Installment bank

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Installment banks are specialist banks that focus on short and medium-term credit business with consumers .

history

The first installment bank was established in the USA in 1905 with the Mercantile Credit Co. , which dealt with the transfer of outstanding debts against cover. The first classic partial payment bank was the customer credit bank founded on August 30, 1926 in Königsberg by Walter Kaminsky and 20 retailers . This was followed on September 1, 1926 by Kaufkredit GmbH , which worked with the Berlin department store Hermann Tietz and dealt with consumer finance. On November 23, 1926, the first cooperative partial payment company began with the goods credit company of the Hamburg retail trade . The customer credit bank moved its headquarters to Düsseldorf in March 1935 and changed its legal form to a KGaA .

A new situation arose for the partial payment banks after the currency reform in June 1948 and in the period that followed, when a broad field of activity opened up again for them. The range of goods increased suddenly, and in order to sell goods, the sellers often had to offer partial payment options. The working group of cooperative partial payment banks e. V. was founded on September 9, 1950 by 12 cooperative partial payment banks. Despite their success, the partial payment banks in the emerging consumer credit business had to surrender considerable market shares to savings banks and major banks by 1971 and lost their leading position to the savings banks.

The customer credit bank, which has now risen to become the largest installment bank, issued savings bonds as part of the deposit business and opened wage and salary accounts from April 1970. In 1973 it was initially taken over by today's Citigroup at 56% and renamed KKB Kundenkreditbank - Deutsche Household Bank KGaA . After Crédit Mutuel acquired the shares in 2008 , it renamed the customer credit bank to Targobank in September 2010 . The Kundenkreditbank, Noris Konsumerbank and CC-Bank owned 40% of all branches of the installment banks in 1981.

In the meantime, the case law of the Federal Court of Justice (BGH) on the immorality of excessive interest rates in consumer credit agreements from November 1978 hit the installment banks hard. In this context, Hans Giger even claimed in 1984 that the BGH's legal practice had "in fact deprived the partial payment banks of their raison d'être" from 1978 onwards. According to the BGH, partial payment banks preferred customers for “meta-economic reasons” who “despite all efforts to clarify, an interest rate comparison is a 'book with seven seals'”.

tasks

Installment banks are an instrument of sales financing . Your classic focus in the installment business is consumer credit, but there has been a shift to commercial installment credit in recent years. In the book cited, Guido Eilenberger differentiates between five basic types of installment banks:

  1. Sales credit bank for private households ,
  2. Credit bank for private households,
  3. Universal bank for private households,
  4. Sales and investment credit bank for commercial borrowers and
  5. Car banks

You maintain both direct customer financing to the end user and indirect customer financing. With the latter, the supplier is involved in credit processing and establishes the connection to the partial payment bank. They also offer leasing , factoring and hire purchase .

In their early days, the installment institutions developed an ABC subdivision. With A business there is direct customer contact. According to the “Königsberger System”, “goods checks” were issued by the installment bank, handed over to the borrower and passed on to a contracting company. The main case of the third-party-financed installment transaction is the B-transaction , in which the dealer negotiates a loan agreement between the bank and the buyer and the dealer assumes joint liability. In the C-transaction , the dealer issued bills of exchange , which the buyer accepted as a drawee and then discounted by the dealer at the installment bank . Since the Bundesbank has not rediscounted any bills since January 1998 , this business is no longer relevant.

Legal bases

The German Banking Act (KWG) does not know the term “installment banks”. They operate the lending business in accordance with Section 1 (1) No. 2 KWG ; with a full license, they also accept outside funds from the public as part of the deposit business in accordance with Section 1 (1) No. 1 KWG. They therefore belong to the CRR credit institutions within the meaning of Section 1 (3d) KWG.

In the banking statistics of the Bundesbank there was an independent sub-aggregate "partial payment banks" until November 1986, to which in 1961 235 reporting institutions belonged. Their number melted to 89 institutes in 1987. The group of partial payment banks has been managed since December 31, 1986 in accordance with the legal forms of the banking groups “regional banks and other credit banks” and “credit unions”. In 2014, the installment banks had, according to their branch association banking association, lent more than 150 billion euros to consumers and companies and 57 percent of the installment loans.

Banking aspects

As specialist banks, banking management generally assigns a higher entrepreneurial risk to this type of bank with the same size of company than universal banks , because the latter are better able to process economic risks thanks to their wider range of products and customers. The one-sided concentration of the specialist banks on certain banking transactions and / or customers lacks the necessary diversification and spread of risks; there is usually a lack of granularity with a simultaneous risk of cluster risks . This applies in particular to the existing loan portfolio . Special banks may not be able to react to changes in the market, especially if their business purpose is restricted by law. Specialist banks turned out to be "trouble spots", as there is a "considerable coincidence between financial crises and the separate banking system ". Since installment banks only have consumers as borrowers and consumer loans with a high positive correlation to purchasing behavior and the economy , it is not possible to balance risks through other groups of borrowers and industries.

Installment banks, which are not associated with larger companies than “open” group banks in consumer finance, tend to also grant loans to customers who normally would not or would not get a loan from a savings bank or commercial bank . Lending is - as part of a small loan - tied to less strict conditions at installment banks. When lending, however, this usually has to be paid for with considerable interest surcharges.

Installment banks are therefore trying to diversify the risk by shifting to the commercial lending business. Since 1970 they have been able to acquire a full license and are then also allowed to operate the deposit business in order to reduce refinancing costs. The main focus of their refinancing is mostly on interbank loans . The higher interest rate for installment loans is due on the one hand to the higher credit risk and on the other hand to the higher refinancing costs because the more expensive secondary market is available as the main source of refinancing.

Individual evidence

  1. ^ Stefan Kaminsky: The sales financing . In: Hans Janberg (ed.): Financing manual . 1970, p. 531 ( limited preview in Google Book search).
  2. ^ Karl Friedrich Hagenmüller; Adolf-Friedrich Jacob: The banking business . tape I . Gabler, Wiesbaden 1987, p. 134 ( limited preview in Google Book search).
  3. ↑ Ludwig Mülhaupt, Structural Changes in West German Banking , 1971, p. 178.
  4. ^ In: Handelsblatt , No. 75, April 20, 1970.
  5. ↑ BGH NJW 1978, 905
  6. ↑ Hans Giger: Problems of legal finding in the area of ​​consumer credit law . In: DB 1984, 1915, 1917.
  7. ↑ BGH NJW 1968, 2586.
  8. ↑ Guido Eilenberger, Bankbetriebswirtschaftslehre , 2012, p. 125.
  9. ↑ Wolfgang Grill / Ludwig Gramlich / Roland Eller (eds.): Gabler Bank Lexicon: Bank, Börse ,finanz , 1995, p. 1490.
  10. ^ Gabler Bank-Lexikon, 1988, Sp. 2006
  11. ↑ Bundesbank; List of credit institutions , accessed on August 20, 2013
  12. ↑ Facts & Figures 2014. (PDF) Bankenfachverband , accessed on January 23, 2016 .
  13. ↑ George J Benston, Universal Banking , in: Journal of Economic Perspectives Vol 8 (3), 1994, pp. 121-143
  14. ↑ Martin Kohlhaussen , The countries with a separate banking system in particular have proven to be trouble spots , in: Handelsblatt No. 92 of May 13, 1993, p. B12 / B14
  15. ↑ Hilmar Kopper , The universal bank is not a discontinued model: Resistance to crises as a trump card , in: BZ No. 67 of April 5, 1995, p. 26
  16. ↑ installment banks. In: Juramagazin. Retrieved December 25, 2015 .
  17. ↑ Guido Eilenberger: Bankbetriebswirtschaftslehre , 2012, p. 126.
  18. ↑ Guido Eilenberger: Bankbetriebswirtschaftslehre , 2012, p. 232.