Meanwhile mortgage banks represent important participants in the markets of numerous European countries. In the past years cross-border financing has increased considerably. There have been some effects due to this stronger European orientation on the range of services offered in Germany.

Regional scope of cross-border mortgage lending

A few years ago mortgage banks were only allowed to extend cross-border mortgage loans to customers in the member states of the European Union, the European Economic Area and in Switzerland. Since 1998 these loans can also be granted to customers situated in Poland, the Czech Republic and Hungary - but only in the framework of the non-cover business which may not be refinanced by mortgage bonds (Pfandbriefe). Meanwhile mortgage banks have branches in almost all European countries. Especially in the large markets of Great Britain, the Netherlands, France and Spain they were able to establish themselves as competitive market participants and to capture market shares from national competitors.

Increasing importance of cross-border lending

The "European business" of the mortgage banks is characterized by some particularities. More than 95% of the properties represent commercial and industrial buildings, among them primarily large projects with high borrowing requirements. The volume of loans granted to borrowers in European countries outside of Germany has reached in the past years a level such that in commercial financing over 50% of the funds for new business of German mortgage banks now flow to European countries other than Germany.

Spectrum of commercial mortgage financing

The forms of financing were also influenced by the growing European orientation. To finance large projects in European countries outside of Germany, mortgage banks must offer new forms of financing due to the high credit amounts needed particularly by foreign institutional investors. Therefore German mortgage banks now also use innovative financial tools such as the so-called "Mezzanine financing" known from England. In this regard the mortgage banks have thus also contributed to a further development and market maturation of according financing forms in Germany including:
* Mezzanine financing: One part of the otherwise required equity of the project sponsor is replaced by an additional loan tranche and compensated by an entitlement of the credit institution to a share in the project's profits.
* Participating mortgage financing: The bank foregoes a part of the interest on the loans. As a compensation the bank is entitled to a share in the project's profits.
* Joint venture financing: In this case the bank becomes shareholder of the project company and is given a say in decisions relating to the project. Consequently the bank has a share in the profits and at the same time shares the risks of the project.
These new financial tools are not only used to finance large commercial and industrial properties, but also in the case of public infrastructure services primarily in the context of public private partnership models.