Regulatory Alerts2013-06-10 | Guidance Notes on BaFin Circular 4/2011 (VA) Part B.4.3 d) with regard to Investments in Corporate LoansBaFin Guidance Notes on Investments in Corporate Loans (Circular 4/2011, Part B.4.3 d)
BaFin has issued updated guidance notes clarifying the credit quality and collateralization requirements for insurance undertakings investing in corporate loans. The document permits loans secured by negative pledges to qualify as "prime-rated" if borrowers maintain at least investment-grade ratings (e.g., A- or A3) and demonstrates that these loans can count toward the mandatory 50% loan diversification limit without triggering additional risk asset ratio constraints. Furthermore, it relaxes strict contractual compliance with financial ratios for the entire loan term, allowing up to 5% of restricted assets in such loans while maintaining stricter standards than standard debt instruments.
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