Asset Management Regulatory News | Germany adopts new electronic securities law
Germany has adopted legislation on the introduction of electronic securities (eWpG), which means that paper certificates will no longer have to be issued in the future for bonds, fund units and Pfandbriefe.
Pfandbriefe are a type of covered bond issued by German mortgage banks secured by long-term assets.
With this new legislation, these securities can now also be created in the electronic ledger or issued as crypto-securities based on a blockchain.
According to Karl-Peter Schackmann-Fallis, member of the board of the German Association of Savings Banks and Giro (DSGV), which will be in charge of the German credit sector in 2021, the law on the introduction of electronic securities will make of the German financial center. adapted to new technologies.
Schackmann-Fallis notes that the German banking sector is well prepared for the electronic securities industry. He says, “If the technology proves its worth, the legislator should continue to modernize the securities law in the next legislature with a fundamental reform of the securities law.”
Meanwhile, Michael Huertas, Partner and Co-Head of Regulatory Financial Institutions Europe at Dentons, explains that the introduction of eWpG marks a further step forward in digital transformation and a move away from the need for paper certificates for banknotes (Schuldverschreibungen et Pfandbriefe) as well as fund units.
Huertas explains that a number of other EU jurisdictions, such as Luxembourg, have also advanced similar reforms.
“All of these elements aim to further electronicize the issuance and service of certain financial instruments and to lay the foundations for greater adoption, for those who wish, of greater use of distributed ledger technology,” Huertas comments.
While these national developments are welcome, Huertas suggests that unless the European Commission steps in to craft some comprehensive provisions and impose harmonized rules, it could end up fueling fragmentation to a point where the Union’s project of the EU Capital Markets (CMU) 2.0 to deliver.
Actions are currently excluded from the new German law and this is an area where new national or preferably EU level regulation would be welcome.
The same applies to some reforms of the German custody law (Depotgesetz) as well as possibly, in view of the Markets in Financial Instruments Regulation / Second Revision of the Markets in Financial Instruments Directive , further alignment between divergent regimes as they apply across the EU. -27.
The new law in Germany is also expected to stimulate innovation in financial markets.
Huertas points out that to help accelerate this change, it is entirely conceivable that it will depend on the largest market infrastructure providers who will advance the use of new solutions as long as they are scalable across jurisdictions and can serve to reduce costs.