News - PwC Establishment of Banks Blog

Requirements for licensing of alternative investment funds managers (AIFM) – Part 1

Funding required for running the business
As already posted on June 2012 (see below), from July 2013 on all collective investment schemes, which are not already covered by the UCITS Directive [Directive for the regulation of collective investment undertakings; Directive 2009/65/EC] are regulated by the AIFMD. Therefore fund managers of so-called “alternative” funds, such as private equity funds or hedge funds generally are required to obtain a license for their activities.

There are numerous requirements that have to be met in order to obtain an AIFM-license by the Federal Financial Supervisory Authority (BaFin). One of these conditions is the availability of adequate capital.

Bank Formation as a Strategic Decision for Company Success

-Professionalization of Financial Services-

In order to offer financial services today, companies usually require a banking license and are therefore subject to the supervision of the BaFin. However, there are financial services which can be exempted from the supervision and are therefore not bound to license requirements. These businesses named “Financing Without a Bank” are often ancillary or secondary businesses, which can be offered as a complement to the core business. A possible release of the license requirements depends on the business volume of the respective company.

Bank formation as a strategic decision for company success

-External Factors Influencing the Decision to Establish a Bank -

Industrial companies are thinking to establish their own bank or have established their own bank already. The motifs to found a bank can be totally different.

The range of existing bank products and services does not always correspond to the needs and requirements of the respective company. Through the acquisition of an own banking license, the company is able to develop new financing models for either internal or external purposes and can also create company specific products and services. Furthermore, companies with high refinancing needs may then obtain access to low interest ECB loans if applicable. Additionally, they get the possibility to place liquidity reserves and other cash assets profitably. Consequently, new value creation possibilities can be revealed through an own banking license.

Trends for the Formation of Development Banks Abroad – Part 2

The support of development banks in countries which are further developed regarding industry and infrastructure is frequently aimed at the financial assistance of SME’s (Small and Medium Enterprises) as they often serve as an economic pillar with regard to the middle class of the respective country. Additionally, development banks grant means to foster innovations, to encourage exports or to subsidize municipalities and regional projects such as the expansion of infrastructure and environmental protection etc. .

An own development bank is a very sustainable instrument in order to strategically set up and establish the support in a country.

Trends for the Formation of Development Banks Abroad – Part 1

We observe plans and concepts that are associated with start-up activities of development banks abroad.

Thereby, the fundamental goal is to promote industrial development and boost economic growth in order to stabilize the country in the long-run but also to act sustainably.

There are different programs depending on the level of development and needs of the country. Thus, the arrangement of these programs may vary from country to country. In order to support developing countries there are often cross-regional development banks focusing on the promotion of a particular region. By using funds the development bank aims at fulfilling the basic needs in the respective regions and then subsequently achieve an effective use of own resources in order to ultimately become more competitive in terms of global trade.

Banking Business in Germany – 3rd edition, revised and expanded – now available

I am proud to announce that the latest, the 3rd, edition of "Banking Business in Germany" is now available. Also the new edition was developed in close cooperation between the Association of Foreign Banks in Germany (Verband der Auslandsbanken in Deutschland e.V.) and PwC and, like the former editions, is endorsed by the State-Government of Hesse.

The book's subtitle tries to explain its ambition in one short sentence:

"A practical guide for foreign banks establishing a subsidiary or a branch in Germany"

MiFID II draft: Extension of the license obligation to non regulated enterprises?

On 20 October 2011, a draft of the revised Markets in Financial Instruments Directive (MiFID) flanked by the draft of a new Market in Financial Instruments regulation (MiFIR) was published by the EU Commission. The two drafts are hereinafter referred to collectively as "MiFID II". The revision of the existing MiFID is part of reforms designed after the financial crisis to create a safer and sounder financial system.

MiFID II is expected to expand the existing licensing obligation to a larger number of enterprises.

Still bank formations in Germany

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The structure of the German banking sector is running through a change process. The increasing consolidation of the banking market is observable. According to the Bundesbank, in 2010 only 2,093 certified credit institutions existed, compared to 2,121 in the year before. Contrary to the declining number of banks, new foundations are taking place. Consequently, 22 new banks have successfully acquired a permit by the Federal Financial Supervisory Authority.

Predominantly, the new banks are operating as regional, securities trading, or other credit banks as well as branch office of foreign and securities trading banks. For instance, an eastern European bank has opened a branch office in the 3rd quarter of 2010 in Germany.

Switzerland and Germany want to ease the market access

Switzerland and Germany concluded on 10 August 2011 their negotiations on outstanding tax issues and initialed a tax treaty. Besides implementation of withholding tax on future investment income and regulations on a deferred tax proceed for previously untaxed assets in Switzerland, the agreement also includes (tax) concessions for mutual market access for financial institutions. In particular the so-called exemption process s for Swiss banks in Germany should be easier and the duty of initiating customer relationships through a local institution should be repealed. In a few weeks, the agreement by the two national governments should be signed. Subsequently, the legislative bodies of both states agree to the treaty, which will come into force in early 2013.

EU branches: Without permission at the German market or still under German law obligations?

Basically banks and securities traders from the European Economic Area do not require a separate authorization from the Federal Financial Supervisory Authority (BaFin), if they would like to establish a branch in Germany and / or if they are about to take action in cross-border services. By using this so-called "European Passport", the Authority in the home country of the bank or securities trader reserves the general oversight authority.

Nevertheless; there are also several regulatory provisions in Germany that must be fulfilled particularly by branches. BaFin notifies the bank about these obligations in advance in a so-called standardized "Welcome Letter". However, due to the generic enumeration of the relevant German sections the real content of the obligations that exist for the branch in Germany are often under-estimated.

Category: News