Strategy - 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.

3rd edition of Banking Business in Germany is now available as an eBook

The third edition of this practical guide on establishing a bank in Germany has been edited by Jens Rönnberg (PwC) and Dr Oliver Wagner (Association of Foreign Banks in Germany).

The authors Christian Wilhelm Baumann, Sascha Demgensky, Dr Nicole Elert, Markus Erb, Christina Grulke, Eva Handrick, Holger Junghanns, Dr Eric Krause, Marco Libudda, Hartmut Liehr, Jens Marth, Dr Angelika Meyding-Metzger, Thomas Karl Otto, Martina Rangol, Kristina Rölver, Jens Rönnberg, Alice Dagmar Romisch, Dr Martin Schulte, Dr Jörg Schwerdtfeger, Marc Seedorf, Hiltrud Thelen-Pischke, Wolfgang Vahldiek, Dr Oliver Wagner, Christian Wettlaufer, Christine Wicker, Daniel Wildhirt, Rainer Wilken, Maxi Wilkowski and Herbert Zerwas have revised and expanded this edition.

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.

LEAN – right from the start

The term lean management is often associated with the increase of efficiency and cost reduction measures in Germany. Why should a financial institution already consider lean management as a method at the very moment of a bank formation?

Lean management implies much more than cost cutting, redundancies and outsourcing of processes and functions. From our point of view lean management stands for establishing a corporate culture which aligns all the activities of a company with their clients’ needs and continuously improves these activities.

Follow the Five Principles

Focus is set on five central principles:

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.

Industrial enterprises found captive banks

The motivation to found a bank is complex.

Addressing the right customer groups and offering them the right financial products is extremely relevant for industrial enterprises. As they have the market knowledge including customers expectations and competitors’ products, they are well positioned to understand clients’ financial needs.. Moreover, they are able to anticipate how future developments on the markets possibly influence the product life cycle and their sales.

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

Bank formation during the financial crisis- factor of success: Carve Out

Greenfield Approach vs. Established Business Model

We see both in the peak of the financial crisis and in its foothills, which can still be felt, the formation of new banks. But it turns out that most of these new bank formations are currently no strategic startups handling a new business segment or a new group of customers, but outsourcing of already existing banks.

Particularly spin-offs in form of previously separated operating divisions or whole business units can be observed. The reasons are often the focus of the strategy of issuing banks due to regulatory requirements. Therefore, the reasons are more exogenously predetermined through the legislation or through requirements in terms of competition law. Nevertheless, it is shown that even these carve outs operate successfully on the market.

Category: Strategy