies or countries with their subdivisions), the recorded debt to repay (economic solvency) and the will to repay them ( willingness to pay ). In the case of issuers of securities , creditworthiness is understood to be the ability to service and repay the issue along with interest . From this it is possible to deduce the probability with which a borrower will be able and willing to make the required repayments.

General

The creditworthiness therefore regularly includes two criteria, of which the economic repayment ability is in the foreground of the analysis. In the personal credit personal is reliability and willingness to pay assessed. The professional and technical qualifications of natural persons as borrowers and of management in corporate financing are of interest here. The economic creditworthiness is about the economic ability based on the past and predictable economic circumstances of the borrower to repay the loan ( debt servicing ability ). For this purpose, data such as proof of income , balance sheets , etc. are used for evaluation.

Creditors , especially credit institutions , must be able to professionally assess and classify their credit risks . For this reason, procedures based on economic and statistical principles have been developed that systematically deal with the determination and subsequent classification of the individual creditworthiness of a debtor ( creditworthiness check ). Without being a creditor themselves, rating agencies also permanently determine the creditworthiness of debtors in order to make their result available to the creditors in return for a rating .

Credit check

Information on checking a company's creditworthiness can be found in numerous sources today. Information required for a reliable credit check can vary depending on the level of risk to be hedged, e.g. B. higher risk trades should be scrutinized more rigorously and extensively than low risk trades. In order to avoid lending to customers / business partners with poor creditworthiness, it is advisable to check the creditworthiness beforehand and to adapt the credit terms of the credit transaction to the result of the creditworthiness check.

A business report offers a wide range of information. Often you can choose between information products of different depths of information - depending on the degree of risk to be hedged. The information serves as a component in the credit check, and it can be useful to combine the information with other sources, such as B. internal data from accounting or information from customer service .

For example, the following data can be contained in a business report:

Rating of creditworthiness

There are no uniform creditworthiness criteria for all debtors. Each debtor more or less fulfills all creditworthiness criteria due to their individual economic situation, so that ultimately an individually graded creditworthiness is the result. These gradations are expressed either in scores or ratings that range from “very good creditworthiness” to “barely acceptable creditworthiness”. In terms of rating, creditworthiness is therefore given if a debtor has just received a rating that is within the scope of the “investment grade”. The Bundesbank therefore designates credit institutions' credit claims as " eligible collateral " if the companies have at least a long-term rating of "BBB-" from the rating agencies.

These credit ratings correlate positively with the statistical probability of default , because a good credit rating means a low probability of default and vice versa. For this reason, specific probabilities of default can also be assigned within the scope of the calibration of a specific rating level. Rating agencies such as " Moody’s " or " Standard & Poor’s " and credit institutes also use such classifications in their own rating procedures, which are based on the institute's own default probabilities. Business information providers such as Hoppenstedt Kreditinformationen GmbH and Creditreform determine the probability of default using a special scoring process. The resulting values ​​of all providers differ only insignificantly. A generally applicable rule for the probability of failure cannot be specified, as this is subject to constant changes. Key figures for the probability of default are obtained from demographic data, macroeconomic data, financial data and payment history, among other things.

Requirements for credit checks at credit institutions

In Germany demanded § 18 KWG by the banks that they shall keep the economic conditions of their borrowers by appropriate loan documents request promptly and evaluate a risk rating. The regulation of Section 18 KWG is a central provision for lending and the associated creditworthiness check, which must be complied with not only formally but also materially. In interpreting this provision, the Federal Court of Justice (BGH) requires banks to make sustained efforts to submit annual financial statements or an asset status with supplementary information and to make the further granting of credit dependent on such a submission, i.e. to terminate the loan if they are satisfied Your legal obligation is made impossible by the further behavior of your customer. If the borrower did not disclose it or not at all in due time, this triggers a reason for termination (see loan agreement ). This obligation protects the credit institutions, but also their creditors .

Art. 144 No. 1a Capital Adequacy Ordinance (CRR) requires a meaningful assessment of every debtor for CRR credit institutions in all EU member states , whereby a rating system must take into account the risk characteristics of the debtor and the transaction (Art. 170 No. 1 CRR) and In the case of credit approvals, each debtor must be assigned a rating (Art. 172 No. 1a CRR). A rating presupposes that the credit institutions have appropriate documents about the assets , debts and income of the borrower. Since the CRR is to be seen as an implementation provision of Section 10 KWG, it is considered a “ lex specialis ” in relation to the KWG , which must be given priority over the general provisions of Section 18 KWG.

The available documents are then evaluated by the loan processing department as part of a credit check . The procedure and the analysis and assessment criteria applied are only roughly defined for regulatory purposes, both in terms of organization and content. The detailed definition and weighting of individual creditworthiness criteria is left to the credit institutions. The MaRisk require credit institutions to fulfill organizational arrangements (design of the operational and organizational structure) to ensure a systematic and proper credit check. In Art. 142, 143 CRR, credit institutions - which create their own ratings - are granted regulatory approval to use the IRB approach for internal bank ratings if all methods, procedures, control and monitoring procedures, and data acquisition and data processing systems support the credit assessment .

Interface providers such as B. creditPass or experian enable creditworthiness inquiries to reduce payment risks, especially in mail order business , but also in other areas, such as real estate trading. However, for reasons of data protection law, a credit check is only permitted if there is a legitimate interest in accordance with the Federal Data Protection Act . This is always given when the person concerned has signaled their interest in initiating business (e.g. by placing an order or submitting an application). In particular, there is a legitimate interest if the person to be checked has requested an offer that requires individual coordination with this person (e.g. for insurance contracts). There may also be a legitimate interest in existing business relationships, for example if the terms and conditions are to be readjusted or if processing takes place in the claims management of the interested party making the request. The registration or enforcement of civil law claims (warning, dunning notice, enforcement) guarantees a legitimate interest. The inquirer himself has to ensure that inquiries are only made if there is a legitimate interest.

Creditworthiness criteria

Each creditor is free to determine and weight the individual creditworthiness criteria. In doing so, he will apply different criteria and weightings depending on his needs and the type of debtor. Financial institutions are also not prescribed by regulatory law which criteria they have to take into account when assigning ratings. The creditworthiness criteria used by rating agencies are largely not public. In general, however, the following minimum criteria can be mentioned, which can be systematized into legal, personal and economic factors:

Natural people
Information on previous loan transactions , income situation (amount, employer , job security ), expenditure situation (rent, loan repayments), financial situation (existing assets), debt situation (loans, assumed liabilities ); Property regime .
Companies
General information from bank statement , credit agency ; Legal form and company statutes ; from the annual financial statements : equity ratio , available cash flow ( cash flow calculation ), cash flow as a percentage of sales, profit or loss situation , quality of management, corporate planning , investment policy , asset and debt situation. The bank indebtedness in the area of millions of loans can be determined via the central bank registry.

Depending on the importance of a criterion, it can have a stronger influence on the rating result compared to other criteria through a higher weighting.

Hard and soft negative features

Negative features are personal data that indicate a bad creditworthiness of the person concerned. The term comes from data protection law and is used there in connection with the legal question of whether a responsible body may transmit known creditworthiness data of a customer to a credit agency. The negative features are to be distinguished from the so-called positive or basic data, which are characterized by the fact that they certify that the person concerned has a positive or no negative payment forecast. However, the details of the delimitation are controversial. The prevailing opinion assumes that negative features are only individual pieces of information that indicate contractual disruptions (e.g. default). This view is countered by the fact that it is unrealistic. Negative features are - according to the opposing view - individual pieces of information that indicate poor creditworthiness. This included not only contractual disruptions, but also personal criteria such as age and place of residence.

A distinction is made between hard and soft negative features within the negative features. Hard negative data are conclusive information about the creditworthiness of the person concerned. The main feature is a judicial confirmation. Examples are the opening of insolvency proceedings, the submission of an affidavit or foreclosure measures. However, a final judgment is also sufficient. Soft negative features are information on the creditworthiness of the person concerned with little informative value. Its main characteristic is a unilateral exercise of rights by a contractual partner. Examples are the application for a dunning notice, the filing of a lawsuit or an out-of-court warning.

According to the old legal situation, this differentiation became more important when it came to the question of whether a bank or any other company was allowed to transmit individual customer information to a credit agency. This initially depended on whether there was a positive or a negative feature. Negative features were only allowed to be transmitted if the bank's interest in disclosure outweighed the customer's interest in confidentiality, cf. Section 28 (1) sentence 1 no. 2 BDSG . A predominance of the disclosure interest was assumed by case law in the presence of hard negative features; for soft features this had to be positively determined. Since with positive features i. d. As a rule, there was no overriding interest in disclosure, their transmission could only be justified by consent .

According to the new legal situation that has been in force since April 1, 2010, the differentiation between hard and soft features has been transferred to the new Section 28a of the BDSG. According to this, the transmission of hard negative features defined there is permitted (cf. Paragraph 1 No. 1 to 3); the transmission of soft negative features is only permitted under strict conditions (e.g. announcement of the transmission) (cf. para. 1 no. 4 to 5). In addition, § 28a BDSG requires that the claim is due and open and that the transmission is also necessary to safeguard the legitimate interests of the responsible body or a third party.

Effects of credit rating

Credit ratings based on the above creditworthiness criteria are carried out both when the credit is granted for the first time and continuously while the credit is being granted. Both have the purpose of determining the current credit risk of a debtor based on a rating. This rating is - in addition to any loan collateral - the essential factor for capital adequacy. In addition, the initial rating and subsequent rating migrations affect the core capital ratio of a credit institution because they are part of the denominator in the calculation formula.

The loan interest also depends on the amount of equity to be backed by the bank for a loan, because this includes a creditworthiness-dependent risk premium. If you have a good credit rating (or good loan collateral), the loan interest tends to be lower and vice versa.

A deterioration in the creditworthiness of existing loans can trigger certain consequences in loan agreements via corresponding rating downgrades. On the one hand, automated credit margin increases can occur, on the other hand, additional collateral or even credit termination rights come into force. The starting point is the significant deterioration in the financial situation (= creditworthiness), as standardized in Section 490 (1) BGB .

Suppliers and Insurance

In addition to credit institutions, two other large groups of non-bank companies deal with creditworthiness, suppliers and insurance companies (especially credit insurance companies ).

With demands from supplies and services the creditworthiness of plays debtor an important role. Supplier credits arise as soon as the risk of a delivery of goods has passed to the debtor and the debtor has not paid immediately. The credit risk inherent in this can be mitigated or eliminated if the suppliers postpone the transfer of ownership by means of retention of title until full payment has been made or if the supplier demands advance payment . The credit rating can change during the term of the supplier credit. Changes in the creditworthiness of the debtors must be recognized in good time and, if appropriate early warning indicators occur (e.g. exceeding the payment term ), the creditor must take appropriate measures (e.g. adjustment of the payment method).

Credit insurances insure these supplier credits and thus assume a credit risk similar to that of credit institutions, because they have to deal with the default risk of a delivery claim. The insured event is the bad debt loss , which first affects the policyholder and then the credit insurance as part of a claim settlement .

criticism

Creditworthiness and its classification according to ratings is accessible to subjective influences. Both the selection of the creditworthiness criteria and their weighting contain subjective characteristics. Therefore, the credit rating carried out by a creditor or a rating agency can only be objectively checked to a very limited extent. The past-oriented selection of creditworthiness criteria, which can only be extrapolated into the future to a very limited extent - and this is where the probability of default belongs - is also criticized . As an alternative, other methods for determining creditworthiness have therefore been developed. These include, among other things, the insolvency forecast procedure or “Extra Financial Research”. The former are used to determine with the help of probabilities whether debtors will become insolvent within a certain period of time (typically one year). The latter deals with influencing factors from the areas of environment ( English Environment ), society and employees ( English Social ) and corporate management ( English Governance ), summarized in the formula "ESG". The focus is on important, non-financial ( English extra financial ) variables, because the classic creditworthiness analysis often only shortens or insufficiently presents a company's future viability.

Criminal and civil protection in Germany

Debtor that the loan application make false statements about their creditworthiness, fulfill the facts of credit fraud ( § 265b of the Criminal Code ). Because of defamation after § 187 punishes the Criminal Code, who against his better knowledge in relation to another an untrue fact asserted or disseminated, which make the same contempt or denigrate in public opinion or its credit compromising appropriate.

Under civil law, a credit-damaging, untrue factual assertion obliges to pay damages according to § 824 BGB as for example in one of the largest German economic lawsuits by Leo Kirch against the Deutsche Bank .

Austria

In Austria too, creditworthiness is the starting point for many contractual decisions, both with regard to consumers and entrepreneurs . A differentiation - as outlined above - between positive and negative features or hard and soft negative features is not unknown to Austrian law; However, the Austrian Data Protection Commission rejects such a legal consequence that the transmission of hard negative features to credit agencies is regularly permitted.

See also

Individual evidence

  1. ^ Deutsche Bundesbank: Assessment of the creditworthiness of companies by the Deutsche Bundesbank in the context of the refinancing of German credit institutions. Short report from April 2014 (see p. 4) and archived copy ( memento of the original from December 29, 2014 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. detailed version from May 2010 (see pages 6 and 21 of 38). @1@ 2Template: Webachiv / IABot / www.schwaben.ihk.de
  2. ↑ Thomas Wolke, Risk Management , 2008, p. 191, ISBN 978-3-486-58714-2 .
  3. ^ Standard & Poor's: Rating Methodology: Evaluating the Issuer. February 2002.
  4. ↑ a b BGH judgment of March 1, 1994 , Az. XI ZR 83/93, full text; WM 1994, 838 = NJW 1994, 2154.
  5. ↑ Information on the credit check ( memento of the original from January 26, 2010 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. .  @1@ 2Template: Webachiv / IABot / creditpass.de
  6. ↑ Manfred Wächtershäuser, Credit Risk and Credit Decision Making in Banking Operations , 1971, pp. 123 ff., ISBN 3-409-40012-5 .
  7. ↑ a b Stephan Gärtner: Hard negative features on the test bench of data protection law. A legal comparison between German, English and Austrian law (= series of publications on personal rights . Volume 5). Kovač, Hamburg 2011, ISBN 978-3-8300-5418-4 , p. 26 f.
  8. ↑ Dammer / Neuburger / Picot / Theurl, Grundlagenschrift, publisher: Schufa Holding AG, May 2007 (role of information and transparency in market processes - an economic analysis with special consideration of data protection) p. 41.
  9. ↑ Stephan Gärtner: Hard negative features on the test bench of data protection law. A legal comparison between German, English and Austrian law. Publishing house Dr. Kovac, Hamburg, 2011, p. 27.
  10. ↑ cf. for the entire section Stephan Gärtner: Hard negative features put to the test of data protection law. A legal comparison between German, English and Austrian law. Kovač, Hamburg, 2011, p. 27.
  11. ↑ OLG Koblenz , judgment of 23 September 2009, Az. 2 U 423/09, MMR 2010, 277 f. (red. guiding principle and reasons).
  12. ↑ BGH, judgment of January 24, 2006 - XI ZR 384/03
  13. ^ Settlement in legal dispute: Deutsche Bank pays Kirch heirs more than 775 million euros Der Spiegel , February 20, 2014.
  14. ↑ cf. for the entire section Stephan Gärtner: Hard negative features put to the test of data protection law. A legal comparison between German, English and Austrian law. Publishing house Dr. Kovac, Hamburg, 2011, p. 70.
  15. ↑ DSK, recommendation (reference number K211.773 / 0009-DSK / 2007).

literature

  • Stephan Gärtner: Hard negative features put to the test of data protection law. A legal comparison between German, English and Austrian law (= series of publications on personal rights . Volume 5). Kovač, Hamburg 2011, ISBN 978-3-8300-5418-4 (dissertation HU Berlin 2010, 457 pages).
  • Dieter Thormählen, Swen Hansen: Efficient credit processes in the consumer credit business using the example of the branded product easyCredit. In: Alexander Suyter (Ed.): Risk management: current developments and effects on banks and companies. Knapp, Frankfurt am Main 2004, ISBN 3-8314-0764-9 , pp. 3-24.
  • Federico Ferretti: The Law and Consumer Credit Information in the European Community - The Regulation of Credit Information Systems. Routledge-Cavendish, London / New York, NY 2008, ISBN 978-0-415-46073-6 .
  • Arne Dammer, Rahild Neuburger, Arnold Picot, Theresia Theurl: Grundlagenschrift, publisher: Schufa Holding AG, May 2007 (role of information and transparency in market processes - an economic analysis with special consideration of data protection).
  • Herbert Schimansky, Hermann-Joseph Bunte, Hans-Jürgen Lwowski (eds.): Banking law manual. 3rd edition, CH Beck, Munich 2007, ISBN 978-3-406-54293-0 .
  • Matthias Casper: General Terms and Conditions (AGBBanken / AGB-Sparkassen). In: Peter Derleder, Kai-Oliver Knops, Heinz Georg Bamberger (eds.): Handbook on German and European banking law. Springer, Berlin / Heidelberg / New York, NY 2004, ISBN 3-540-00944-2 , pp. 27-84.