German Federal Court of Justice Decision Supports Loan Transfers by German Banks to Funds

January 13, 2012

The financial crisis in 2008 has led to regulatory changes in the financial sector worldwide. The regulatory environment for banks organised in the European Economic Area (“EEA”) in particular has been subject to many material changes since 2008, and further regulatory changes are in the process of implementation by the competent national and supranational authorities.

The assignment of loan receivables (and the sale of the loans themselves) to non-banks in Germany had been subject to uncertainties, both of a regulatory nature and under civil law. Recently, however, the German Federal Court of Justice (Bundesgerichtshof) published a decision that clarified the German civil law aspects regarding such assignments. This article summarizes the regulatory background of the sale of loans (including the assignment of loan receivables) to non-banks, as well as the new decision by the German Federal Court of Justice.