Economic and regulatory changes have sparked renewed activity in debt and other non-strategic-asset sales by financial institutions, particularly in Europe. This Legal Update provides an overview on new legislation and proposals in several jurisdictions throughout Europe. We outline what these changes mean for market participants – be they buyer, seller, financial institutions or new players in the market such as insurance companies.

Germany: The German refinance register as a new instrument in loan portfolio transactions for insurance companies

In the latest draft of the amendments of the German Banking Act (Kreditwesengesetz, KWG) i.e. the CRD IV-Implementation Act recently published, a new element in the refinance register provisions is contained.

The goal of the new provisions is to allow “insolvency- proof ” access by insurance companies to the relevant assets of the originator/seller of the loan and security in the event of the originator’s insolvency without requiring a German law transfer of title to such asset. It is expected that the new ruling will probably come into force beginning 2013.

In order to achieve this aim, the new legislation will extend the refinance register for insurance companies which shall allow assets of the originator/seller to be registered in a refinance register for the benefit of a creditor to be claimed by such creditor in the event of the originator’s insolvency. In the current version of the KWG, insurance companies cannot directly benefit from this regime.

The new regime would also allow to reduce costs for insurance companies if they use this tool for loan portfolio transactions in the secondary market.


In general, if a refinance enterprise has either (i) a claim on the transfer of receivables against the refinance enterprise or (i) a claim on the transfer of land charges or mortgages against the refinance enterprise securing receivables, then such assets are eligible for registration in a refinance register which will be kept by such refinance enterprise. The same applies with respect to registered liens on aircrafts and ship mortgages.

Under the current legal regime, the refinance register will be kept by the refinance enterprise itself (provided the refinance enterprise is a credit institute or another entity listed in Sec. 2 para. 1 No. 1 to 3a of the German Banking Act). If the refinance enterprise is not authorized for keeping a refinance register, the refinance register will then be kept by another credit institute or by KfW.

Assets not subject to German law could also be eligible for registration provided that the originator has the legal capacity to transfer title to such asset.

In the event that insolvency proceedings are commenced against an insolvent enterprise which keeps a refinance register not exclusively for third party assets, the insolvency court will appoint upon application of the German Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) one or two trustees (Sachverwalter) of the refinance register. The regulator BaFin may also appoint one or two trustees of the refinance register in case of a threat of insolvency. The appointment as well as the withdrawal of the appointment of the trustee of the refinance register will be publicly announced and will be registered in the commercial register. The trustee of the refinance register will be supervised by the insolvency court. The insolvency administrator and the trustee of the refinance register have to exchange all information which are required for the administration of the assets registered in the refinance register. As far as the enterprise keeping the refinance register was entitled to administer the assets, such administration right as well as the right to transfer title or to encumber such registered assets passes to the trustee of the refinance register; furthermore, the trustee of the refinance register may use in coordination with the insolvency administrator the infrastructure of the register keeping enterprise which is required for the administration of the registered assets. The fact that the trustee of the refinance register may continue to use the servicer’s infrastructure will reduce for securitization transactions the need for replacing a servicer by a substitute servicer ins case of servicer’s insolvency provided that such servicer kept a refinance register.

Assets of the refinance enterprises and of the refinance arrangers which have been properly registered in the refinance register are deemed to be an asset of the beneficiary in the case of the insolvency of the owner of such asset. Notwithstanding of the registration of an asset in the refinance register, a registered asset may be assigned or encumbered by the owner of such asset.

The proper registration of an eligible asset in the refinance register entitles the registered beneficiary to object and offers a defense to an enforcement or commencement of insolvency procedures impairing the beneficiary’s rights. The main effect of an asset registration in a refinance register is that the beneficiary may claim separation in the event of the originator’s insolvency (Aussoderungsrecht) within the meaning of the German Insolvency Code.

Before the envisaged amendments to the KWG, only, inter alia, special purpose vehicles, refinancing intermediaries and mortgage and credit banks were favored by the Refinance Register. The circle of eligible assignees was considerably expanded to comply with the current market expectation movements. Under the new regime insurance companies, especially German insurance companies, will benefit from the Refinance Register also.

Spain: “Bad Bank creation”

The Royal Decree-Law 24/2012, of August 31, on restructuring and resolution of credit institutions (hereinafter, “RDL 24/2012”) was published in the BOE (Spanish State’s Official Journal) on August 31, 2012, and it is primarily intended to regulate early intervention measures for restructuring and resolution of credit institutions in order to protect the stability of the financial system while minimizing the use of public resources.

In addition, the new regulation not only modifies the bank restructuring framework, but also sets out additional rules that have an impact on all institutions. Within three months from the entry into force of RDL 24/2012, the FROB (The Spanish Fund For Orderly Bank Restructuring) shall incorporate an asset management company (AMC) aimed at acquiring the assets held by those institutions to be determined by the FROB.

The role of the AMC is regulated in the RDL 24/2012, and will be subject to a further detailed regulatory development. This instrument will allow the removal from the balance sheet of state aided banks of certain problematic assets in order to ease their viability. The sole purpose of the AMC shall be the holding, management and direct or indirect administration, acquisition and disposal of any assets as may be transferred to it by credit institutions.

The AMC shall be a incorporated for a limited period of time to be set out under its articles of association. The AMC’s shareholders shall be, apart from the FROB, the Deposit Guarantee Fund for Credit Institutions (Fondo de Garantía de Depósitos de Entidades de Crédito), credit institutions, any other financial institutions qualified as such in accordance with Article 3(3) of Law 25/2005 of November 24, regulating private equity firms and their management companies, other institutional investors and other institutions to be determined under the relevant implementing regulations.

The public stake may not be less than fifty percent of the capital of the AMC under any circumstances.

Francisco José Bauzá and Rafael Bazán, Partners at Ramón y Cajal Abogados, co-authored this article.