Establishment of Banks Blog

Third Countries Regime pursuant to MiFID II

Single aspects of future market access in Germany for investment firms from third countries according to MiFID II (Directive no. 2014/65 / EU) and MiFIR (Regulation (EU) No. 600/2014)

Part of the revision of MiFID was the intended uniform regulation of market access in the European Union (EU) for providers of investment services and activities from third countries.

SSM licensing procedure – first impressions

On November 4, 2014, the Single Supervisory Mechanism (SSM) became effective. It entrusts the European Central Bank (ECB) with the final approval of a credit institutions licence application. Here some first impressions from one of the SSM licensing procedures currently on the way:

Theory and practice of an SSM licensing procedure

While the corresponding EU-provisions describe ECB’s involvement in an SSM licensing procedure as having 10 (20) working days for its final approval once the national application procedure came to a positive preliminary result, the practice is rather different. In reality, ECB will be involved in an SSM licensing procedure from the first day the applicant approaches the national competent authority (the national regulator). Thereafter, ECB and the national regulator will liaise closely. The national regulator will remain the first point of contact for the applicant in the daily operations of the licensing procedure. However, ECB will join the meetings with the applicant once the application is filed.

Islamic Banking: BaFin grants licence to Kuveyt Türk

The Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, hereinafter BaFin) has granted a licence for running banking business in Germany to Kuveyt Türk Bank AG (hereinafter KT Bank), a German subsidiary of the Turkish bank Kuveyt Türk Katilim Bankasi A.S.. KT Bank will be the first credit institution in Germany, which will offer banking products according to Islamic jurisprudence (covered by Sharia) to retail-clients. Whether other banks will follow this example, remains to be seen.

Despite BaFin will not handle the application to run a credit institution according to the Sharia different than the application to run a non-religious credit institution, some regulatory specifics have to be considered when it comes to Islamic Banking.

Reporting on risk bearing capacity after the establishment of a bank


With their establishment credit institutions will face further reporting duties. After the German Ministry for Finance (Bundesfinanzministerium für Finanzen) has amended the “Verordnung zur Einreichung von Finanz- und Risikotragfähigkeitsinformationen nach dem Kreditwesengesetz“ (Finanz- und Risikotragfähigkeitsinformationsverodnung = Finance and Risk Bearing Capacity Information Regulation – FinanzRisikoV) of December 6, 2013 (last amendment December 19, 2014), credit institutions in Germany will be obliged to file reports on their risk bearing capacity.

Reporting Dates

On February 25, 2015 the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) has enacted “Allgemeinverfügung zur Einreichung der Informationen zur Risikotragfähigkeit“ (GZ: BA 54 – FR 2204 – 2010 / 0004), which sets the reporting dates for risk bearing information reports of credit institutions, as follows:

“Kleinanlegerschutzgesetz”: The end for Crowdfunding and „Banking without a Bank“?

Crowdfunding, which by now is not only practiced in the Anglo-Saxon area, will already be stronger regulated in this year. In the recent years a market has developed in Germany, which offers individuals businesses typical of banks (e.g. Deposit and Credit Business as well as Financial Services) without the necessity to have (direct) business proceedings with a bank. Through commercial it was intended to make individuals believe, that it is possible to invest without a bank in a project and to achieve big profit out of it. On closer examination, it becomes clear that in most of the cases it is neither a classic crowdfunding project nor “banking without a bank”, since all crowdfunding marketplaces in Germany cooperate with a regulated partner (credit institution, payment service institution, or financial services institution). Proper prospectus are rare as well as information on a project once the public offering is finished.

Now: ECB and BaFin decide together about authorisation and notification procedures of credit institutions

The European banking supervision has started. Since November 4, 2014 the Single Supervisory Mechanism (SSM) has begun its work. The SSM comprises the European Central Bank (ECB) and the national competent authorities (NCAs) of euro area countries and other participating countries (participating Member States).
The three main aims of the SSM are to:

• Ensure the safety and soundness of the European banking system
• Increase financial integration and stability
• Ensure consistent supervision

Court Ruling of the BGH concerning the Definition of Deposit Business re left monies in Companies

The German Federal Court of Justice (Bundesgerichtshof – BGH), ruled in its decision recently that left monies in companies (in this ruling especially the German “GmbH & Co. KG”) may be regarded as deposit business for which a banking license is needed. Doing deposit business without such license may create a compensation claim and even can result in criminal penalties for the managing directors.

In this ruling the plaintiff – a member of a winemaker society – demanded compensation from the director of the debtor company (here a German GmbH & Co KG) for monies he left with the company.

Banking set-ups – in search of a suitable outsourcing partners

In the recent past we have seen different new bank set-ups as well as license and product expansions for existing banks

There will be some questions which the banks have to have in mind. E.g. should all necessary functions, tasks and activities be done by the banks or could it be done by an external provider?

If a bank decides to outsource portions of the task, many companies offer such support. The scope extends from marketing and sales through call-center services and back office units for opening an account, deposit or loan business as well as IT operations, development and infrastructure.

MiFID II and future regulation of commodity traders

The “Market in Financial Instruments Directive” (MiFID ) is currently being revised and will be final adopted as so-called “MiFID II” by the European Parliament later this or next month.

The definition of the term “financial instrument” is expected to be extended . For example, according to the draft, emission allowances will be classified as financial instruments . In addition, basically all physically settled commodity derivatives that are not stipulated bilaterally will be classified as financial instruments, with the exception of certain electricity, gas , coal and oil contracts.

The EU-Manager Passport pursuant to Sect. 53 and 54 KAGB shall prospectively include the provision of services and non-core services

In the course of the AIFMD’s (Directive 2011/61/EC) transposition into national law, Article 33 AIFMD has been interpreted differently. Some competent authorities were of the opinion that the provision of services and non-core services pursuant to Article 6 para. 4 AIFMD could not be part of the EU-Manager Passport. Other competent authorities, as for example the English FCA, took the position, that Article 33 AIFMD very well allows the so called passporting of MiFID services and non-core services.