Stock Lending Agreement for Germany

Stock Lending Agreement Template for Germany

A comprehensive legal agreement governed by German law that establishes the framework for securities lending transactions between financial institutions. The agreement details the terms and conditions for the temporary transfer of securities from a lender to a borrower, including collateral requirements, fee structures, and risk management provisions. It incorporates specific requirements under German securities law, banking regulations, and relevant EU directives, while addressing operational procedures, rights and obligations of parties, default scenarios, and regulatory compliance requirements.

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What is a Stock Lending Agreement?

Stock Lending Agreements under German law are essential documents used to facilitate the temporary transfer of securities between financial institutions while ensuring compliance with German regulatory requirements and EU directives. These agreements are typically employed when financial institutions need to cover short positions, enhance portfolio returns, or support market-making activities. The Stock Lending Agreement establishes the legal framework for such transactions, incorporating specific German law provisions regarding title transfer, collateral arrangements, and regulatory reporting requirements. It addresses crucial aspects such as voting rights, corporate actions, and dividend treatments, while ensuring alignment with German banking regulations (KWG), securities trading law (WpHG), and relevant EU regulations including SFTR and EMIR.

What sections should be included in a Stock Lending Agreement?

1. Parties: Identification of the lender and borrower, including their legal status and registered addresses

2. Background: Context of the agreement and general purpose of the stock lending arrangement

3. Definitions: Defined terms used throughout the agreement, including specific German law terms and market standard definitions

4. Loans of Securities: Core provisions governing the lending of securities, including loan mechanics and delivery procedures

5. Transfer of Securities: Provisions regarding the transfer of title to securities and the mechanism for such transfers

6. Collateral Requirements: Rules regarding posting, maintaining, and returning collateral, including margin requirements

7. Income and Corporate Actions: Treatment of dividends, rights issues, and other corporate actions affecting the lent securities

8. Fees and Charges: Lending fees, rebate rates, and other charges payable under the agreement

9. Tax Provisions: Treatment of tax matters, including withholding tax and manufactured payments

10. Representations and Warranties: Standard representations and warranties adapted to German law requirements

11. Events of Default: Definition of events of default and their consequences

12. Termination Provisions: Provisions for terminating loans and the agreement itself

13. Set-off Rights: Rights of set-off under German law

14. Notices: Communication requirements and contact details

15. Governing Law and Jurisdiction: Confirmation of German law governance and jurisdiction provisions

What sections are optional to include in a Stock Lending Agreement?

1. Agency Provisions: Required when either party acts as agent for multiple principals

2. Clearing House Arrangements: Required when transactions will be cleared through a central counterparty

3. Tri-Party Arrangements: Required when using a tri-party collateral agent

4. Special Custody Provisions: Required when specific custody arrangements are needed beyond standard settlement systems

5. Electronic Trading Platform: Required when transactions will be executed through specific trading platforms

6. Additional Tax Provisions: Required for cross-border lending arrangements with specific tax implications

7. US Tax Provisions: Required when either party is subject to US taxation

What schedules should be included in a Stock Lending Agreement?

1. Schedule A - Eligible Securities: List of securities eligible for lending under the agreement

2. Schedule B - Eligible Collateral: Types of permitted collateral and applicable haircuts

3. Schedule C - Fee Schedule: Detailed fee arrangements and calculation methodologies

4. Schedule D - Operating Procedures: Detailed operational procedures for loans and returns

5. Schedule E - Forms of Notices: Standard forms for borrowing requests, recalls, and other notices

6. Schedule F - Contact Details: Authorized persons and contact information for both parties

7. Schedule G - Tax Documentation: Required tax forms and documentation

8. Appendix 1 - Standard Settlement Instructions: Settlement and payment instructions for both parties

9. Appendix 2 - Collateral Management Procedures: Detailed procedures for posting and managing collateral

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Germany

Publisher

Genie AI

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Banking

Financial Services

Investment Management

Securities Trading

Asset Management

Hedge Funds

Institutional Investment

Custody Services

Clearing Services

Investment Banking

Relevant Teams

Legal

Compliance

Risk Management

Securities Lending

Operations

Trading

Settlement

Collateral Management

Credit Risk

Documentation

Treasury

Regulatory Reporting

Client Services

Middle Office

Product Control

Relevant Roles

Securities Lending Trader

Portfolio Manager

Legal Counsel

Compliance Officer

Risk Manager

Operations Manager

Collateral Manager

Settlement Officer

Relationship Manager

Credit Risk Analyst

Trading Director

Head of Securities Finance

Regulatory Reporting Officer

Documentation Specialist

Treasury Manager

Industries
German Civil Code (Bürgerliches Gesetzbuch - BGB): Provides the fundamental legal framework for contracts, including general provisions on formation, performance, and termination of contracts
German Securities Trading Act (Wertpapierhandelsgesetz - WpHG): Regulates securities trading, including requirements for securities lending transactions and associated reporting obligations
German Banking Act (Kreditwesengesetz - KWG): Governs banking transactions and financial services, including requirements for institutions engaged in securities lending
German Safe Custody Act (Depotgesetz): Regulates the custody and administration of securities, including requirements for securities transfers and custody arrangements
European Market Infrastructure Regulation (EMIR): EU regulation applicable in Germany governing derivatives, central counterparties, and trade repositories, including reporting requirements for securities financing transactions
Securities Financing Transactions Regulation (SFTR): EU regulation applicable in Germany specifically governing securities financing transactions, including reporting and transparency requirements
German Insolvency Code (Insolvenzordnung - InsO): Provides framework for handling insolvency situations, including treatment of securities lending arrangements in case of bankruptcy
German Income Tax Act (Einkommensteuergesetz - EStG): Governs taxation aspects of securities lending transactions, including treatment of fees and substitute payments
Market Abuse Regulation (MAR): EU regulation applicable in Germany addressing insider dealing, market manipulation, and related disclosure requirements
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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