Category: Organisation

Stay up to date - the Organisation RSS-Feed

Banking Business in Germany: 5th revised edition is now available

I am happy to announce that the 5th revised edition of Banking Business in Germany is now available. You can order it at „Fachverlag Moderne Wirtschaft“ (34,50 EUR). It is also available as an E-Book at ciando (28,50 EUR).

Cover picture of "Banking Business in Germany", 5th revisededition

Banking Business in Germany, new 5th revised edition


“Banking Business in Germany” is again a joint project of the Association of Foreign Banks in Germany and PwC.

From the Preface, written by Thomas Schäfer, Minister of Finance of the State of Hessen:

Now in its fifth edition, „Banking Business in Germany“ presents the legal and economic frameworks for the banking sector in Germany.


With the European Central Bank and the Bundesbank located here, Frankfurt is a leading location for international monetary and currency policy. And since the Single Supervisory Mechanism (SSM) has been placed under the auspices of the European Central Bank in November 2014, the financial centre of Frankfurt as a whole has become even more valuable and attractive for foreign institutions. And so, together with the European Insurance and Occupational Pensions Authority (EIOPA) and the European Systemic Risk Board (ESRB), Frankfurt is not only the centre of European monetary policy, but has also become a centre for regulatory authorities and supervisory agencies that can boast a competitive regulatory environment.

Over the last few years, the main objective of regulatory efforts at international, European and national level has been the rebuilding of trust in the financial markets. The creation of a Capital Markets Union and the implementation of new European requirements for financial market products are just two of the changes we will have to adapt to. I believe that Frankfurt should contribute towards achieving a change of direction: after years with a focus on regulation, it is now time for the simplification and optimisation of framework conditions. If these challenges can be actively addressed, I am confident that Frankfurt will be able to successfully defend its market position among the competition provided by global financial centres.


We welcome all financial institutions coming to Germany and contributing to this financial market, thereby enabling customers to choose from a diverse range of financial products.

I hope you will enjoy reading this publication and I cordially welcome you to Germany.


Amendment of the Building Society Act (Bausparkassengesetz) introduces new refinancing possibilities for Building Societies

The amendment of certain fundamental legal foundations for the supervision of Building Societies as e.g. amendments of the German Banking Act required modifications of the Building Society Act. Furthermore, the business environment for the Building Societies’ business has changed: a low interest level in the capital market is accompanied by a strong demand for residential property financing.

The amendment of the Building Society Act was published in the federal gazette on 28 December 2015 and entered into force the day after. Inter alia, it introduced the possibility for Building Societies to issue mortgage backed bonds (Hypothekenpfandbriefe) to allow a competitive refinancing. For this purpose, Building Societies in principle need a licence according to the Pfandbrief Act. They need a higher amount of core capital as the amount required by the Building Society Act (minimum 25 million EUR) and have to fulfil the additional risk management requirements according to the Pfandbrief Act. The fulfilment of these conditions has to be stated in the licence application.

Please find here the link to the Second Act amending the Building Society Act.

Please find here more details to the amendment of the Building Society Act, e.g. with respect to the new risk management provisions.



New 5th edition of Banking Business in Germany is due for 2016

As time goes by …

Although it seems to me as if the 4th edition of Banking Business in Germany was finalised only yesterday: The regulatory pace is still high and changes the framework of the financial services market day by day. So the authors from Association of Foreign Banks in Germany (Verband der Auslandsbanken in Deutschland e.V.) and PwC will convene once more over the next months in order to implement the latest developments into a new 5th edition of this practical guide for foreign banks establishing a subsidiary or a branch in Germany.

So I would like to encourage you to send in the comments below your feedback on the current 4th edition as well as your suggestion for anything we should take into consideration when we start to make up our minds on the content for the new 5th edition of Banking Business in Germany.

The new 5th edition is due for 2016.

Calculation of the contributions to the German deposit guarantee scheme – Overview and preview of the new contributions regulation

When establishing or acquiring a bank in Germany, a regulatory business plan must be provided to the German Federal Financial Supervisory Authority which contains, amongst other things, the expected costs. These costs include the mandatory contribution payments to the German deposit guarantee scheme Entschädigungseinrichtung deutscher Banken GmbH (EdB).

As of recently, the contributions to the EdB (these include non-recurring/one-off payments, annual contributions, special contributions, special payments) are no longer calculated according to the Deposit Guarantee Scheme and Investor Compensation Act (Einlagensicherungs- und Anlegerentschädigungsgesetz – EAEG) in conjunction with the EdB contributions regulation (EdB-Beitragsverordnung – EdBBeitrV). As part of the implementation of the Directive 2014/49/EU of the European Parliament and Council of 16 April 2014 on deposit guarantee schemes (DGDS), the previous Deposit Guarantee Scheme and Investor Compensation Act was “split” into the Deposit Guarantee Scheme Act (Einlagensicherungsgesetz – EinSiG) and Investor Compensation Act (Anlegerentschädigungsgesetz – AnlEntG). The Investor Compensation Act secures the liabilities from securities transactions whereas the Deposit Guarantee Scheme Act (EinSiG) secures the deposits.

The contributions of the CRR credit institutions are now calculated according to the EinSiG in conjunction with a new contributions regulation yet to be released which will contain the specific calculation methods (like the previous EdB contributions regulation). The general contribution model consisting of annual contributions, non-recurring/one-off payments, special contributions and special payments shall remain unchanged however.

A transitional regulation applies to the annual contributions for the calculation period 2014/2015 (1 October 2014 to 30 September 2015) which shall still be calculated according to the previous provisions.

In order to ensure consistent application of the DGDS, the European Banking Authority (EBA) was supposed to issue guidelines to specify methods for calculating the contributions to deposit guarantee schemes. Accordingly, on 28 May 2015, the EBA issued Guidelines on methods for calculating contributions to deposit guarantee schemes (EBA/GL/2015/10). They recommend specific and in detail the methods to be used for calculating the annual contributions. It remains to be seen how the expected contributions regulation will look like. However, considering the implementation history, it can be expected that the new EdB contributions regulation will mostly adopt these guidelines.

The guidelines recommend the calculation of the annual contributions of an institution which is a member of the deposit guarantee scheme according the following formula:

Annual contribution of a member institution = Contribution rate x Aggregated risk weight for member institution x Covered deposits for member institution x Adjustment coefficient

There is the possibility that the annual contributions will be higher in the future. Furthermore, it is unclear how the non-recurring/one-off payment, which is mandatory when being allocated to the EdB, will be calculated. This payment could also be higher in the future.

The deposit guarantee schemes, including the EdB, shall reach a target level of 0,8 % of the amount of the covered deposits of its members.

As soon as the new contributions regulation is available, we will provide you with an update here so that you will be able to determine the amount of the contributions for the target figures in the regulatory business plan.


Revised Deposit Guarantee Schemes Directive implemented in Germany

The implementation act changes the definition of deposits eligible for compensation, introduces new reporting requirements and extends information requirements.


The revised Deposit Guarantee Schemes Directive (Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014, DGS Directive) provides new and largely harmonized rules at EU level for deposit protection. It aims to protect as many deposits as possible in favor of comprehensive consumer protection and in the interest of financial stability. The provisions form one of the pillars of the European Bank Union and are connected closely to the regulations on bank recovery and resolution.

The law transposing the DGS Directive : is expected to be published in the Federal Law Gazette soon and will enter into force entirely on 3 July 2015. It replaces the existing Deposit Guarantee and Investor Compensation Act (Einlagensicherungs- und Anlegerentschädigungsgesetz – EAEG) by the new Deposit Guarantee Act (Einlagensicherungsgesetz – EinSiG) and the Investor Compensation Act (Anlegerentschädigungsgesetz – AnlEntG). Due to the new regulations, depositors in principle will have a right of compensation for their covered deposits up to an amount of EUR 100,000 and in certain cases even up to an amount of EUR 500,000. This would be the case e.g. with deposits which were made due to the sale of private property for the period of up to six months after the credit on their account.

The newly introduced definition of “deposits eligible for compensation” of EinSiG based on the specifications of the DGS Directive is not completely congruent with the current notion of deposits eligible for compensation pursuant to the current EAEG. For example, in future deposits eligible for compensation will be also deposits denominated in foreign currencies and not only deposits in the currency of a Member State of the European Union or in Euros. Furthermore, also deposits of larger companies, currently excluded from compensation, will be eligible for compensation. In addition, in future set-off or retention rights of the CRR-credit institution will not be considered.

Credit institutions are obliged to flag their deposits eligible for compensation so that they can be identified for each depositor immediately. There are also future reporting obligations with regard to the so-called “covered deposits“, which are determined in reference to the deposits eligible for compensation. The first report on the amount of covered deposits with the reference date 31 July 2015 has to be delivered already on 1th September 2015 due to a provision of the (European) Commission Delegated Regulation No. 2015/63. It could be therefore appropriate to review the existing internal bank system used to survey the deposits eligible for compensation and to adapt them if necessary.

In addition, new information obligations towards depositors are introduced. E.g., the reception of the new “depositor information template” must be confirmed by the depositors. In this context, the internal processes related to the customer service might have to be adjusted to fulfill the new requirements.


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.

According to the draft the current exemption for commodity traders will be deleted (Article 2 para 1 lit. k). This exemption currently allows to carry out certain trading activities in commodities derivatives without a license. Further, the so-called ” ancillary activity ex-cemption”, which is also used by commodity traders will be extensively revised and is likely to be rather limited in its application (Article 2 para 1 lit. i). For example, investment services will be allowed to be performed only for customers or suppliers of commodity traders which want to make use of the exemption. In addition, these investment services may only relate to commodity derivatives , emission allowances or derivatives thereof.

As a consequence, according to the current MiFID II draft, activities carried out by commodity traders without a license may be subject to a license requirement from 2017 on. Although not yet all the details of future regulation have been clarified, it makes sense to analyze in time the trading, advising and portfolio management activities in relation to a possible future license requirement.

Banking Business in Germany, 4th edition – now available

We did it again: The 4th revised 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.

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”

True. But actually the book covers much more: It presents a current overview of the economic, regulatory, legal and tax framework that applies to credit institutions and financial service institutions in Germany.

Due to the current numerous developments throughout the financial market it was necessary to shorten the interval for the new edition from four to two years in order to keep up to date. Especially the chapter on prudential supervision in German got more or less completely re-written. The book now also comprises a new chapter regarding the ‘Minimum Requirements for Risk Management (MaRisk)’ published by the German regulator Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). Since regulation is not likely to stop here, you can expect the 5th edition by 2016.

With so many new things to tell, we were concerned that the book might lose its character as a concise guide and become simply to voluminous. We therefore managed to enhance the book’s focus throughout the chapters. In addition, you find now a subject index for ease of use.

The book is available as paperback or e-book.

I hope you enjoy reading the book and look forward to receive your comments.

Is as voluntary report of reporting failures possible for the reporting requirements pursuant to AWV and AWG?

Typically an administrative offence exists when a necessary reporting pursuant to the Foreign Trade and Payments Regulation (AWV) was conducted incorrectly, incompletely, not at all, or not in time.

According to the changed rules within the Foreign Trade and Payments Act (AWG), the prosecution of that administrative offence will be ceased if it is a negligent breach of law, the breach was revealed by way of self-monitoring and the responsible authority was notified. Moreover, it is necessary that adequate measures are taken to prevent a repeat failure for the same reason. Pursuant to Sect. 22 para. 4 clause 2 Foreign Trade and Payments Act a notification to the responsible authority will only be regarded as voluntary if the respective authority has not started any investigations, yet.

Because of these changes revising oneself in aspects of abidance by the reporting requirements can be worth it. As a consequence it might be possible to voluntary report discovered failures.


Development Bank 2.0 – Implementation by founding

Due to the very positive role of development banks in regard to the cyclical stabilization and the economic growth stimulus, we see the progression to a development bank 2.0 not only in Germany, but in an international environment.

This leads to an international momentum to take the positive aspects of development banks and establish them in their own countries.  The aspects of the development bank 2.0 concern the independence of the bank regarding influence from politics. We observe an increase in freedom and a change from narrow political provisions to a leadership through goals, especially in the area of foreign bank foundation:

  • Strict recognition of competition neutrality in regard to future product and service offerings
  • Professionalization already in the process of planning the building and procedure organization
  • Recognition of growth scenarios and limiting external factors already in the first conception
  • Support of foundation purposes, especially in developing countries from already established development banks

Therefore a stable market of foundations or foundation concepts establishes, despite the financial crisis. The economic benefits from the foundations will create additional stabilization and growth impacts in these countries.

Licensing procedure: management has to commit sufficient time

In the future, in the course of the banking licensing procedure according to KWG (German Banking Act) it has to be proven  that the prospective managers of the institution are able to commit sufficient time to perform their functions. The license application has to include information according to which BaFin (German Federal Financial Supervisory Authority) can assess whether the managers are able to commit sufficient time to perform their functions. Especially the number of further directorships of the manager has to be given, as well as the expenditure of time which has to be donated to them. This has to be set into proportion to the time required for his management function in the new established institution.

Should BaFin come to the conlusion that a manager is not able to commit sufficient time to perform its function, it has to deny the license.

This requirement along with further provisions regarding the obligations and responsibilities of managers and members of the superisory board of an institution will be incorporated into the KWG within the context of the CRD IV (Directive 2013/36/EU) implementation into German law.

It is expected that EBA will publish guidelines on the notion of “sufficient time commitment” (in addition to its guidelines on the assessment of the suitability of members of the management body and key function holders).