Guarantor liability
In Germany, guarantor liability is a subsidiary liability of the guarantor of a federal, state or municipal institution under public law, based on the law and / or the articles of association , in the event that their assets are insufficient to meet the demands of their creditors .
General
In this exceptional case, every creditor has a claim to the fulfillment of his claim against the public institution by the respective institution (the municipality , the federal state or the Federal Republic of Germany ). The aim of the guarantor liability is that the permanent solvency of the establishment as a legal entity under public law established by its sponsor is guaranteed as well as that of the sponsor itself. Unless regulated in the respective statutes, the guarantor liability is provided for by law (e.g. § 114a para. 5 NRW municipal code). However, since all institutions are equipped with sovereign tasks and in this function exercise the right (legally or under the articles of association) to levy taxes or fees and at the same time are subject to the cover and self-financing principle, the occurrence of a liability case of a guarantor liability is rather unlikely. Guarantor liability and Anstaltslast form the liability system typical of German public administrative organization law for public companies in the legal form of an institution under public law and lead to their inability to become insolvent .
history
According to the “revised city regulations” of March 17, 1831, the establishment of savings banks required the approval of the district president , because the acceptance of savings deposits was considered to be a loan from the respective sponsoring municipality requiring approval . Savings banks were an organizational part of their community, so that the investments accepted by the savings banks were classified as liabilities of the community. As a result of the banking crisis in 1931 , the “Ordinance for Securing Economics and Finances” of October 6, 1931 under Art. 1 § 2 NotV3 brought the savings banks to independence, because they were now given the legal form of the communal institution under public law. As long as the savings banks were an organizational part of the municipalities, the municipalities were liable for the liabilities of the savings banks as for their own liabilities. The guarantor liability also had its origin in this Reich Emergency Ordinance. The reason for the introduction of the guarantor liability was that the creditors should not lose their communal liability for the liabilities of the Sparkasse by making the savings banks independent and thus their previous status should be retained.
Guarantor liability for state banks and savings banks
In contrast to the above-described federal and state direct or municipal institutions under public law in the non-banking sector , savings banks and state banks as credit institutions are subject to general competition in the credit industry. However, this guarantor liability gave the beneficiary credit institutions a competitive edge, for example in terms of refinancing costs, because of their relatively good long-term ratings compared to private banks .
As early as 1996, the Monopolies Commission spoke out against guarantor liability because savings banks no longer had a public contract that could represent a consideration for an unrestricted commitment of liability. After the Association of German Banks had lodged a complaint with the competition authority of the European Commission in December 1999 and assumed that the guarantor liability constituted prohibited state aid according to Art. 107 (1) TFEU , the competition authority opened a formal one on January 26, 2001 Investigation procedure. The longstanding disputes were finally settled by a decision of the European Commission on March 27, 2002 addressed to the Federal Republic of Germany . The federal government adopted this decision on April 11, 2002. The agreement reached on July 17, 2001 between the European Commission and Germany and the conclusions drawn from it on February 28, 2002 by both sides are taken into account. The key points of this Brussels Concordance were the elimination of institutional burden and guarantor liability at savings banks and Landesbanken.
As part of a grandfathering - during a transitional period from July 19, 2001 to July 18, 2005 - new liabilities were still subject to guarantor liability, provided they did not fall due after December 31, 2015.
Changeover
This “Brussels Concordance” of July 17, 2001 provided that after this multi-year transition period, the institutional burden, as it existed until then, would be replaced and the guarantor liability for savings banks and Landesbanken abolished. The sponsorship and liability are now regulated in the regional savings bank laws in such a way that the sponsor is neither obliged to make funds available to the Sparkasse, nor is the sponsor liable for the Sparkasse's liabilities (e.g. Section 7 (2) of the Savings Bank Act NRW).
Liabilities before the start of the transition phase on July 19, 2001 are fully subject to guarantor liability. Liabilities with a term up to a maximum of December 31, 2015, which were entered into during the transition phase (July 19, 2001 to July 18, 2005), are also subject to guarantor liability. Liabilities that are entered into after the transition phase or in the transition phase with a term beyond December 31, 2015 are no longer subject to the guarantor liability.
For the period after the guarantor liability has ceased to exist, the rating agency Moody’s has given the savings banks, Landesbanken and Landesbausparkassen a minimum rating of A1 (so-called “rating floor”) in recognition of the solidarity-based Sparkassen-Haftungsverbund .
Banking impact
In connection with the Brussels Concordance, banking management discussed two effects that resulted from the elimination of guarantor liability. On the one hand, the market discipline effect ensures that the creditors of public banks actually bear a risk of loss for their invested capital once the guarantor liability has ceased . This gives them an incentive to limit the bank's risk-taking . On the other hand, there is the so-called franchise value effect . According to this, the elimination of guarantor liability increases the refinancing costs of the institutions concerned due to the higher risk of default . This decreases the present value of all future profits ( English franchise value ). With a lower franchise value , however, the willingness to take on more risk increases because the bank has less to lose. This could actually be observed at some Landesbanks from 2002 onwards.
These effects have the following effects on the business of the savings banks / Landesbanken:
- The increased funding costs result in loan losses - at competitive conditions remaining constant lending rate - to lower interest margins and these in turn to lower profits . The credit conditions of the savings banks can tend to be similar to those of the private banks.
- In the deposit business , an increasing is market share possible because higher credit interest can be offered.
- Since the savings banks now also have to bear the full refinancing costs, an increasing risk-return orientation in the lending business, which is desired by banking operations, is conceivable.
- In order to improve the ratings, savings banks are trying to increase the liable capital .
Unchanged guarantor liability
In favor of the other federal, state and municipal institutions under public law, the institutional burden and guarantor liability remain unchanged in the previous scope, provided they fulfill federal administrative tasks or tasks of municipal services of general interest . These tasks are not subject to competition and were therefore not covered by the “Brussels Concordance”. Therefore subject to a variety of local businesses, especially the municipal company to continue the devout protective guarantor liability. The German federal and state-owned development banks have also been allowed to retain Anstaltslast, guarantor liability and / or state refinancing guarantees within the framework of Understanding II since April 11, 2002 .
Individual evidence
- ↑ Thomas Brszoska: The public-law savings banks between the state and municipalities. 1976, p. 85
- ↑ Thorsten Wehber: guarantor liability and Anstaltslast - a historical review. In: Journal for the entire credit system , 2005, p. 753
- ↑ Börsen-Zeitung No. 127, 1996, p. 1
- ↑ Mark Jeffrey Flannery: Could publication of bank CAMEL ratings improve market discipline? 1998, p. 244
- ↑ Thomas F. Hellmann, Kevin C. Murdock, Joseph E. Stiglitz: Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough? In: American Economic Review 90 (1), 2000, pp. 147-165
- ↑ Federal Ministry of Finance of April 4, 2002, State Aid No. E 10/2000 - Germany Anstaltslast and guarantor liability , reference number EC 3 - F 2505-93 / 02
- ↑ Federal Ministry of Finance of April 12, 2002, Anstaltslast and guarantor liability; Decision of the European Commission of March 27, 2002 , reference EC 3 - F2505-104 / 02
