Category: Regulatory Law

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The transitional provisions of ZAG are about to expire

On 30 April 2011 the transitional provisions of the Payment Services Act (ZAG) are going to end. According to that, companies who already had a license to provide money transfer business and credit card business before 25 December 2007, and companies who have provided their activities in the area of payment services (for example, the payment authentication business) without a license before 25 December 2007 can make use of the transitional provisions until 30 April 2011. However, starting on 1 May 2011, they require a licence according to the Payment Services Act to carry out the respective payment services. This licensing procedure includes the submission of extensive documentation to the Federal Financial Supervisory Authority (BaFin). Amongst others the submission of documents concerning the proof of the required initial capital, the business plan including a budget planning for the first three fiscal years as well as a description of the internal control mechanisms and the representation of the organizational structure is necessary. Since BaFin has to decide about the application only within three months after the complete documentation was submitted and since it is no longer allowed to conduct payment services according to the Payment Services Act without respective authorization after the expiry of the transitional provision, there might be a need for action.

The Restructuring Act came into force

The Restructuring Act of 9 December 2010 was published on 14 December 2010 in the Federal Gazette. Since 1 January 2011 at the latest all regulations of the Restructuring Act are binding. According to the explanatory memorandum of the Act the provisions of the Act shall regulate the proper wind-up of banks. This Act includes for banks which have run into difficulties the possibility to execute a so called controlled procedure (geordnetes Verfahren) (redevelopment proceedings and reorganization proceedings). In this context, the Federal Financial Supervisory Authority achieves the possibility to demand and enforce the necessary steps from a bank to solve their problems at an early stage.

New regulations for Electronic Money Institutions

On 27 September 2010 the Federal Government published a draft legislation which will serve for the implementation of the Second Electronic Money Directive. The content of the Second Electronic Money Directive is interlocked in a substantial part with the Payment Services Directive and the business activities of payment institutions. The implementation of the Directive shall take place until 30 April 2011. According to the explanatory memorandum of the legislation it is intended to take account the particularities of the electronic money business by creating a special type of institution. Similar to the institutions that provide payment services, it is planned to separate the activities of electronic money institutions from the Banking Act and to regulate them in the Payment Services Act. According to the Second Electronic Money Directive, the classification as a bank is no longer necessary to operate this business.

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