Differences Between Loans and Deduction Loans

Shareholders without direct influence on the business are not deductible loans

Shareholders without direct influence on the business are not deductible loans

The term deduction loan indicates that the corresponding loan amount must be deducted from the bank’s equity. As a result of this provision, the financial institution can grant a lower loan amount, since the amount of equity is a very important parameter for the amount of the maximum loan to be granted. In addition, each withdrawal credit must be reported to the Federal Financial Supervisory Authority. In addition to the name of the recipient of the corresponding loan, the corresponding notification must also include all conditions and information about the collateral taken into account. The legal provisions stipulate that a loan is to be treated as a deduction loan whenever there is a close economic link between the borrower and the lender. This is basically required for a loan to shareholders, which can be both natural and legal persons.

If this principle is interpreted literally, any loan that a Cream Bank bank pays to a member would be regarded as a deduction loan. The same situation would apply if a small shareholder received a loan from the bank of which he had shares. In practice, a single member has very little influence on the economic decisions of his bank, and a small shareholder can only exert a small influence on them. For this reason, loans to bank members or shareholders without direct influence on the business are not deductible loans, but can be granted as normal loans. This also applies if the bank grants a member bonus or shareholder bonus on the loan terms.

Deduction loan exists if the loan is granted to a shareholder 

Deduction loan exists if the loan is granted to a shareholder 

A deduction loan exists if the loan is granted to a shareholder who, due to his shareholding, can actually influence the bank’s economic decisions, which must be checked in individual cases, since no exact participation rate is given, from which it can be assumed. In the case of loans to employees of a bank, comparable criteria apply for deciding whether this is a deduction loan. The employee loan to the cashier or bank advisor with very little decision-making authority does not have to be reported and does not have to be taken into account when calculating the bank’s equity, while the loan to the director or an authorized officer of the bank is usually classified as a call credit got to.

Loans to subsidiaries or sister companies must also be classified as deduction loans. It depends on the actual economic connection. If a car bank is actually wholly or predominantly owned by the manufacturer, a loan to the manufacturer is a deduction loan; however, if the bank only bears the name of the motor vehicle manufacturer and has actually been sold to a banking group independent of it, auto bank loans to the manufacturer are normal commercial loans and do not have to be reported as deduction credits.

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