Category: Regulatory Law

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SSM-Erlaubnisverfahren – erste Eindrücke

Am 4. November 2014 ist der einheitliche europäische Aufsichtsmechanismus (Single Supervisory Mechanism – SSM) in Kraft getreten. Er betraut die europäische Zentralbank (EZB) mit der abschließenden Genehmigung von Erlaubnisanträgen für Kreditinstitute. Hier unsere ersten Eindrücke aus einem laufenden SSM-Erlaubnisverfahren:

Theorie und Praxis eines SSM-Erlaubnisverfahrens

Gemäß den entsprechenden EU-Bestimmungen besteht die Beteiligung der EZB am SSM-Erlaubnisverfahren darin, dass sie, sobald das nationale Antragsverfahren zu einem positiven vorläufigen Ergebnis gekommen ist, binnen 10 (20) Werktagen über die abschließende Genehmigung entscheidet. In der Praxis sieht das anders aus. In Wirklichkeit wird die EZB schon ab dem Tag, an dem der Antragsteller mit der zuständigen nationalen Aufsichtsbehörde Kontakt aufnimmt, in das SSM-Erlaubnisverfahren eingebunden. Ab diesem Zeitpunkt arbeitet die EZB eng mit der nationalen Aufsichtsbehörde zusammen. Die nationale Aufsichtsbehörde bleibt zwar weiterhin primärer Ansprechpartner des Antragstellers für die laufenden Aktivitäten des Erlaubnisverfahrens. Die EZB nimmt jedoch an allen Gesprächsterminen der nationalen Aufsichtsbehörde mit dem Antragsteller teil.

Learning by doing

Abgesehen von dieser grundsätzlichen Vorgehensweise scheinen die EZB und die nationalen Aufsichtsbehörden noch stark beschäftigt, ihre internen Prozeduren zu entwickeln und gegenseitig abzustimmen. Zurzeit scheint der Ansatz “learning by doing” – manchmal gekoppelt mit „Versuch und Irrtum“– eine Best Practice der Aufsicht zu sein. Zum Beispiel haben wir die Situation erlebt, dass die nationale Aufsichtsbehörde ein vereinbartes Abstimmungsgespräch zur Antragsvorbereitung aufgrund einer Intervention der EZB kurzfristig absagte. Uns wurde mitgeteilt, die EZB erlaube keine bilateralen Treffen zwischen dem Antragsteller und den nationalen Aufsichtsbehörden. Für uns war ein solcher starker Einfluss der EZB in dieser Phase des Verfahrens eher überraschend. Insbesondere weil der Antrag zu diesem Zeitpunkt noch nicht eingereicht war und das SSM-Erlaubnisverfahren formell noch nicht begonnen hatte. Offensichtlich wurden auch unsere Ansprechpartner beim nationalen Regulierer von der Intervention durch die EZB verwirrt: sie hatten Schwierigkeiten, uns ihre nächsten Schritte zu erläutern. Eine Woche später wurde uns mitgeteilt, dass es zu einem Missverständnis zwischen der nationalen Aufsichtsbehörde und der EZB gekommen sei: die EZB habe gedacht, der Antrag sei schon eingereicht gewesen.

Digitalisierung des Antragsverfahrens zu erwarten?

Wir hatten die Möglichkeit einen ersten Blick auf das Web-Portal zu werfen, welches die EZB zurzeit für die nationalen Aufsichtsbehörden entwickelt, damit diese die Informationen zum Antrag des jeweiligen SSM-Erlaubnisverfahrens online einreichen. Es scheint, dass zurzeit von den Mitarbeitern der nationalen Aufsichtsbehörden viel manuelle Datenerfassung erwartet wird. Vielleicht wird dies im Laufe der Zeit zu einer verstärkten Digitalisierung des formellen Erlaubnisantrags führen.

Es bleibt abzuwarten, welche weiteren Usancen für das SSM-Erlaubnisverfahren im Rahmen der laufenden engen Zusammenarbeit zwischen der EZB und den nationalen Aufsichtsbehörden entstehen werden.

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.

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.

These different interpretations of Article 33 AIFMD were taken into account. In the context of negotiations on EU-level regarding the draft of MiFID II consent was reached to clarify and amend Article 33 AIFMD. It will be explicitly stated in Article 33 AIFMD that an EU-AIFM is allowed to provide services and non-core services according to Article 6 para. 4 AIFMD in another member state by using the passport procedure.

Even though the provision is still at draft stage on EU-level, national competent authorities already reacted on the clarification. For example, the Central Bank of Ireland explained in its FAQ’s re AIFMD (ID 1019), that the passporting of services and non-core services pursuant to Article 6 para. 4 AIFMD is permitted from now on.

Also in Germany the transposition of the planned amendment is to be expected soon. A respective adjustment of Sect. 53 and 54 KAGB (German Investment Act) is already part of a Federal Ministry of Finance’s draft regarding an act to adjust financial market’s laws (dated 4 March 2014).

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.


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).

Major topics of license applications for AIFM under KAGB

The first license applications of Alternative Investment Fund Managers (AIFM) under the new Capital Investment Code (Kapitalanlagegesetzbuch, KAGB) are on their way. Any form of regulatory license has its own challanges, even so the AIFM license. So far, the following special issues arose:

  1. Additional occupations: Some managing directors of AIFM are still engaged in the management of various property companies or SPVs
  2. Trustworthiness of managing directors: Since some of the property companies or SPVs had (also due to the financial crisis) to start insolvency proceedings, managing directors carrying sometimes the burden of having insolvency experience
  3. Conclusive regulatory business case: Always a neuralgic point, especially in new areas of regulation like AIFs

We expect the regulator’s first feedback on these issues within the next weeks and will report here accordingly.


Changes of Reporting Duties (Part 2)

Changes regarding reporting obligations pursuant to the German Foreign Trade and Payments Regulation (AWV)

Within the scope of the establishment of credit or financial institutions external sector statistics reporting is still to be observed. This topic is subject to substantial changes from July 2013 on.

From this date on the reports could only be filed electronically. Apart from that, the content of the reporting will be extended in order to meet the increased needs for information on both, national and international level. Additionally, there will be changes with respect to the persons subject to external sector statistics reporting obligations.

Not filing the external sector statistics report or filing delayed, incorrect and incomplete external sector statistics reports will still be considered administrative offenses and cause fines.

Please also refer to the Homepage of the Deutsche Bundesbank

Changes of Reporting Duties (Part 1)

Extended Reporting Requirements based on the ‘Financial Information Regulation’

Within the context of the establishment of a credit or financial institution the proper compliance with the German reporting regulations has to derive already from the respective application documentation. That means, one should deal with the German reporting duties at a very early stage. Even EU-Branches pursuant to Sect. 53b German Banking Act should be aware of German reporting requirements since they are also obligated to submit regulatory reports to a certain extent.

Due to the introduction/implementation of the CRD IV package there will be extensive changes regarding the regulatory reporting duties. For example the so-called monthly reports (in future financial information) which have to be submitted quarterly pursuant to Sect. 25 German Banking Act will change.

That means, based on the draft Financial Information Regulation (Finanzinformationenverordnung) there will be additional requirements for credit institutions. According to the current legislation credit institutions which already submit monthly reports for statistical reasons are exempt from the quarterly reports. However, it is planned that also these institutions shall submit quarterly profit and loss statements. Furthermore so-called planned profit and loss figures as well as additional information will be required.

Requirements for licensing of alternative investment funds managers (AIFM) – Part 2

Outsourcing/delegating of tasks by an AIFM

While the last post addressed the issue of capital requirements (see below), the present blog deals with the question to which extent an AIFM may outsource functions already in the course of the licensing procedure (and later when conducting the business as licensed entity).

The outsourcing or delegating of tasks by an AIFM is possible as far as the outsourcing structure can be justified on objective grounds and certain other conditions, such as a written contract, are fulfilled.

However, an AIFM shall not transfer its functions to the extent that it becomes a mere letter box entity. The now adopted version of the implementing regulation (also known as Level II measures) gives indications under which conditions an AIFM is classified as a letter box entity.

An AIFM is generally required with respect to outsourcing that it maintains the necessary resources and expertise to supervise the outsourced functions and to control the risks associated with the outsourcing. Furthermore, the AIFM must be able to exercise the contractually stipulated information, auditing and managerial rights. The AIFM must also continue to make all important decisions especially with regard to the investment strategy.

To avoid to be classified as a letter box entity, the scope of the outsourced functions should not exceed the scope of the functions performed by the AIFM itself by a substantial margin.

The implementing regulation establishes not only quantitative criteria, such as the amount of assets managed, for evaluating the scope of the outsourced functions. The outsourcing structure is to be assessed by regulators with respect to the fulfillment of certain qualitative criteria. These are inter alia

• the importance of the assets the administration is outsourced to achieve the investment goals of funds

• the configuration of delegates

• the types of outsourced tasks in relation to the tasks retained by the AIFM

• the risk profile of the funds, etc.

The regulation was adopted on 19 December 2012 and shall enter into force after three months, unless the European Parliament or the Council raises objections. It is unlikely that the rules discussed here will change.

An AIFM should analyze its outsourcing structures accurately. It should take into account the requirements set forth in the regulation and adjust its outsourcing structures if necessary before submitting a license application to avoid classification as a letter box entity.

(To be continued)

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