Following the introduction of the German Investment Taxes Act (GITA) in January 2018, we saw some dislocation in this market with a number of institutional investors either restricting their lending supply or withdrawing completely from this market. To better understand these new rules and also provide market participants with greater certainty around how the rules work and how to apply them, ISLA has worked closely with the German Tax Authorities and other relevant stakeholders. On 15th May 2018, the German Federal Ministry of Finance issued the final guidance on the application of the new provision of the German Investment Tax Act 2018 which gave further clarity.
Notwithstanding this work, we are aware that there still appears to be a certain element of disruption in this market associated with apparent limited supply in certain German names. This appears to be causing spikes in fee rates with other potential impacts around overall market liquidity and the cash execution markets. To better understand why this is happening, we are trying to build up a comprehensive picture of this market. As part of that process, ISLA is reaching out to its affected lending member firms to complete a short survey. If you would like to be part of this exercise, please contact the team at ISLA directly.