Loan restructuring

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Under loan restructuring ( English loan restructuring , loan recovery ) is understood in the banking system , all measures which the borrowers of non-performing loans should enable the debt service for their loans back under the contract to be provided.

General

Loan restructuring is a sub-area of problem loan processing . It ties in with payment defaults in debt servicing , which have led to a borrower in arrears . The existing at a bank exposure is referred to as "frozen credit" of a dubious claim is true and written off must be. This results in possibly bad debts , which at banks to lost profits or even losses can result. To avoid this, lenders have the following options:

With the exception of loan processing, all other options are aimed at continuing the loan.

Thomas Hartmann-Wendels understands loan restructuring as "those measures that are taken by the bank in negotiations with the borrower and other creditors in order to get a bad loan back on the right track". For him, the loan restructuring includes measures with the help of which a non-performing loan is to be cured again.

activities

As with general restructuring , loan restructuring also includes measures that are intended to bring about economic recovery for the borrower. If he is in default with repayments and / or loan interest or if another credit event occurs and the bank has decided to refurbish the loan, the following measures - graded according to the advantages for the borrower - come into question:

  • Standing still : The lender does nothing even though the borrower is late in servicing all or part of the debt or repeatedly. In particular, the bank holds all or part of unused loan commitments openly speaks no credit termination and does not proceed to the recovery of any collateral .
  • Deferral : It means that the debt service must be provided by the borrower in whole or in part at a later point in time than that provided for in the loan agreement .
  • Debt rescheduling : it is intended to relieve the debtor's debt situation and restore his debt service capacity .
  • Recovery loan: is an additional loan that is made available on the basis of a recovery plan. The reorganization plan must contain the positive prognosis - certified by an expert - about the reorganization ability and reorganization worthiness of a borrower.
  • Renegotiation of the loan agreement : The loan terms of the original loan agreement are adjusted to the difficult economic circumstances of the borrower.
  • Interest waiver is the total or partial waiver of loan interest .
  • Debt relief is all or part of debt relief .
  • Cooperation with several lenders within the framework of a pool contract , through which the loans and loan collateral are bundled and common interests are pursued vis-à-vis the borrower.
  • A subordination can prevent over-indebtedness or under certain circumstances
  • Conversion of the loan into an equity stake : From the point of view of the borrower, this conversion turns the previous debt capital into - no longer repayable - equity , the bank is no longer a lender, but a partner .

These measures can be used in isolation or in combination for loan restructuring.

organization

Due to its specific areas of responsibility, loan restructuring requires special specialists , so that this specialist area has to be managed as an independent organizational unit . In addition to the loan processing (responsible for new loans and renewals ), the credit analysis (responsible for credit analysis ) and the loan processing (responsible for debt collection and recovery of loan collateral ) the loan restructuring is part of the back office . Compared to loan processing, it is more expensive, can hardly be automated and requires a higher level of personnel intensity .

Outsourcing to external service providers

Over the past few years, banks have outsourced non-performing loans to external loan service providers . On the one hand, this is due to the fact that, due to downsizing and restructuring after the banking crisis of 2008/2009, many credit institutions do not have sufficient human resources available for extremely high-risk engagements that require intensive care. On the other hand, the negotiating positions of the former contractual partners (i.e. customer and credit institution) are in many cases so deadlocked that a financial intermediary - detached from the positions of the former contractual partners - can work out amicable solutions between the contractual partners. The outsourcing can take place in the form of a loan sale or a servicing order. In the event of the loan being sold, the bank immediately receives a purchase price for the bad loan and assigns all rights from the contract to the service provider - who are now the new creditors. In the case of a servicing order, the bank receives all incoming funds minus the service fees. In the case of a servicing agreement, communication between the creditor and the servicer is important.

Significance in Germany

Loan restructuring has become much more important in the German banking industry since the beginning of 2000 than settlement. The main reason for this is the increasing awareness on the capital market side that pure foreclosure usually brings worse results than an approach with a different approach. Then there is the experience that the most strong contractual position then uses the lender nothing if particular hesitation, fear of timely and necessary value adjustments or concerns about the implementation and utilization despite (high) impairment , ultimately draw a total loss (a English collateral damage ).

Law of obligations reform

With the reform of the law of obligations , which came into force on January 1, 2002 , the legislature made a very significant contribution - especially for future restructuring cases . Previously, the calculated interest rates on loans and mortgage loans in particular were hotly controversial because there were frequent surcharges on the usual market rate . From now on, only the following interest rates may be calculated for terminated credits and loans.

Consumers (private individuals)

The base rate is set anew on January 1st and July 1st of each year by the Deutsche Bundesbank.

It should be noted that there is a so-called compound interest ban . That is, canceled loans are not, such as B. Current overdrafts , billed monthly or quarterly, with the accrued interest added to the loan, but updated for the duration of the loan termination without interim settlement, and only at the end the accrued interest is added to the loan.

When a loan by real estate liens ( mortgages , land charges or mortgage is secured) to rank first place and the hedging after careful determination of the market value to 80% of the loan value mortgaged is, this credit is usually a mortgage to assess, which agreed for the original Interest rate can be of very considerable importance because under certain circumstances the loan may be immoral due to usury of interest rates .

Corporate loans

This legally clear definition of the debt interest to be calculated on canceled loans - especially in the case of private mortgage loans and overdrafts - usually allows efficient loan restructuring, since the interest rates are usually below the previously calculated loan interest, so the debtor is initially relieved.

Renovation support

In legal contexts, one speaks of restructuring support when specialized lawyers support indebted borrowers in their financial restructuring. The tasks of a lawyer include the correspondence with financing banks, the accompaniment of bank discussions and the professional implementation of settlement negotiations.

background

If investors suffer high losses through high-risk capital investments such as junk property , claims can possibly be made against the seller, advisor or the financing bank. In principle, a lawsuit for investors is always associated with considerable risks. An alternative to legal action, even after the statute of limitations for legal claims, are negotiations in which the bank and the investor work together to find an economic solution. If those affected do not conduct these negotiations alone and seek the legal support of a specialist lawyer for banking and capital market law instead of a government debtor adviser for discussions with the financing bank , this is professional restructuring support.

target

The aim of the restructuring support is to find an individual arrangement with the financing institutions with regard to a risky financial product and the credit associated with it, in order to significantly improve the debtor's economic situation. Ideally, through restructuring support, amicable solutions in the form of condition adjustments or even a complete or partial waiver of claims by the financing bank can be achieved.

Loan Rehabilitation Goals

Non-performing loans are given the worst rating by rating agencies and credit institutions (default or partial default , English default ) and must in all EU member states within the framework of the minimum capital requirements for credit risks according to Art. 122 para. 1 Capital Adequacy Ordinance (English abbreviation CRR) as a "credit rating 6 “for loans to non-banks are backed by 150% of their nominal amount with own funds , therefore have a heavy burden on equity and make future lending business more difficult . It is therefore in the interests of the banks when these loans are trying through the available measures, the credit quality of their borrowers back to the credit level of investment grade (English investment grade raise), which only makes do with 100% or even 50% equity exposure.

Individual evidence

  1. ↑ Credit claims are increasingly being transferred to debt collection agencies or factoring companies for loan processing.
  2. ↑ Thomas Hartmann-Wendels / Andreas Pfingsten / Martin Weber, Bankbetriebslehre , Volume I, 1998, p. 222
  3. ↑ Thomas Hartmann-Wendels / Andreas Pfingsten / Martin Weber, Bankbetriebslehre , 2010, p. 590
  4. ↑ Volker Römermann / Jan-Philipp Praß, The new restructuring law for companies , 2012, p. 45
  5. ↑ Volker Römermann / Jan-Philipp Praß, The new restructuring law for companies , 2012, p. 46
  6. ↑ Volker Römermann / Jan-Philipp Praß, The new restructuring law for companies , 2012, p. 47
  7. ↑ Thomas Hartmann-Wendels / Andreas Pfingsten / Martin Weber, Bankbetriebslehre , Volume I, 1998, p. 223
  8. ↑ Larry Cordell / Karen Dynan / Andreas Lehnert / Nellie Liang / Eileen Mauskopf, The Incentives of Mortgage Servicers , in: Uniform Commercial Code Law Journal, Volume 41, 2009, p. 362 f.
  9. ^ BGH, judgment of June 20, 2000, Az .: XI ZR 237/99