In Germany, most banks offer trust loans.

These include, above all, savings banks or Volksbank Raiffeisen banks. In any case, they have a social mission and expand their portfolio for the promotion of society as a whole by taking on trust loans.

The funds for the loans receive banks from the state or from state-owned banks such as the Kreditanstalt für Wiederaufbau. Also possible are insurance companies as lenders for trust loans.

For the function as a trustee, the banks are paid by the lenders. As a result, banks do not earn as much as when it comes to lending their own loans, but the fees still pay for their own administrative expenses.

The combination with other loans

Combination with other loans

 

Many banks offer trust loans along with other loans to broaden their customer base. At the same time, for example, future property owners may combine a trust loan with a real estate loan- Payday Loan Helpers. In this way, the bank additionally earns on the conventional loan provision and has gained a new customer by offering a trust loan.

The legal basis for trust loans

Paragraph 6 of the Financial Reporting Ordinance on credit institutions and financial services institutions specifies exactly how banks are permitted to show trust credits in their books. Accordingly, trust loans must be listed in the balance sheet.

Administration of trust loans

Administration of trust loans

There are various ways in which trustee loans are paid out. While some loans immediately pay the full loan amount, there are other loans where only partial payments are paid out.

A typical example of partially disbursed trust loans is student loans that are granted on a fiduciary basis. Also possible is the pro rata disbursed loan amount for business start-up loans.

Roles and functions in the trust loan

Roles and functions in the trust loan

Unlike a traditional lending business, the trust loan consists of three players:

  1. Trustor: The trustor is usually the state, a state bank or an insurance company that provides the capital for the loan.
  2. Trustee: The trustee is responsible for the proper processing and proper use of the trust loan. He collects the interest and installments due, which he forwards to the trustor. For the administration of the loan, the trustee receives a fee from the trustor.
  3. Borrower: Borrower can be a private client, such as a company, who applies for and receives the money as if it were a traditional loan. The repayment takes place via the bank.

Frequent trust loans from KfW in Germany

In Germany, trust loans are often granted through the Kreditanstalt für Wiederaufbau (KfW). This state-owned bank offers both consumers and businesses various loan options.

  • Business start-up founders: There are certain loans for start-up founders via KfW which are intended specifically to promote business. The special feature of lending is that the business plan has a greater weight than the creditworthiness of the applicants. Appropriate loans for founders can be applied for through banks such as Sparkasse or Volksbanken.
  • Homeowners: Anyone who owns a home can use a KfW loan for energy-efficient renovation or the purchase of alternative energy sources. For example, KfW is promoting the installation of a heat pump.

Funding opportunity via the BafA

Incidentally, funding opportunities for alternative heating can also be obtained from the Federal Office for Export Control (BafA).

  • Students: Students can apply for a student loan through the KfW. In this way, a trust loan contributes to social promotion. Trainees can also apply for a BAföG bank loan.

In addition to supporting private individuals, KfW also offers trust loans for companies as well as municipalities and social insurance providers.

In 2012, KfW granted trust loans totaling 437 billion euros.

Advantages of the trust loan

A trust loan is usually associated with many benefits for borrowers:

  • Borrower benefits from conditions: The terms of trust loans are usually much better than comparable loans in the private sector. Finally, these benefits are deliberately created as the state sets certain goals for lending through trustees.

Banks can also benefit from the granting of trust loans:

  • Bank does not have to bear credit risk: the risk of default is not borne by the trustee, but always by the trustor. This puts the banks in a very comfortable position. You just have to manage the loans.
  • Bank does not need to provide financial resources: as the trustor provides the capital, lending does not burden the bank’s own resources.

Finally, the trustor also benefits from a continuous loan:

  • T reugeber does not need its own administrative machinery: if the state provides funds for trust loans, it does not need to use its own administrative resources to do so. The trustee is solely responsible for the administration. There are fees for this. However, they are well below the cost of own credit management.

Trust Loan: Liability Risk

A special feature of the trust loan is that the trustee carries no liability risk for the loan. As a trustee, a bank is solely responsible for ensuring that the loan is properly managed and organized. Liability for the loan is borne by the trustor.

However, there are regulations in practice according to which the trustee is also partially involved in the credit risk. In this way, the trustor ensures that the trustee carefully selects the borrowers.

Amortization loss on trust loans

Since escrow loans are usually government-sponsored loans, there are often more accommodative solutions to repayment problems. For example, KfW may apply for deferment of student loan repayments. It is important that the accrued installments are due at the end of the deferral.

Trust loans for the promotion of society

Trust loans for the promotion of society

The granting of trust loans is usually mainly public money passed on by the trustee. For this reason, states use trust loans to promote social development. The aim of fiduciary financing, for example, is targeted for regional economic promotion or support for investments in social infrastructure.

The motives of the state can be, for example:

  • Family Support: By providing cheap trust loans, the state can help families.
  • Housing Development: Trust loans are often used for social housing. This creates a living space that can be obtained from socially disadvantaged families. It is also possible to use these loans for the construction of social facilities such as kindergartens or retirement homes.
  • Promotion of environmental protection measures: The state promotes the implementation of energy-saving measures with continuous loans. For example, real estate owners can receive discounted loans for thermal insulation or the energetic renovation of buildings.
  • Monument protection: Government-sponsored trust loans can be provided for construction measures that serve to preserve culturally important buildings.
  • Entrepreneurship: Through fiduciary loans, the state has the opportunity to promote entrepreneurs or SMEs. The loans facilitate investments in new machines or products and help to set up companies.

These requirements must be met by trustees

In order for government funds to be provided for funding, trustees must assure that they will manage the loans according to their purpose. This includes the obligation to return interest or repayment installments to the trustor, who in this case is the state, a state or another body.

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With punitive tariffs can be reduced no trade plus

World trade With punitive tariffs can be reduced no trade plus

Image result for world trade germany

  • Even under President Obama, Angela Merkel had to justify for the German trade plus.
  • The Chancellor’s arguments are more than thin from an American point of view. And US President Trump now wants to reduce the excess with punitive tariffs on steel.
  • Experts warn, however, that the US could cut into their own flesh.

Angela Merkel had a hard time fighting, because the pressure of the colleague from Washington was enormous. In world trade, the US president complained, there was a massive imbalance, because “countries like Germany” contribute with their huge export surpluses that elsewhere, the deficits skyrocketed. Such unilateral transactions to the detriment of the United States are no longer acceptable, the Federal Republic must commit itself to introduce a strict upper limit for their export plus. The Chancellor struggled with her hands and feet against the demand. Finally, Barack Obama gave way.

The US complaints about German foreign trade policy, as shown in this episode from 2010, are by no means new and neither an invention of incumbent President Donald Trump nor a hobbyhorse of his Republican party. On the contrary, the view that states such as Germany and China are flooding the markets with their goods and thus placing the world economy in a dangerous imbalance is at least as prevalent among opposition politicians and democratically-minded economists in Washington. The further right and left one looks, the sharper the attacks become – to the point where, in the recent presidential election campaign, the economic nationalist and the more socialist agenda of the candidates Trump and Bernie Sanders merge.

However, the difference between Obama and Sanders on the one hand and Trump on the other is that the incumbent president does not think much of diplomacy and international institutions like the World Trade Organization (WTO). Instead, he relies on a policy of strength and threats that friendly states are not immune to. Should Merkel be unable to identify concrete steps to reduce surpluses in trade with the United States in their meeting with Trump this Friday, the President could introduce tariffs on steel and aluminum imports from Europe as early as next week. Deliveries from countries such as China are already subject to import duties of between ten and 25 percent, while the EU still has a derogation.

Federal government fears trade war with the US

Government officials expect the US tariffs on steel and aluminum to apply to the EU from May onwards. On Friday, Chancellor Merkel wants to promote US President Trump for a dialogue. 

Merkel’s problem is that her arguments are more than thin from the American point of view. Put simply, the Chancellor has been referring for years to the fact that the Federal Republic has already carried out those painful structural reforms that other states have been pushing forward for many years. Examples include the Hartz reforms in the labor market or the extensive processing of non-promising sectors such as the coal industry. According to Merkel, the result is that German goods are not only qualitatively but also priced among the most attractive in the world today. Nobody should be punished for that.

That Germany “produces without a doubt good products that foreigners want to buy,” deny even politically unsuspicious experts like the former US Federal Reserve Chairman Ben Bernanke. The fact is, however, that the German export surplus with more than eight percent of economic output has remained at a level for years that many economists regard as unsustainable, even harmful. Even the federal government itself has repeatedly signed international agreements stating that it is critical of six percent.

Steel imports from Germany did not amount to two billion dollars

Steel imports from Germany did not amount to two billion dollars

Bernanke sees two points that differentiate German companies from other top manufacturers. For one thing, he wrote in 2014, the euro reflects the competitiveness of the entire currency area, but not the position of individual member states: “If Germany were still using the D-mark, it would probably be much stronger than the euro today . ” In other words, German products are also so competitive because they are sold in an artificially discounted currency. On the other hand, the German government is also contributing to the imbalance with its austerity policy and underinvestment. Almost at the same time, US Treasury Secretary Steven Mnuchin had commented only on the weekend after meeting with his German colleague Olaf Scholz in Washington.

A completely different question is now whether the German trade plus vis-à-vis the USA could be noticeably reduced with the help of steel tariffs. Short answer: no. According to the US Department of Commerce, the United States imported goods and services worth $ 153 billion from the Federal Republic in 2017. This was offset by exports of 85 billion, the bottom line was a German surplus of almost 68 billion dollars. The steel imports from Germany made but not two billion dollars.

Many US experts even warn that the Americans cut their own meat with tariffs on European steel deliveries. The US manufacturer, Trump wants to protect by the import duties from foreign competition, today employ only 140 000 workers, the steel and aluminum processing industries but 6.5 million. These include the car and aircraft manufacturers, the beer can and the construction industry and dozens of others. All of them would have to reckon with higher costs, which some companies might have to redeem elsewhere, for example by relocating production abroad. And there is another serious problem: many European manufacturers have developed grades of steel that their American customers can not order anywhere else in the world, especially solid or extremely thin ones. All of them would have to go shopping in Europe in the future – but considerably more expensive.

The third day is over with kisses

The third day is over with kisses

First Macron expects before Congress with Trump’s foreign policy, then France’s head of state also meets an opponent of the US president. Is the romance between the two over? By Thorsten Denkler more …

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