Category: Sourcing

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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.

 

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

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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.

The following questions and aspects are to be considered:

  • What is the core competence of the bank and for which service should an outsourcing ensue?
  • Which providers are there and how does a suitable provider selection take place (long-list, short-list, proof of concept, scoping/GAP analysis)?
  • How could the bank become secure during the selection process a maximum in transparency through quality, costs, reliability and a provider’s future security
  • What does a project for the integration of the external provider have to look like? How long does such a project last? What are the additional costs? What are the pitfalls?
  • Which information about the provider, whose tasks and performance must be known during the service from the outsourced bank, and which service must stay within the bank in order to be sure that a stable banking service can always take place, and that the authorities give their approval?

PwC has recently supported new bank set-ups and license and product expansions and also gave comprehensive advice to its clients on the above mentioned topics.

Get in contact with us and profit from our knowledge and experience.

Banking Business in Germany, 4th edition – now available

We did it again: The 4th revised edition of “Banking Business in Germany” is now available.

banking-business-in-germany-auflage-4-cover

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.

License procedure of AIFM under KAGB: Experience from the first months

Nearly half a year went by since the Kapitalanlagengesetzbuch (German Investment Act; “KAGB”) entered into force in July 2013.  Time for a first resume of the issues which crystallised in the due course of the license procedures for Alternative Investment Fund Managers (“AIFM”) since then.

Capital requirements and regulator’s usance in this area

While most of the draft applications complied with the general capital requirements pursuant to section 25 KAGB, it was sometimes necessary to remind of existing regulator’s usance in order to avoid otherwise predictable feedback by the regulator on this issue.  Occasionally applicants omitted that the volumes requested by section 25 par. 1 and 4 KAGB are minimum requirements, which can be missed, especially in case of starting losses.

Also it must be recognised that the regulator expects a sustainable business case:  This expectation includes usually that the own funds necessary to cover the starting loss were already provided by the initial capital contribution. Any additional capital contribution during the planning period of the planned figures filed with the application should therefore be avoided.

Appropriateness of the managing directors

As in all regulatory license procedures, the regulator ascribes also under the KAGB highest importance to the reliability and competence of the managing directors.

The regulator turns its attention especially to whether the approved business experience of the managing directors covers all types of assets and funds applied for. In single cases even two managing directors for each type of asset/fund were requested. Similar to the rules under the former Investment Act, the regulator requests also under the KAGB a corresponding restriction of the license application and thereby the later license to individual types of assets/funds. Especially in case of expansive business models the scope of license should therefore be considered carefully.

However, regarding the managing directors’ reliability the regulator seems rather pragmatic: Initially there were concerns that especially managing directors from the former unregulated business of closed funds could, due to their “insolvency experience” gathered there, would receive intensive feedback from the regulator regarding their reliability. In the current practise, however, only few remarks were recorded. The same applies regarding the number of additional activities due to parallel managing director positions in the individual AIF-companies, where also only few enquiries were raised; however, many managing directors already waived such parallel positions in anticipatory obedience.

Organisational requirements

With regard to the business organisation of the AIFM, the regulator especially picked up planned outsourcing arrangements. The transformation of existing business models usually involves either to add the AIFM as a most confined extension to the existing structure or the existing organisation is transferred to the new licensee thereby retaining a minimum structure for settling the unregulated former business which enjoys grandfathering. In both cases the smaller unit usually receives services from the bigger organisation under various outsourcing agreements. It was not always ensured that the regulated AIFM must be vested with appropriate authority to give directives and monitoring rights. In some case the unregulated unit was even designed as a fall back solution for the rather small organisation of the AIFM. The regulator did not appreciate such approach in the licensing procedure.

General observations

The license procedure takes usually more time than most of the applicants were expecting. Some applicants filed their applications already in July and still await the end of their license procedure. During this time some applicants felt being subjected more restrictive requirements compared to other license applications. At time one could get the impression that the coordination process between the regulator’s individual staff in charge for the application is still in an early stage. It remains to be seen how the regulator’s practise is going to even out. This would be helpful since another wave of applications can be expected to be filed during the now starting second half of the grandfathering period.

Captive Automotive Banks use customer deposits to refinance the business

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The German Automotive Market shows a downturn for the first six months of this year again, just as the European market as a whole does. The reasons are multilayered.
OEMs reinforced their activities by using a combination of offering car sales, after-sales services, mobility services and financial service out of one hand (one stop shop) to break this trend. This has been supported by OEM owned/captive financial services organizations. These banks offer traditional finance products like loans and leasing as well as insurance services.
One of the major questions on captive finance agenda is the issue of re-financing. An attractive option here is to use account deposits held by customers.
OEM owned banks can offer several products, like fixed-term deposits, restricted cash or savings deposits. With these products they increase customer loyalty and improve their own re-financing structure.
What chances and threats arise and what themes are currently to be considered are some of the key topics for our PwC Team. Don’t hesitate to contact us.

PwC – survey: “Ihr Reifegrad unter der Effizienzlupe”

Besides successfully undergoing a licensing procedure, designing an efficient business model is the most crucial step when establishing a bank. In order to increase cost-effectiveness, most banks source out services such as securities settlement, management of accounts or credit processing to external providers.

On account of this trend, the market for banking service providers has grown in the recent years. Both providers with a very strong focus on certain services as well as ones that offer the whole range of banking services are entering the market.

The PwC-survey “Ihr Reifegrad unter der Effizienzlupe” is analyzing and assessing the market of banking service providers by evaluating the maturity level of the single actors. The survey focuses on processes, service management, as well as customers and sales. In the analysis three main areas for enhancement in the provider’s degree of industrialization were being observed:

  1. Most providers don’t sufficiently focus on an integrated process improvement, i.e. process documentation and cost-controlling are not being integrated and workflow systems are not being used in a sufficient manner
  2. Due to of the irregular use of KPIs, a detailed and short-dated management reporting is hardly available
  3. The focus on growing revenues is not strong enough. Many providers are lacking a sufficient sales management, and a sales performance based controlling of the sales staff

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"

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. More than 27 authors, 6 months of preparation and 442 pages were required in order to cope with that task. Due to the numerous developments throughout the financial market in the last four years it was necessary to revise and expand more or less every chapter of the book.

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

Banking business in Germany – revised edition soon available

As time goes by …

Time is relative. But from a regulatory perspective the last four years since 2007 brought close to epochal changes. In nearly all areas of the financial industry the measures taken to scope with the financial crisis led to fundamental amendments and new regulations which already transformed the industry sustainably and will further do so in future.

What you can look forward to

Insofar it was high time to start a new edition of the English publication "Banking business in Germany", which was published last time 2007 as 2nd edition. The work offers its readers a detailed and comprehensive overview of Germany in general and its financial industry in particular, including the possible legal forms of an organisation in Germany, the relevant supervisory authorities and supervisory framework, and German tax law and labour relations. The book can be used as a helpful guide to the establishment of banks, branches or representative offices in Germany.

Time line

Also the new edition is developed in close cooperation between the Association of Foreign Banks in Germany (Verband der Auslandsbanken in Deutschland e.V.) and PwC. It is scheduled for January 2012.