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Loan Origination by Foreign Investment Funds in Germany

Updated: Jan 27


Originating loans in Germany is a banking service that generally requires an authorisation (license) by the German supervisory authority BaFin. Foreign managers of alternative investment funds (AIF) should therefore carefully assess whether providing loans to German borrowers falls under German financial regulation. If this is the case, a specific exemption rule might be applicable.



Loan Origination as a Banking Service


Loan origination is a banking service under the German Banking Act (Kreditwesengesetz, KWG) and legally defined as the granting of money loans and acceptance credits.


BaFin generally adapts civil law principles when interpreting the business of granting money loans. Decisive is whether the loans in question correspond with the loan in the sense of § 488 of the German Civil Code (Bürgerliches Gesetzbuch, BGB).


This implies, for example, that the repayment claim must be for money. Anyone who gives money and is to receive securities, objects or rights back at the end of the term (without at least optionally being granted the option to insist on a repayment in money) does not hereby grant a loan. However, the agreement that the borrower has the right to refer the lender to the items provided as security after the end of the term, or another right of substitution granted contractually in favour of the borrower, does not exclude a loan agreement, as long as the claim for repayment is fundamentally in money. Even a subsequent agreement to settle a loan by delivering securities, goods, or rights does not retroactively eliminate the conduct of banking business.


When determining the legal nature of an agreement, BaFin regards the following factors irrelevant: (a) whether interest is stipulated, (b) whether the lender is instructed to disburse the funds to a third party at the borrower's direction, (c) the type and extent of collateral provided and (d) whether the loan is refinanced with external funds or backed by the lender's own resources.


There are, however, peculiarities in special cases. Kronsteyn will assist you in determining whether your specific activities qualify as loan origination under German law.



Loan Origination in Germany


Loan origination falls under German regulatory law when it is performed 'in Germany'. The decisive factor is generally the manner in which the negotiations relating to the loan have been initiated.


If the foreign entity specifically targets the German market to offer loan agreements repeatedly on a commercial basis to companies or persons that have a registered office or habitual residence in Germany, BaFin generally considers this to constitute lending activities that typically require an authorization (license). By contrast, merely maintaining existing client relationships or concluding loan agreements at a client's own initiative (reverse solicitation) do not constitute an activity in Germany.


If you provide loans in Germany and rely on the principle of reverse solicitation, it is advisable to have a Cross-border Services Policy in place. Kronsteyn can provide you with such a policy upon request.



Exemption for Foreign Investment Funds


Managers of certain alternative investment funds (AIF) are generally allowed under German law to also provide loans under their existing asset management authorisation (license) without requiring an authorisation under the German Banking Act (KWG). This exemption under the KWG generally also applies to a foreign alternative investment fund manager (AIFM) insofar as it carries out as banking activity only collective asset management, including, where applicable, the granting of money loans, or, in addition, only certain AIFMD services or ancillary services, if:


  • the AIFM is situated in a member state of the European Union (EU) or the European Economic Area (EEA) and is an AIFMD or UCITS management company, or

  • the AIFM is situated in a state outside the EU/EEA and the AIFM has made a marketing notification to BaFin under the German private placement regime for retail investors. Note that the non-EU/EEA AIFM will have to comply with AIFMD and certain German gold plating provisions, including investment limits for loan origination depending on the specific type of AIF concerned. Such investment limits are likely to change when Germany implements AIFMD II in April 2026 as it contains specific provisions for loan-originating AIF.



Handbooks for Foreign AIFM


If you are a foreign AIFM and are interested in learning more about the permissibility of marketing foreign AIF in Germany either under the European passport regime or the German national private placement regime, please refer to one of the following handbooks:




Kronsteyn Services


The German law firm Kronsteyn can assist you in determining whether your specific activities fall under German regulatory law and find solutions that fit most to your intended business model. Kronsteyn can also guide you through the marketing notification procedure to ensure compliance with German regulations. Please refer to Hendrik Müller-Lankow for any queries.

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