KfW

KfW banking group is a German government-owned development bank, based in Frankfurt. Its name originally comes from Kreditanstalt für Wiederaufbau, meaning Reconstruction Credit Institute. It was formed in 1948 after World War II as part of the Marshall Plan.

It is owned by the Federal Republic of Germany (80%) and the States of Germany (20%). It is led by a five-member Managing Board headed by Ulrich Schröder, which in turn reports to 37-member Supervisory Board chaired by Rainer Brüderle, Federal Minister of Economy and Technology, since October 2009.

Operations

KfW banking group covers over 90% of its borrowing needs in the capital markets, mainly through bonds that are guaranteed by the federal government. This allows KfW to raise funds at advantageous conditions. Together with its exemption from corporate taxes due to its legal status as a public agency and unremunerated equity provided by its public shareholders, this allows KfW to provide loans for purposes prescribed by the KfW law at lower rates than commercial banks. KfW is not allowed to compete with commercial banks, but it facilitates their business in areas within its mandate. Typically, KfW does not lend directly to enterprises or individuals, but it provides commercial banks with liquidity at low rates and long maturities, as well as with instruments to transfer risk (securitization). KfW thus acts as a second-tier bank.KfW banking group has three business...
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