Large loan

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In banking, a large loan is a loan that a credit institution grants to a borrower or to a group of connected customers and the amount of which is considerable. In the EU-wide capital adequacy regulation (English abbreviation CRR), large exposures are used when the loan amount reaches or exceeds 10% of the credit institution's eligible capital (Art. 392 CRR).

General

The designation as "large exposure" indicates that the credit volume to a single borrower or to a group of affiliated customers in relation to the liable equity capital has reached a level that in itself already represents an independent risk , without the borrower's credit risk being examined got to. Large exposures contradict the banking risk policy of diversifying credit risks through the broadest possible spread of risk across a large number of borrower addresses ( granularity ). In the case of large exposures with the risk of being concentrated on a single address, however, the credit risk is not sufficiently diversified. Large loans are therefore one of the cluster risks , where the same high correlation values ​​from a single borrower accumulate. If a large borrower defaults, there is a risk that the bank as a whole will get into trouble.

history

The world economic crisis of October 1929 led to the German banking crisis from May 1931 . The second largest German bank at the time, Darmstädter und Nationalbank , had to accept high credit losses after the bankruptcy of its borrower Nordwolle and closed its counters on July 13, 1931. Further high losses at banks due to risk accumulation triggered the intention of the German legislature to restrict large loans to a borrower. Otto Christian Fischer first proposed in the banking inquiry of November 1934 that the reasonable amount of individual loans should be made dependent on the bank's equity. For the first time, section 12 of the KWG of December 5, 1934, as part of a large loan regulation, stipulated that the Reichsbank's central registry had to record large loans of 1 million Reichsmarks or more. This was the first time that there was an obligation to report loans. The explanatory memorandum complained that “large exposures are being excessively cultivated in all branches of the banking industry” and therefore represent a source of capital misdirection and capital losses. For the Deutsche Bundesbank it was finally “proven that the vast majority of bank insolvencies since 1962 were related to large loans that had become uncollectible”. An amendment to the KWG in March 1976 tightened the large exposure rules even further. The large exposure definition was retained at 15%, but bank sureties and bank guarantees had to be included in full. The individual upper limit for large exposures was reduced from 100% to 75% of the bank's own funds; In addition, the required regulation was formally converted into a mandatory regulation . However, there was still no inclusion of German banking subsidiaries abroad.

In April 1980 IBH Holding acquired the “Wibau” stake from SMH Bank , which has since acted as the IBH Group's house bank and financed the IBH Group's future corporate acquisitions with bank loans . When the global construction crisis also affected the construction machinery trade and thus the IBH Group, the IBH Group had to cope with losses of 212 million DM in 1982. The IBH loan volume at SMH Bank in November 1983 was a total of 898 million DM with bank capital of 110 million DM. This loan volume was eight times the own funds of the bank, which had circumvented the large loan regulations applicable at the time because the IBH loans from the Luxembourgers SMH subsidiary (DM 473 million) did not have to be included in large loans due to a loophole in the law . According to the regulations at the time, only 75% of the own funds were allowed to be lent to a single borrower, which was also complied with domestically. Like the Herstatt bankruptcy , the SMH crisis also had regulatory consequences and triggered a further amendment to the KWG in January 1985. The consequences were that foreign banking subsidiaries were obliged to consolidate large exposures and were further tightened. The individual upper limit for large exposures has been reduced from 75% to 50%, and the upper limit for large exposures has been deleted without replacement. In January 1994, the implementation of the Large Loans Directive took place, according to which large loans now started at 10% (previously 15%) of own funds and the maximum limit for individual loans to a customer or his group was reduced to 25% (50%). The 6th Amendment to the KWG in October 1997 implemented the Capital Adequacy Directive. The large exposures regime now differed on whether a bank to a greater extent in proprietary trading with securities and financial derivatives employed so as and trading book, or is to be regarded as non-trading book institution applies.

According to the legal definition of Section 13 (1) KWG (old version), which was valid until December 2013, a large loan existed if the total loan volume granted to a borrower or his group reached or exceeded 10% of the liable equity of the lending bank ("large loan definition limit"). The law made a distinction between the “single large exposure limit” and the “overall large exposure limit” (Section 13 (3) KWG). While the individual large exposure limit covered all loans to a group of connected customers, the overall large exposure limit applied to all large exposures of a credit institution. The version of Section 13 (1) KWG, which has been in effect since January 2014, contains a legal authorization to make the type, scope, time and form of information in accordance with the provisions of Art 394 CRR. The Austrian counterpart in the new version of Section 75 BWG now regulates - analogous to the German multi-million euro reporting system - reports by Austrian banks in accordance with the Central Credit Register Reporting Ordinance (ZKRMV).

New regulation

Large loans are now implemented across Europe through the Capital Adequacy Regulation (CRR) on the basis of Regulation (EU) 575 / EU of June 26, 2013 or correction, which from January 1, 2014, the content of the previously existing regulations according to § 13 KWG old version (Germany) and Section 75 BWG old version (Austria) replaced.

Reporting requirements

According to Art. 392 CRR, an institution's risk position with a customer or a group of affiliated customers is a large exposure if its value equals or exceeds 10% of the institution's eligible capital. These large exposures must be reported to the responsible banking supervisory authorities in accordance with Art. 394 (1) CRR. In addition to large exposures, according to Art. 394 (2) CRR, the institutions have to report to the banking supervisory authorities their 10 largest loans to institutions and their 10 largest loans to non-regulated companies in the financial sector . The reporting standards are set out in the Commission Implementing Regulation (EU) No. 680/2014 on the establishment of technical implementation standards for supervisory reports by institutions in accordance with the CRR and have the previous large exposure reporting regulations (in Germany, the Bundesbank's information sheet on reports pursuant to Sections 13, 14 of the KWG and GKE guideline of the Austrian National Bank).

Limitation

However, the main purpose of the large exposure regulations is not to display these loans, but to limit these loans due to their high risk to the institutions. Art. 395 CRR stipulates that a large loan to a customer or a group of affiliated customers must not exceed 25% of the creditable own funds of the respective institution. However, according to Art. 400 (1), certain risk positions are excluded from these limitation rules in Art. 395 CRR. This includes loans to countries (especially European government bonds ), central banks and public- with a risk weighting of 0% or from these guaranteed loans (Art. 400 para. 1 CRR) and pledge of bank deposits / savings certificates when lending institution secured loans. Nationally, further risk positions can be excluded from the limitation rules on the basis of Art. 493 (3) CRR. In Germany this was done through § § 1 and § 2 GroMiKV . According to this, fully covered bonds ( e.g. Pfandbriefe ), interbank claims and 50% documentary letters of credit and unused loan commitments cannot be offset against large exposures. The ECB has issued a regulation (2016/445) for the application of the exceptions to the voting rights according to Art. 400 (2) CRR within the SSM, but this is not relevant for German institutes as the GroMiKV applies to them. In addition to the above There are exceptions for small institutions according to Art. 395 (2) CRR, according to which the risk position vis-à-vis a CRR institution can be up to 100% of the credit-granting institution's own funds, up to a maximum of EUR 150 million.

The limit of 25% does not only apply to a single customer, but also to a group of connected customers , which are defined in Art. 4 Para. 1 No. 39 CRR.

Formal criteria

Before a large loan is granted, a unanimous resolution of all managers must be brought about internally in accordance with Section 13 (2) KWG . Managers are the board of directors or management of the bank. This regulation intervenes in the bank's internal competence regulations and requires approval from all managers regardless of the amount of the large loan. However, a loan agreement is also valid if the unanimous resolution of all managers is not available or is invalid. The notification requirements are regulated in Art. 394 CRR, the upper limit for each large exposure (25% of the eligible capital) in Art. 395 CRR.

See also

literature

  • Nikolaus Demmelmair: The large loan, million dollar and organ loan regulations, Sparkassenverlag, 8th edition 2018, ISBN 978-3-09-304790-9
  • Beck / Samm / Kokemoor, Banking Act with CRR . CF Müller Verlag, Heidelberg, loose-leaf collection, commentary on Art. 387-403 CRR, 183rd delivery, ISBN 978-3-8114-5670-9

Web links

Individual evidence

  1. ↑ Joachim von Köppen, The Equity of Credit Institutes , 1966, p. 203
  2. ↑ Christoph Müller, The emergence of the Reich law on credit from December 5, 1934 , 2003, p. 221
  3. ↑ German Bundesbank, the immediate amendment to the Banking Act , in: Monthly Report July 1976, p 19
  4. ↑ DER SPIEGEL 46/1984 of November 14, 1983, You have to have a feel for banking , p. 124 f.
  5. ↑ Joachim K. Bonn, Bankenkrisen und Bankenregulierung , 2013, p. 429
  6. ↑ OJ. EU L 321/6 of November 30, 2013