Do foreign lenders require a licence/regulatory approval to lend into your jurisdiction or take the benefit of security over assets located in your jurisdiction?
Lending & Secured Finance
Foreign financial institutions from EU member states may perform lending and secured finance activities based on the notification sent to the Croatian National Bank of their intention to do so, while foreign financial institutions from third countries are obliged to obtain the Croatian National Bank’s approval. The operations of all types of non-banking financial intermediaries are regulated and supervised by the Croatian Financial Services Supervisory Agency (HANFA). The HANFA is authorised to supervise the operations of the stock exchange and regulated markets, investment funds, pension funds, pension insurance companies, leasing and factoring companies, insurance companies etc.
Foreign lenders may freely take the benefit of security over assets located in Croatia.
Banks domiciled and licensed in EUs member states may grant loans or take the benefit of security over assets under Czech jurisdiction in accordance with the principle of single authorization of their home EU member state, either through the establishment of a branch or the free provision of services. Banks without authorization within the EU require license of the Czech National Bank.
Other lenders always require a license from the Czech National Bank in their business relationship with consumers. Transactions between other lenders and entrepreneurs / companies are not subject to licensing requirements of the Czech National Bank.
Foreign lenders may require a license/passport in order to be able to lend into Finland. Where the loan is provided by a licensed credit institution or investment firm or another regulated entity (with their home state in either non-EEA or EEA jurisdictions), the lending activity must be included in the scope of its licence and passported into Finland, as applicable. On the other hand, if a loan is provided by an unregulated entity, lending does not require a licence in Finland. This applies for unregulated entities with their home state in either non-EEA or EEA jurisdictions when lending to corporates. Lending to consumers does, however, require completing a registration.
However, lending into Finland or taking the benefit of security without the lender having solicited an entity in Finland does not trigger the licensing requirements. Accordingly, it is possible to have Finnish borrowers and/or guarantors and to take security from Finland without triggering the licensing requirements.
Originating loans to German borrowers requires a licence under German law, a European passport or an exemption from German licence rules. No licence is required if a lender acquires fully drawn term loans (while certain changes to an existing loan may give rise to licence requirements, such as the extension of the maturity of a loan). Under particular circumstances foreign lenders may not require a licence when lending to German borrowers; this includes, amongst others, that lenders do not actively approach the German market.
Lending money alone, without any additional banking activities (such as accepting deposits from the public) does not require the relevant lender to obtain an authorisation from the Spanish banking authorities.
However, in most cases, entities which provide loans, factoring or financial leasing on a permanent basis usually set up of a regulated entity (establecimiento financiero de crédito).
In any case, additional banking activities (such as accepting deposits from the public), can only be carried out by certain credit entities (banks, savings banks) which need to be authorised by the Bank of Spain.
Notwithstanding the above, the following laws stablishes certain requirements to non-banking lenders which provide mortgage loans to consumers on a permanent basis:
- Law 2/2009, of 31 March 2009, on contracts with consumers for mortgage loans or credit facilities and intermediation services for the conclusion of loan or credit facility agreements (Law 2/2009). This law establishes the following requirements: (i) the investor must be registered in the Public Register of Companies for the autonomous community where its registered office is located (or, if none exists, on the Central Government Register at the National Consumer Affairs Institute); and (ii) the investor must have insurance cover for civil liability or a bank guarantee covering any potential liability that the investor assumes with respect to the debtor.
- The Real Estate Credit Act (Ley reguladora de los contratos de crédito inmobiliario), which was passed, but still pending to be published in the Official State Gazette, transposes the European Directive (Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property) and seeks to enhance the transparency of mortgage contracts to be signed with individuals (customers). This law shall entry in force as of the date falling three months since the date it is published.
Article 42 of the Real Estate Credit Act provides mandatory registry for real estate lenders, unless they are credit entities, regulated entities (establecimiento financiero de crédito) or Spanish branches of credit entities.
In principle, any kind of lending entity may take the benefit of the relevant Spanish security against a Spanish asset.
Multiple lenders can benefit from Spanish security, notwithstanding their nationality or country of registration.
Unless the lending activity amounts to doing business in the Philippines, foreign lenders do not require a license to lend or take security in the Philippines. However, the lending transaction may require regulatory approval or registration, as the case may be.
Foreign loans to the public sector require prior approval from the central bank of the Philippines, Bangko Sentral ng Pilipinas (BSP). Publicly-guaranteed foreign loans to the private sector require prior BSP approval applied for and secured at least 30 banking days before the target date of execution of the loan agreements and, if to be serviced with foreign exchange resources of the Philippine banking system, BSP registration within six months from utilization of proceeds. Foreign loans to the private sector which will be serviced with foreign exchange resources of the Philippine banking system require submission of notice to the BSP within 30 days from signing the loan agreement, and BSP registration within 30 days from drawdown date (for short-term loans) and within six months from utilization of proceeds (for medium- and long-term loans).
The ability of foreign lenders to hold security over real property in the Philippines is subject to the restriction against a foreign lender/mortgagee acquiring land in the Philippines or taking possession of the mortgaged property during the existence of the mortgage except after the default and for the sole purpose of foreclosure, receivership, enforcement or other proceedings and in no case for a period of more than five years from actual possession. Such foreign lenders are also prohibited from bidding or taking part in any sale of such real property in case of foreclosure.
Lending to Swedish borrowers (other than consumers) or taking the benefit of security over assets located in Sweden does not in itself require a license or regulatory approval for foreign lenders. A license may however be required if the foreign lender also conducts other types of financial activities (e.g. accepts deposits from the public). Also, if the foreign lender has a permanent establishment in Sweden, lending to Swedish borrowers (other than consumers) requires that the lender applies for registration with the Swedish Financial Supervisory Authority (Sw: Finansinspektionen) in accordance with the Swedish Currency Exchange and Certain Financial Activities Act (Sw: lag (1996:1006) om valutaväxling och annan finansiell verksamhet).
Lending and offering of credit products within Turkey can only be conducted by banks duly licensed by the Banking Regulation and Supervision Agency (the "BRSA") under Article 4 of the Banking Law (Law No. 5411). However, pursuant to the Decree No. 32 on the Protection of the Value of the Turkish Currency ("Decree No. 32"), Turkish residents may freely and without any permission, approval, licence from, or registration or filing with any Turkish regulatory authority, including the BRSA, Ministry of Treasury and Finance (the "Ministry") and the Central Bank of Turkey ("CBT"), obtain cash or non-cash loans (other than consumer loans or mortgage loans) in foreign currency or Turkish Lira from banks and financial institutions abroad provided that the proceeds of such commercial loans are paid to an account of the borrower held with a bank operating in Turkey.
Federal law does not generally require a banking license or impose any lender licensing requirements on entities extending commercial credit to U.S. borrowers. Depending upon the amount of the loan, the type of borrower (e.g., natural person or corporate entity) and the security for the loan (e.g., real estate secured or unsecured), some states require that a commercial lender obtain a lending license. For example, the California Financing Law (“CFL”) requires a license to make commercial loans regardless of the amount of the loan or the type of collateral securing the loan. Like other state licensing laws applicable to commercial lending activities, California has a number of exemptions from the licensing requirement. While every state requires any person “transacting business” within the state to register or qualify as a foreign corporation or limited liability company, many state laws expressly exclude certain activities, such as creating or acquiring indebtedness and securing or collecting debts, from the definition of “transacting business.”
Except in the area of consumer credit (subject to the Swiss Consumer Credit Act (SCCA) (Bundesgesetz über den Konsumkredit, KKG), lending activities are generally unregulated in Switzerland, provided the lender does not accept deposits from the public or refinances itself via a number of other banks.
Currently, foreign regulated entities operating on a strict cross-border basis (without having a business presence in Switzerland) are not subject to authorisation by the FINMA. However, should these activities involve a physical presence (such as manpower or physical infrastructures) in Switzerland on a permanent basis, the cross-border exemption will generally not be available.
Although in principle there is no restriction or prohibition related to foreign lenders taking the benefit of security interest in Switzerland, specific enforcement restrictions may apply depending on considerations such as the type of security interest or underlying collateral, in particular with respect to security interests over residential real estate located in Switzerland.
In particular, the acquisition of residential real estate in Switzerland by foreign investors or foreign-controlled companies is subject to restrictions under the Swiss Act on the Acquisition of Real Estate by Persons Abroad ((Bundesgesetz über den Erwerb von Grundstücken durch Personen im Ausland), also known as the Lex Koller), which is particularly relevant in an enforcement scenario as those restrictions apply to (i) direct acquisition of real estate (residential or, to a lesser extent, commercial) properties – relevant in case of security interest in the form of or over mortgages or mortgage notes or (ii) acquisition of pledged shares in real estate companies.
Finally, restrictions may also apply in relation to security interests related to companies active in regulated industries, such as the financial sector (in particular in the banking and insurance sectors), telecommunications, energy, radio/TV and aviation and the like.
In the United Kingdom, general corporate lending is not a regulated activity requiring a licence or regulatory approval. Lending is only a regulated activity in relation to residential mortgages and consumer lending. In these circumstances, and assuming none of the available exemptions apply, a Lender will need to be authorised by the UK Financial Conduct Authority and/or the Prudential Regulation Authority) to conduct such business. In addition, deposit taking by banks is a regulated activity which again requires authorisation by the UK regulator.
Mortgage and consumer loans are subject to a range of regulatory requirements that do not apply to unregulated loans. For example, for regulated mortgage contracts there are particular restrictions around how:
- the loans are marketed, originated and sold;
- lenders administer the loans on an on-going basis; and
- borrowers who fall behind with their payments are dealt with.
Regulated credit agreements on the other hand have specific requirements around how the agreement is drafted and formatted and what information must be included.
There are no additional restrictions that apply to foreign lenders.
Foreign lenders which do not lend from within Jersey are not required to be licensed, qualified or otherwise entitled to carry on business in Jersey to be able to lend money or take the benefit of security over assets located in Jersey.
There is no need to obtain regulatory approval to take or enforce security over Jersey assets unless security is taken over shares in a regulated entity, in which case the prior approval of the Jersey Financial Services Commission would be required.
A person carrying on a financial services business in or from within Jersey, and a Jersey body corporate or other legal person registered in Jersey carrying on a financial services business anywhere in the world is required to register as a specified Schedule 2 business, under the Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008.
Under the Proceeds of Crime (Jersey) Law 1999, lending money to third parties constitutes carrying on financial services business. Consequently, a foreign lender operating in, or from within Jersey, and a Jersey company or other legal person registered in Jersey which lends money anywhere in the world, is required to register as a specified Schedule 2 business under the Proceeds of Crime (Supervisory Bodies) Jersey Law 2008.
Lending into Hong Kong
Any person, not being an authorised institution authorised by the Hong Kong Monetary Authority under the Banking Ordinance (Cap. 155) carrying on business as a money lender in Hong Kong must obtain a money lender's licence in accordance with the Money Lenders Ordinance (Cap. 163) ("MLO"), unless one of the exemptions set out in the MLO applies (including loans secured by charges registrable under the Companies Ordinance (Cap. 622) ("CO")). However, even though there is no legal authority on this point, it is arguable that the MLO does not have extra-territorial effect, so a lending business carried on outside Hong Kong does not need an MLO licence. This can be the case even if the borrower is incorporated and/or doing business in Hong Kong or the loan is disbursed in Hong Kong, if the lender otherwise operates solely from outside Hong Kong. But the law is not clear, so a cautious view is that the MLO can require a licence if any part of a money lending transaction is carried on in or from, or involves any action in, Hong Kong.
There is also a general corporate registration requirement for "carrying on business" in Hong Kong pursuant to the Business Registration Ordinance (Cap. 310). The test for carrying on business in Hong Kong is not expressly defined, other than to expressly include a company incorporated in Hong Kong or registered in Hong Kong as a registered non-Hong Kong company, and is therefore not precise. However, case law indicates that the threshold is low. Any form of commercial activity is sufficient. The existence of business premises is probably not an essential feature. A business can be carried on through an independent agent. Probably the incurrence of legal obligations within Hong Kong is necessary. As the Business Registration Office ("BRO") is an office of the Inland Revenue Department and the primary purpose of registration is to put the business on the radar of the tax authority (though it also serves to enable persons dealing with the business to find out with whom they are dealing), the test is likely to be based on whether potentially taxable activities are being carried on in Hong Kong. A lender needing to register with the BRO in fact has an obligation only to complete, sign and deliver to the BRO the required application form within 1 month after the business starts (or in the case where the lender is registered as a registered non-Hong Kong company, 1 month after such registration (see below)). This is not an approval process and the BRO will later issue a business registration certificate.
Further, there is a requirement to register as a registered non-Hong Kong company where a lender has established a place of business in Hong Kong pursuant to the CO. The test for establishing a place of business in Hong Kong is not expressly defined in the CO and is therefore not entirely precise. However, case law indicates that (a) the term "establishing a place of business" is not the same as carrying on business in the jurisdiction and the expression points to the company having "a local habitation of its own", (b) the establishment of a place of business connotes a degree of permanence or recognisability as being a location of the company's business, (c) the term "business" should be interpreted in the general sense of activities, and not confined to the narrow sense of commercial transactions, and (d) the business carried on must be activities which fall within the company's paramount or subsidiary objects. A company needing to register with the Hong Kong Companies Registry in fact has an obligation only to complete, sign and deliver to the Hong Kong Companies Registry the required application form, containing the particulars prescribed by procedural regulations and details of at least one person who is proposed to be an authorized representative on registration of the non-Hong Kong company, and certain supporting documents, within 1 month after the place of business is established. The supporting documents include a certified copy of each of the company's constitutional document(s), incorporation certificate and (if publication of accounts or delivery of accounts to a person for public inspection is required under the law of the place of incorporation of the company, or the law of any other jurisdiction where the company is registered as a company, or the rules of any stock exchange or similar regulatory bodies in that jurisdiction that impose that requirement) latest published accounts. This is not an approval process and the Companies Registry will later issue a registration certificate.
Taking of Security situated in Hong Kong
It is not necessary for a lender to obtain a licence / regulatory approval solely by reason of taking the benefit of security over assets located in Hong Kong.
In general, the Austrian Banking Act (BWG) contains a list of banking businesses, which require a banking licence, if carried out commercially in Austria. This list also includes the lending business defined as “the conclusion of loan agreements and the granting of loans“.
However, the Austrian BWG is only applicable if the banking business in question has an Austrian nexus. It has to be decided on a case-by-case basis whether an Austrian nexus actually exists based on criteria such as place of conclusion of the underlying agreement, whether there is a targeted approach to the Austrian market or if the relevant banking services were especially designed for the Austrian market. If there is no Austrian nexus at all, a foreign lender does not need a licence under Austrian law.
Under Austrian Law there are no general rules regarding the possibility of foreign lenders to take benefit of security over assets located in Austria; however, certain restrictions may apply, e.g. the acquisition and pledge of real property is restricted in some Austrian territories (e.g. Vorarlberg), meaning that a permit from the representative authority is required.
Generally, lending and other credit-related activities may be conducted by nonregulated business entities in Mexico, whether national or foreign, provided that such activities are executed on a private, noncustomary and nonprofessional basis. Likewise, there are no restrictions to accept, take benefit or execute security interests and collateral in Mexico.
Banking and finance, however, and other professional offering credit services (including active and passive operations) are regulated activities under the Credit Institutions Law of Mexico (LIC). Any lender, Mexican or foreign, who wishes to offer banking and finance services professionally must request authorization from the National Banking and Securities Commission (CNBV) and Mexico's Central Bank (Banxico) and incorporate, organize and operate itself as a financial institution (commercial or development).
Under Mexican law, a foreign financial institution may open a branch or office of representation to promote services and products of such foreign financial institution. Such branches or offices must obtain prior authorization from CNBV and are regulated under the Rules for Branches and Representative Offices of Foreign Financial Institutions. Moreover, the activities permitted to such branches or offices are expressly limited by LIC and shall not fall within the legal scope of soliciting and deposit monies (captación) or securities brokerage (intermediación bursátil).
Bosnia & Herzegovina
Foreign banks and other foreign lenders do not need a licence or regulatory approval to grant credits/loans on the territory of Bosnia and Herzegovina (“BH”), to BH legal entities and BH natural persons, or to take the benefit of the security over assets located in BH.
The only requirement is that the transaction is reported to the one of the following authorities: (1) Ministry of Finance of FBH, (2) Ministry of Finance of RS or (3) Administration Office for Finance of BD – depending on the registered seat of the legal entities or place of residence of natural persons, after its execution.
 BH consists of two entities and one district, that is Federation of Bosnia and Herzegovina (“FBH”), Republic of Srpska (“RS”) and Brčko District (“BD”). Laws governing securitization and lending are at the level of entities, and thus different regulations apply throughout the territory of BH.