The German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) has announced an extension to the monitoring period with respect to the distribution, issuance and marketing of credit linked notes (formerly known as “Bonitätsanleihen”, now called “bonitätsabhängige Schuldverschreibungen”) to retail clients until the end of September 2017 (view BaFin statement).
In order to avoid a prohibition of the distribution, issuance and marketing of credit linked notes to retail clients announced by BaFin earlier this year, the German Banking Industry Committee (Deutsche Kreditwirtschaft – DK) and the German Derivatives Association (Deutscher Derivate Verband – DDV) had presented a self-commitment containing ten principles to improve transparency and investor protection regarding the issuance and distribution of credit linked notes to retail clients on 16 December 2016. The most important restriction is that credit linked notes will only be issued with a fixed coupon, a simple structure (single underlying reference entities and multiple reference entities only if used for diversification purposes) and a minimum denomination of EUR 10,000. On the basis of this self-commitment, BaFin had suspended its planned prohibition and announced it would examine the effectiveness of the self-commitment over a six month period. So far BaFin has not reported a breach of the self-commitment.