Until now, it was only possible for insurance companies, pension funds and provident funds to invest in loans to a very limited extent. In Germany, commercial lending is subject to authorisation according to the German Banking Act (KWG) and is classic banking business. To allow institutional investors to extend loans to municipalities or public utilities, Loanboox and DKB now offer banking services for fronting bank and paying agent.
“Fronting bank” and “paying agent” are services that are already used in traditional business by the various market participants. They are also necessary in the digital business to enable institutional investors to enter the lending business.
DKB’s “Fronting Bank” service enables insurance companies, pension funds and provident funds to access new investment opportunities. In doing so, DKB takes over the entire operational processing of the loan. This includes, among other things, the preparation of documents, the value date process including KYC, the verification of disbursement requirements and much more. The advantage: investors do not have to build up administration or additional know-how to grant loans.
As a paying agent, DKB also takes over the execution of payment transaction functions for loan agreements in order to significantly reduce the administrative effort for borrowers and investors. In doing so, DKB serves as a contact and coordinator for its contractual partners. Settlement is simple, fast and digital via the independent debt capital market platform Loanboox.
Direct access to the municipal lending business
Loanboox primarily addresses municipal and municipal-related clients, i.e. cities, municipalities, municipal enterprises and municipal utilities. With municipal loans we are talking about a very safe asset class. After federal bonds (risk of the Federal Republic of Germany) and the bonds of federal states, municipal loans are a quasi AAA investment option with an extremely low default risk. At the same time, the achievable return is significantly more attractive compared to federal or federal state investment options. Municipal financing also has the advantage that, similar to government bonds, there is no equity backing under Solvency II. Investors looking for interesting but at the same time very safe investment opportunities in this challenging market environment will find what they are looking for at Loanboox.
By expanding the range of these banking services, we can find new investors for our borrower clients. At the same time, investors can choose from a wide range of municipal financing applications the one that suits them best – and select the necessary service directly without any further effort.
For investors who are interested in the new services, we offer personal webinars. Please feel free to contact us.