Establishment of Banks Blog

“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

The new European Single Supervisory Mechanism (SSM)

The introduction of the Single Banking Supervisory Mechanism (SSM) led to a substantial shift of supervisory functions from BaFin to ECB. Since November 4th 2014, ECB is not only the competent authority for the final decision within licensing procedures of deposit-taking credit institutions, the assessment of intended acquisitions or disposals of significant holdings in deposit-taking credit institutions but also amongst other things for supervising significant deposit-taking credit institutions. Thus, the new SSM is a first significant step towards unified supervisory practices in the European Union.

Regarding this topic, see also our article from April 9th 2015.

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.

Access to the German markets should be easier for Swiss banks

Already in August 2013 Germany and Switzerland have agreed to facilitate the market access for Swiss Banks in Germany. Through an intensive cooperation with the supervisory authority between both states, the exemption process should be tightened and push on forward. The procedure releases the Swiss banks from the German licensing requirements, if they fulfill certain conditions. Swiss banks can now acquire customers in Germany without having a branch. Within the planned German-Swiss tax treaty both states have negotiated an easier market access in 2011. However, the tax treaty failed in 2012 in the German Bundesrat.
For a long time it was unclear whether the planned financial market directive “Markets in Financial Instruments Directive” (MiFID II) would cancel the facilitated market access in Germany. As the first drafts of MiFID II stipulated that banks from non-EU-countries have to establish a local branch in the state where they intend to operate. According to these plans they are allowed to offer their services only over such branch to an EU-customer. However, it won’t come this far: on 14 January 2014, representatives of the European Parliament, the Council of the Ministers and the European Commission have agreed that a branch is not necessary for market access in advising private clients.
In order to make use of the exemption process Swiss banks must fulfill some conditions. The identification of the customer must be carried out by genuinely, trustworthy third parties. Furthermore, Swiss banks have to comply with the German investor and consumer protection regulations in the case of transitional business preparations in Germany. In addition, the Federal Supervisory Authority (BaFin) may participate in audits through Swiss Financial Market Supervisory Authority FINMA in Swiss banks.

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.

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.