 Okay, so we begin with the last part of the of the day with our panel discussion and After the panel discussion or during the panel discussion you can also ask questions At all the time, so I will encourage you to do that and you can also ask questions with regard to the keynote speech we just heard from Ming Feng and So Ming Feng I have already introduced you so I will continue to my right with Henning Frank Henning Frank today jumped in and actually he's it's a it's a great pleasure that he actually made it and came from Hamburg to Bremen to Berlin on short notice and so Henning is the CEO of Zinsland and as we've recently been reading in the news you have merged with expo so obviously you will also get some questions on that and how that worked out and Just as a general note, so we will do it like that with the economics people the lingua franca's English and we will continue to speak in English and for the Legal language I think in Germany. It's It's English as well. Okay, perfect. So great and yes, so it's my great pleasure to introduce Udo Franke Who is from the Ministry of Finance German Minister of Finance and actually the head of the department? Which is in charge of all the regulation that crowdfunding platforms have to deal with and we have Conrad Rusch here who is partner at Linda Mann Schwenke law firm and Who advises I think both platforms and also investors and in in this field Okay, so I think we we should just jump right into this topic of real estate crowdfunding Which is becoming a really a big market in Germany and I think it is taken over most of the other types of equity crowdfunding in Germany And so my question would be to you Henning Why do you think we actually need real estate crowdfunding in in Germany? And I mean we have a lot of other forms of finding financing of real estate, right? I mean we could also invest in a reed or something like that And why do you think we actually need real estate crowdfunding? First of all, thanks for having me I think we need real estate crowdfunding to the point that so far if you want to invest in certain Properties your only way is buying like the asset itself being it an apartment a condominium or whatever And or you could actually go into a blind pool like a like a fund or something similar and What we want to do is give the opportunity to people who don't have the money investing in huge properties buying the whole place And and give them the opportunity to invest in certain properties Why so ever they believe in it certain cities certain as a type certain class certain Developer maybe because you know the developer or you know somebody on the team And and give those the opportunity to invest directly In addition It's it's a process that through digital platforms nowadays. It's super easy super quick You don't have to go to your to your bank consultant read about 60 papers of paper sign it sign it back It's a it's a process you can actually do in a couple minutes And I think that's something in terms of the user experience what people demand nowadays And yeah, I think I think these are some of the possibilities you do have with real estate crowdfunding Maybe just to follow quickly up on that. So I mean how you phrase it It's it's somehow sounds like that you can actually invest in your own property, but that's not the case, right? I mean you're investing in a different Property of someone else I think that was always my dream right that I could buy my real estate using a crowdfunding platform But it's not really my real estate. So the question would be I mean what would you? Outline I guess you could do this if you buy a fund with your retail broker as well, right? So so can you elaborate on that? Sure. So what we do As expuro which I represent now after the merger. I'm sure you have a question around that as well Is that we have two product lines one is we do finance Developers so somebody building a property who needs messing in capital for the next two years until the property is built And sold off and you can invest of this you into this you get a Fixed interest rate, which is will be paid out in the end when the money is paid back and it's not your property Obviously, but at the other time on the other side. We also have a product where You can invest into an existing an existing multi-family home for example with starting from a thousand euros And you also participate in the upside. So you participate in the Rental income But you also participate in the upside of this building will be sold for a higher price in a couple of years So is it your property? No, it's not but it's quite similar it's I think it's the most similar you can get through by by not buying yourself a piece of land and That's the idea. We're having moving more into that direction what you actually just described More being at your own and instead of financing somebody else So maybe I continue with the economic side and then we switch over to the let's let's just ask Henning Can you can you talk a little about the market size because we didn't choose this general topic for this discussion for no reason It's because real estate crowdfunding is by far the biggest market in the whole sort of realm of crowd investing This is something we this is the seventh crowd investing symposium We did the first in 2012 and I think nobody would have expected real estate crowdfunding to become that big So maybe could you tell us a little about about market size? And maybe you could also elaborate on the reasons why you think this was such a boom This one that's easier So in terms of the size we have a platform volume in 2018 which is roughly about 300 million euros in Germany In 2018 Growing it obviously started very small in 2012 13 the first first crowdfunding campaigns on real estate have been done Last year 300 million euros in Germany altogether. We will be That's the best guess about 500 million euros of capital In this year, and it's it's something that's definitely growing I think I think there are several reasons for for why it's it's picking up so quickly one of the reasons is that that Real estate is something people are obviously interested in and has been interested in a long time and as you all know the markets are quite empty if you want to buy right now and So I think that's one of the reasons you get an access to a market that's sometimes hard for you to get to especially if you are not like a like a high net worth individual or somebody with a high income But you have a couple couple thousand bucks. You have otherwise no chance participating in the market besides going into a fund or Read or something something similar I think I think that's one of the reasons why why people like to invest in in that case and Obviously, there's also a bit of a boom because real estate Markets have been going up the last couple years quite significantly and some people want to jump on the train and and you know They see other people making money They want to do the same and I think so it's also besides the fact that there's like an natural growth in it There's a bit of a boom growth in it as well. Why why things are picking up quickly Yeah, these these are my main reasons from from my understanding just to make point one thing out If we're talking about massing in capital In Germany, we're still there's not really secured numbers, but it should be a market Which is between 10 and 15 billion a year So what all together so what the platforms are doing like it's still a very small Percentage of what actually is happening in the market a lot of the massing capital still comes from Institutional investors or semi professional investors on an offline analog system Because they know somebody or they want to invest in a certain in a certain developer So we are still small and compared of the overall market size, but it's a market. That's as you said growing up quickly Okay, so my my question would be if Germany is doing so well apparently in real estate crowdfunding How is it working in the US currently? I mean thing. Do you know anything about that? I Don't know too much. I know there are some platforms working on that. I think I've showed some of their logos there I think many of them actually focusing on like accredited remasters like and people who have a lot of fixed a Lot of a lot of wealth already So I don't think there's I think there's a few but not many that has kind of been opening up to regularly masters Okay, so so do the Americans just differently invest in real estate in terms of do they have an alternative? So usually if I read the alternative finance report from Cambridge I see all those very multiple types of investments that are apparently Taking taking place in the UK. Do you know that the Americans are just doing it differently or they're just with banks or what are they doing? I think they are still catching up. So I think there's opportunity there for sure I think it's just sometimes it's the legal hurdle and sometimes people getting used to that It's just like any new product has a diffusion process. So you guys are obviously in the lead Okay, yeah, I think that it was also represented in the in the publications right because the jobs act was implemented So late we could in Germany always have this this data up front and then now the US I think it's also publishing a lot in an equity crowdfunding All right, so then let's turn to the regulatory point of view now and so let's ask mr. Franco What what is the we heard about the market size and the development the growth? What's the basic view of the Ministry of Finance on this market? When the special regulation on crowdfunding was introduced 2015 they are the basic reasoning behind it was to alleviate Startup financing financing of small small enterprises and that was the reason why This exemption from the prospectus requirements were introduced and when we did the first Evaluation of the effects of the of the crowdfunding Exemption we were quite surprised that a large part even at that time was going on to into real estate crowdfunding and In the last two three years this even Increased this this part. So now it's the majority of financing and We discussed and we did also this also in our in our two reports about whether this Would be appropriate to grant this kind of Elevation for this crowdfunding real estate sector Because we on the one hand thought that There might be in effect on on the pricing on on Contributing to a boom in in in real estate in real estate prices and at the same time There isn't really a leg on on on bank financing for real estate For real estate projects in addition In in general bank loans on real estate are quite sure they They are strict lending standards. They are strict Collateralization standards and at least some of these Crowdfunding a real estate finances seem to be Non-collateralized and From from the Investors perspective, they might be they might be to a certain extent risky if prices go down in the end we decided that We let the market decide on where investors want to Want to invest also into taking to conservation then comparison to the overall financing of real estate sector crowd investing is a quite Limited part, but we Increased the and strengthen the information requirements regarding collateralization of of crowdfunding Investments in In real estates so crowdfunding firms Must inform the investors whether the loans are collateralized so the investors have a better Better ability to assess the risks When they when they're doing this kind of investments We can ask a follow-up question on that because I would Like to ask Henning and like I mean how are the loans collateralized because I have been reading the far we be Letters of some of the issuers and I find it quite difficult to find out what the collateral actually is so in some case It is was the backyard of a real estate prop of a property and Can you say something about how the collateralization actually work? Sure, so first of all we we need to see that products have changed over the last couple of years So pretty much all the platforms started with subordinated loans with no security backup whatsoever And this is something that has changed We we also learned from from the market and from stuff that happened on a market And so we we a moved much more from crowdfunding into crowd lending so you have the possibility of putting security measures behind it and be Experial right now We're doing about seventy two to seventy five percent of all the projects are actually through bonds So it's not typical fraud funding anymore. It's not a subordinated loan anymore. It's a bond Which is moving from a gray market into more of a white market more of security to towards the the investors and That is something that that we see as well In the end there's always a risk associated to it. It's it's you don't get Interest rates of six seven percent With with no risk associated at all But we try to make it as secure as possible for the for the investors and the different possibilities sometimes we we we we we got Don't know the English word We're getting to the to the current book and and so we're trying to to secure the loan as well as possible But bank is first obviously We sometimes have projects which are not actually we're not no bank is involved then it's a bit different But then comes first, but that's also a different interest rate and but the you wouldn't Hardly ever find any subordinated loans on the platform or you don't find any subordinated loans with any risk As sorry with any security on the platform anymore Okay, so heading just talked about some trends in the market or at least how expo or since land Changed contracts or the trends you see. Let's ask Conrad who has an overview of the market Is that representative of all platforms of what what platforms are doing? Where do you see trends and what legal or what challenges for legal advisers are connected or associated with those changes? Yes, there is there is definitely a trend towards bond real estate crowdfunding and That is that is developing you I have several clients who are moving towards that direction and One of the reasons is exactly that reason what you've mentioned Due to our banking supervisory law in Germany We have to take the bond route in order to do certain things namely Create security if we if we do it with a normal loan then We need to do it with a qualified subordination loan with a with a with a very Significant qualification and subordination in in the in the loan document because otherwise the land the crowd would be doing Credit business and would actually need a banking license each individual would need a banking license and also the issue would need a banking license, so That is the driving factor why this real estate crowd a lending market started with this subordinated loan model, and I think that is it is the trend is moving away from that, but it is still there and I'm actually Very curious to see what what model will actually Make the race I'm not sure that the standard Qualified subordination model is is out of date. I don't really see that For the following reason which you also also already mentioned. There's always the bank. There's always the commercial bank On ahead, yeah, and they have to take the senior security for banking supervisory law reasons because very strict banking supervisory law standards, so they have to take the senior security and then If you take the second tranche land charge or whether you take no land charge Sometimes doesn't really make a difference and then You may find that it's actually much much more efficient to do a normal subordinate loan rather than a bond structure So that's how I see this thing about the bond trend and part of your question was sort of the Challenges Which I see in the market, I mean I always see it through the lens of through the eyes of our clients, you know, so Those are a number of crowd-lining platforms So I don't see it the whole of the market I have to make that qualification, but there's a number of crowd-lining platforms and we also do due diligence this For investors, so then we also see other platforms which are not really our clients But we can we can look at them because we're doing due diligence and so so what are the challenges? I think One main challenge is actually I would call it regulatory stress and I'm Because there is a lot of regulation regulatory waves coming over the platforms in rather short iterations reiterations and actually most Almost all of this regulation has a good reason But the way it is the way it is implemented and the and also the timing in which it happens Actually causes a lot of stress. So I see a lot of the in-house council dealing a lot with with regulation and actually watching the the legislation process and And now we have Frank seeing extra. So I Really have to say it's it's it's not really the Drafting of the of the study would you would you do in at the BMF, but it's also It's it's really that the timing and I'll give you and and it's the preparation of the of the supervisory authority Which is the buffing. Yeah, I'll just give two examples one example now we have early early November and on the 1st of January there is going to be An amendment to the German anti-money laundering law now we have a lot of international guests here You don't have to do so. What is that? No, well, it's it's an important law for for the crowd planning platforms it has to deal with know your customer and It is a potential conversion killer Put simply yeah, so if you if you have traffic on your website and you have to show them Oh, can you please go to the next post office and show your ID and then can you please come back? Then you will not going to see him again. So this AML thing is actually quite an important issue and I think it is To say that right in front right right right at the beginning I think it's absolutely correct that crowd landing platforms should be should be obliged entities under the AML laws I think that's right Because you can invest a lot of anonymous money over these platforms So I think it's actually quite right that that should be that they should be obliged entities But you know, it's now early November and there hasn't even there's there's been the first hearing of this statute last week and it's going to be enter into force on the 1st of January and There's actually no pressure for this because There is no EU directive telling us to make crowd-lining platforms AML obliged entities. That's a autonomous decision of the German legislator. It's a good it's it's it's a good decision I think but you know, I sometimes wonder why does it have to be now in such a rush and I can see them the the long-term Motivation because we'll talk about this. I think also in a minute because in the long term The crowd-lining platforms shall be Shall be supervised by BAFIN and no longer by local authorities as at the moment, which is also a good idea I think and so in order to prepare that they should also be under AML obligations anti-money laundering law obligations just like all the banks and all the brokers and and so on So I can see that point but really I Mean you get the point. I'm now pitching for a little extension to to to my left Because it would be actually in compliance with you law to do so So that's one one example where we I just find what is what is the challenge? It's it's really this the stress that is sometimes created the other other example is is is coming Is one which you already mentioned it's about also a very Sensible thing to do you've obliged so that the legislator Which is all of us, which is the democratic a lawmaker. Yes, so the lawmaker has obliged the Lawmaker has obliged the platforms to put into their information sheet also information about the security because we've just heard it's important and That that That entered into force in the middle of July I think and it was also just like six weeks Between the passing of the law and the entering into force and the officers of barfin They had no idea how to how to read it and they didn't know what to do with it and I had really strange discussions with barfin officers about what this means and Because the point is it should be The idea was actually quite simple. It should say in the in the information sheet. What is the security, but for us Quite quite difficult to explain because there isn't really security because it's subordinated security and it's a bit of a contradiction in itself To have subordinated security and so we have to explain that and all in in like five lines Big challenge and I think it would I think the law is perfectly fine You could do a workshop with the barfin officers. That's just a suggestion because I think they I mean They are perfectly educated to do that and qualify to do it But they just had didn't have the time to get prepared. So and then actually one or two crowd-lending Projects had to go on hold for a month or so until these things were and so, you know the real estate developers had to wait for their money for like a month because Nobody knew how to read the new law So well, we have a real panel discussion right now. So I would just ask would you like to respond Maybe two or three remarks regarding this a ML issue that's Luckily I must say not on my desk. It's a colleague that is responsible But as far as I understand The amended directive has to be put into As we're implemented into German law until the first of January. So we are in a rush to implement this This amended AML Requirements and and that's it's now a decision to go above that to make the German Market not only with regard to crowdfunding, but with regard to a lot of other issues more AML resistance or and And Therefore I can understand That this is is a challenge For for the market, but I must also say it's a challenge for for lawmakers. There was a public hearing on Wednesday next next Wednesday The final reading will be in the in the in the parliament or in the In the committee and then in the parliament, so it's a very even for the lawmakers a very short timed process and That's a general this decision on To enlarge the law and then I think it's also to a certain extent legitimate for this kind of a not to to foresee exemptions for certain for certain kinds of Financing tools Regarding the implementation Challenges, I must say I am I was not aware about that I can I can see Or I can understand that it's a it's a challenge, but the The goal was also to provide the market with elevations you also know that There were the The kinds of instruments that were allowed for crowdfunding Or that are a lot for crowdfunding were enlarged by by the law And I think this was very much welcomed by the by the market and the market would certainly Work a bit more to have this Six months earlier than six months later. So I think this every time you Regulations must be put into place. There are some Some frictions, but I hope that this can be solved and and I think the buffing in itself is good world so That's right. I know you can ask for some understanding of the challenges Understood I didn't mention that in the same law the the threshold for prospectus free crowdfunding was was increased from 2.5 million to 6 million. So that was in a significant Elevation for the market indeed and so that's just me the advocate only making the points that Left and so that that's actually correct That's all Thank you, this actually is quite a good point since we have many economists here in this in our group Just just maybe first We this this is what economists call an external shock, right? It's it's an external event and we can see what would be interesting to find whether it has any consequences So maybe let's just very quickly Henning Do you think that the the the the fact that it's that you can invest now or you can issue? Subordinated profit participating loans not only up to 2.5 million, but up to 6 million has any effect on on on your daily day-to-day business small one because something I'd like to mention to what you said a couple minutes before about Subordinated loans versus bonds in a general context and what which one will be the one coming in first You have to see that a issuing a bond is just much more expensive than a subordinated loan So if you have a project that needs to be financed. That's a 800k It's not worth it whatsoever to to issue a bond. Nobody will do this. It's way too expensive So that's one of the reasons why we have to go through we are going through more once now than we did one year ago because our projects in general are bigger now obviously for somebody who Who's not allowed to issue bonds? It's it's obviously a big help if you can finance now up to 6 million rather than 2.5 million on on the downside The limit of the subordinated loan is a jump from 10k per person to 25k per person But they're still a limit So you still need a lot of investors to really fill a 5 million Subordinated loan and there's not too many platforms who can do this who have that amount of investors So I think they're there in theory you will see be see more and more subordinated loans and bigger bigger sciences In the next couple of years, but in the first moment. I think there's not like such a big difference To to the market We already had the first question, but I would suggest we just continue for maybe 10 minutes and then open the floor Absolutely, yeah, so I would like to ask one more question to Ming Feng So the the legal scholars are apparently is more interested in in thresholds and certain amounts to protect investors and so so for me, this is all and I have to To apologize Mambo jumbo in a sense that you know, it doesn't matter whether you invest 10,000 euros or 9,000 euros If the money is gone, it's gone, right? So the question for me would be I mean can technology or the platforms itself Also protect investors and if they can how would that look like and I think you have investigated in your papers already different mechanism like auction mechanisms and post-a-price mechanisms and Would you say this that there is a way that technology can actually help? Thank you Lars. So I think Sorry the jelly I think that's a very important also difficult question. I remember there's a recent issue of I can't remember whether it's Bloomberg or Economist the cover pages the Tesla's new system is going to save millions of life, but it's going to kill Millions of lives and kill a few people first. So I think that's always a dilemma for technology So I think ultimately it can help but I think there's also going to be a lot of challenges in that process So for instance For platforms one, of course, we need to take it into account. They're incentive, right? So they they are profit profit maximizing organization. So we should respect that but on the other hand Sometimes they'll create a conflict for instance if you want to protect Small investors for instance, or if you want to predict the borrowers Make sure that they are not biased against on certain protective information basis such as race and gender One thing we need is to actually for instance if it involves any kind of algorithm we need to know what actually is in the algorithm, but that would mean may not be easy to do and By definition because some of the algorithms are proprietary. So they they are belong to I think as last probably No more about is they could probably belong to business secrets, right? Right. So they have a right to keep some of things private But so that I think it's always going to be an intricate balance between the two so it's all you want to put at the Investors and borrowers, but also you want to protect the interests of the platforms who develop these algorithms in the first place So, but I think ultimately Technology will help if you have the transparency and the large amount of data to train a lot of things and detect Not just biases in algorithms, but also in other places for instance I think if you want to protect small investors if borrowers for instance in B2B landing context It's not just the platforms we need to look at sometimes because the loans when they are originated It's not just a decision of the platform to list them on the platform on the website But it's also the individual investors decision whether to lend to that person or not So if you do see some biases at the end results who gets funding and who doesn't get funding It it could be yes could be platform, but it will also be the individual investors So it's very difficult for us to to disentangle who is actually accessing that bias and whether somebody should punish or not So I think technology data and then many other things are actually all I play here. So It should it should be able to help, but I think there's going to be a lot of challenges to deal with as well Okay, so so one of the platforms with which has used technology recently is I think Expo because they have implemented the blockchain technology and when extending loans So can you say anything about why you did this and why this would actually help investors and why that's a good thing Or maybe it's not and you don't believe in it because you you are still the CEO of since land at the time You think it was a terrible thing to do But now you're in it and can't do anything about it anymore or If so, I wouldn't admit it No, I think it's actually a great idea The the idea why we why we use blockchain technology to to for the bond is that it enables us to do any sort of Transfer much quicker. So otherwise you need the banks you need it Depots sorry a depot with a bank Takes couple of days till till actually the investors see that they that they have the bond in the depot It's always a hassle for the investors, you know, they paid the money and After five days, they still don't have it in the depot and another reason is that if we You talked about a secondary market as well and how it affects the primary market Secondary market is not that important if you're talking about a Financing of a developer for two years because most people don't need liquidity within these two years, but we're talking about Yield-based property with a bond for ten years. There might be some people who want to sell it before so Creating a secondary platform or a secondary market is obviously the the blockchain helps a lot It's it's much quicker. It's much more efficient And in terms of the cost structure just by seeing the cost that we need for clear stream And then the depot banks and so on we can save more than 90% of that cost by going through blockchain Which is obviously something we can pass on to to investors through higher yield and so it's it's a it's I think a better user experience and be it's its higher interest rates, which I think both investors really like But if I have anything learned from from the legal scholars It's that you actually want to have a repeat player who's in the market for a long time and builds up a reputation, right? And then now you're building this on the blockchain. So I guess who's holding the blockchain It's not decentralized right that might be bad in the first place if it's decentralized But I guess it's it's held by bikes and operated by exporter and I would say well, this is a very young player, right? I mean if it defaults then it's just gone So so why should I trust someone to hold this blockchain very very recently only? Well, first of all, we work with a partner here. We don't do everything ourselves I'm a big believer of an infrastructure system. I don't think you have to do and know everything yourself You can combine players in the market who are better in certain fields. You are and so It's it's not we don't have the expo e-wallet It's something that obviously our investors see on our platform and when they log into their account But the wallet itself is with one of our partners and that's where they where they see the the investment if you Really do not trust blockchain honestly, you shouldn't Invest in anything blockchain related. It's it's I think it's a simple thing that everybody should only invest in things he believes in and we do obviously have bonds as well as crowd landing Without any blockchain involved and if this is something you don't trust don't don't invest in it I think it's it's quite secure. I think it's the future and it helps our investors It just said future so let's look into the future For the last part of this this discussion so as everyone knows there is a big thing the next big thing will be the EU regulation on crowdfunding platforms and Of course, this is a European Legal Act, but as I understand the German Ministry of Finance is closely Watching the whole process or at least participating in some form. So let's maybe just ask mr. Franke What do you think will be the most interesting topics challenges of this legal act when it's passed? Yeah, it's this moment It's in the final stage of negotiations and so-called try lock and the Finnish presidency wants to finish this try lock until the end of this year We see this This is realistic and there are still a couple of issues that are that are open there the Crowdfunding regulation according to the Proposal made by the Commission in compasses Securities transferable securities that means bonds and shares as well as as loans and Now the discussion is more in in the trial of weather to broaden the scope to also include other other instruments including limited liability company shares we don't have this at the moment in In in in the German crowdfunding regulation There was a there was a discussion Among this among in the parliamentary field and also among ministries to broaden it but in the end the decision was not to do that because In the German law for a limited like liability companies The provisions that are not really adapted to a broad investor space The idea behind limited liability companies act is that there's a small and limited group of investors that come together to create a to create a Company and also transfer of shares is is a burdensome process with Notary notification required so in the end it was not included in the crowdfunding regulation Now there is some pressure from the from the European side to to broaden this this will Question that will be interesting for also for Germany and what will be certain will be that Bonds crowdfunding with with bonds was financial instruments was Securities will then be able to also be done on a cross-border basis At this moment we have opened this possibility up to 8 million euros for in Germany to sell also crowdfunding from platforms without a prospectus only with an information sheet this will will be possible if the regulation comes into force At the European level and there the question is what Limit will apply 8 million 1 million or something in between or something that will be differentiated between member states because the exemption is a mandatory up to 1 million and Every member state can increase this limit up to up to 8 million for its territory and there are some certain member states that have only increased up to 1 million and they don't want that Foreign crowdfunding platforms are able to enter their market up to 8 million euro Prospectus exempt offerings these are the questions that are open and There's certainly an issue that will alter the current Landscape for crowdfunding I will definitely come back to this to the German liability limited liability company issue because I think that's very interesting, but I think the point you made that But the very last of your of your points I think is a general point because what seems to be the problem to me is that this regulation tries to Create a level playing field for crowd investing platforms in Europe But it does not regulate the product market. So Ken, I mean, I don't really know how this should work. Can we have a real Level playing field on the crowd investing market if we don't have the same regulation on the product level Conrad do what do you think about this? Yeah, I think that's one that's one of the big Issues which I recommend that you just take into the trial org actually Because that is an open question. That's an open. That's a point which I don't find resolved in the current draft of the of the of this regulation Just today one of the Participants here showed me the most recent draft which is from June. I think and in that draft the there is a there is a very peculiar peculiar phrase in the preamble which says that the members it says in the preamble which is Not the operative part of a regulation. I don't want to bore the economists But you put the operative part into the into the into the articles, you know And in the preamble you say what you want to do and why you do it and in the preamble it says the member states shall ensure that that The regulated platform that if the regulated platforms do cross-border projects and also cross-border lending projects So if they use the license then the Then this activity shall not be Deposit taking business Neither by the crowd lending platform nor by the issuer so the regulation says if you use the If you use this license then Even for a loan project then it shall not be deposit taking business and that's for for us. That's that's quite a quite a spectacular thing because the German the German banking supervisor law since I think 50 years is different Yeah, because it says that is actually deposit taking business. That's why we do this subordination stuff So I think and I didn't really understand the regulation draft on that point at this stage I think it is I don't I don't really understand why it's not really addressed I think that is something that should be should be really discussed and Well as a practitioner, I would hope that We get a level playing field because The platforms are really keen to do that. So it's fine that they can that they can Approach investors all across Europe, but they also want to offer Let's say a German product in Spain and they want to offer a Spanish product in Germany and that requires As you said level playing field on the product basis I think just to be fair We should mention that we have that level playing field on both the services market and the product market when it comes to Securities, right? We have all of that when it comes to security So all we we are we just talk about the stuff below the security line so to speak exactly the small stuff Yeah, yeah, do we need a single market for this? I'm not so sure actually Yeah, yeah, of course we have a lot of new noise traders in securities markets as well No, but I get your point and and I think it's and I think you can save I mean It I think you can make a fair point that we actually need this and that would actually be a good idea So I don't want to to to really ridicule that but I think you wanted to respond directly to this or did I misunderstand? That's a challenge and It's my understanding that we Should very carefully then look at the and That's German regulation at a German banking act and As this is a would be a regulation that would be applicable directly The this it's There's a case to Yeah to a man see the men's and banking actor to to to to bring it into line with With the with the regulation if the regulation stands as it is So mr. Franke actually has to leave in ten minutes. So why don't we open the discussion to the floor or do well? I would have asked one question for the future of the Economist so I mean if economists think about the future. I mean they always thinking about the interest rate, right? And the saying is like everything that goes down like the interest rate can also go up at some time, right? and even though the Central Bank in the US is now decreasing interest rates. I mean thing you have Followed prosper by heart and I think you know the data like for a long time and the question would be I mean you have seen a lot of shocks, but what do you think will happen if interest rates increase again? Will you see that these platforms are just completely defaulting because they're just so much on the edge or? What is your feeling on the on that? So I think there are several and goes if interest rates increase I think we should Expect that some of the institutions will pull out. Maybe because they can find more Profit profitable opportunities elsewhere, but I think the platform is already knew that so that's why they have the whole Programmes they like landing club have about I think still it's the same they all the loans They put it into a half of them into a whole on programs and then the rest will go to the crowd So so I think they knew that and then they are they are preparing for that So how that affects the rest of the population? I think still hard to say so I wouldn't expect like a mess default So so the question would be is exporter prepared? I think it's hard to say we are prepared for everything because you never know what's what's coming But in the end interest rates will at some point Go up again. I think that's not the question of the if but more of the then To me the end the product we offering is risk associated so If overall interest rates are going up our interest rates are going up the interest rates that real estate developers have to pay are going up That's not only with regard to to crowdfunding platform, but also with regards to the bank so Because we have a certain a different level of risk associated. We are above the interest rates of The ones that that that developer would pay to a bank and this will stay the same so we will always be above that and if it's now 6% on the platform versus Let's say 1% if you if you put your money on the bank somewhere, then it's maybe nine against three so the overall Difference will I think not crazily changed there might be obviously some some ups and downs in there But if the overall market goes up in terms of the percentage we do as well All right, let's open the floor for the discussion first question Why don't you just okay? Yeah, so so we recording this I think everyone is aware of the fact, right? so yeah customers of so the The interesting thing is I want to say for having this European perspective number one is In Germany why the laws of peculiar is not so much because the Ministry of Finance isn't Competent enough or something like it's quite the opposite. Yeah, I think Mr. Franke and the crowdfunding platforms have had a Very have a very good relationship and I think the Minister of Finance has been very good in terms of keeping a balance between consumer protection and Making sure that transparency and so on but at the same time putting enough Liberties in the market to allow it to grow and so and the same is regarding to Barfin Barfin is also. I think very good compared to other supervisor agencies in Europe and approaching the market directly and also your both of your Studies for the evaluation period for last thing was really good so I think there's a good connection between the academic world which is here the platforms which is presented by Henning for instance and The government but where it is sort of the problematic issues are That in Germany unlike in other big European countries There's a lot of sort of crunchiness going on in terms of that What is a good intention of one side of the government doesn't necessarily result in a good Impact on the other side and the small countries in Europe seem to be able to manage this a little bit better For instance, the Slovakian government has set up a small FinTech workshop where they invite government officials supervisor agencies platforms FinTechs and academics and they speak about Issues which are you know on the hearts and minds of the industry and they get the results from from the academics So this is something I think it would be interesting to hear Across Europe how that if that works better, but I want to ask you how you see that in the US because you see I mean is your research used in the formulation of regulation or would you Like to have the regulation list more to the academics because you have done these papers But you have published them two years after you had these shocks So maybe by that time the regulators were already a few steps further Yeah, that's a very valid question. So I think it's always a challenge that we have to deal with as academics, right? So Reviewers are hard to convince and that's but I think also from the reviewers point of view For them the biggest goal is to make sure that you produce something in the journals. They are long lasting So that's what I got from senior scholars in the field And I think that's the common kind of understanding across the social sciences So I think if you are in computer science, then you worry about the timeliness much more than Other like general business school fields. So yes, we hope that is something that lasts But of course, there are more replication that needs to be done to validate them. So Yeah, hello, Jens Engelmann from funding circle. I just wanted to comment on the On the European perspective because I was quite surprised that this is actually being challenged and From from a platform's point of view. It is I think it's really important to to have a level playing field in Across the European Union because at the end of the day, it's a game about scale So and in the one reason for which platforms stay in their home markets and they don't expand into other into other countries It's actually that different regulation is the main entry hurdle for expansion So I think it is really important and it's a really really good and promising step and it's also from an investor perspective, I think very much Very Very positive in the end because all over Europe. We don't really have bespoke platform regulation Which would really a bit which is really tailored to the needs of retail investors. So in Germany For example, it's it's quite clear that the regulation in the FinFM for Sorry, it doesn't really take into account the way our platforms operate and So for this reason, I think this is really a very positive initiative and also on the on the banking monopoly side where This banking monopoly only exists in Germany that actually the counterparties would require banking licenses And if we want to have a bad 11 level playing field then this in fact is this the main prerequisite To to establish this playing a level playing field So I think this is really positive and that it was also really encouraging to understand that the BMF is considering to To revisit this banking monopoly maybe for for platform lending in general then So that was not really a question, but I wanted to comment on it Okay, are there are there more questions if not, then I think Lars has the last word All right. Well, then if there are no more questions, let me please thank all of our panelists Let me thank Lola Witt and Dennis Kutchuk. Where is he over there for organizing for helping organizing this event? I think it was come absolutely Reibungslos, I'm sorry for not knowing the English word right now and Thanks to Lindemann Schwänneke our sponsor who who provided this great venue and all the food We enjoyed and everything else And and thanks to the audience for participating and we're looking forward to maybe hopefully another crowd-investing Symposium in the future. Thank you very much