As proof of the funds required for business operations pursuant to § 32 par. 1 sent. 2 no. 1 of the German Banking Act, a confirmation of a CRR credit institution with its registered office in a state of the European Economic Area shall be submitted, stating that the initial capital has been paid in, is free of third-party rights and is at the free disposal of the managing directors.
However, the regulation (§ 14 par. 3 AnzV) also provides an alternative:
With the approval of the Federal Financial Supervisory Authority, proof may also be provided by written or electronic confirmation from an auditor who would be authorised to audit the applicant’s annual financial statements if permission were granted, of the existing own funds, which must have been determined in accordance with the principles applicable to institutions.
Now, while these two options might seem to be alternatives, in practise they are not. The German regulator Bundesanstalt für Finanzdienstleistungsaufsicht (“BaFin”) uses them quite specifically for different cases. The main differentiator is whether the applicant is an existing entity with a former business or a newly set-up entity. Only in the latter case, BaFin would accept a confirmation of a CRR credit institution as the single means of proof. In all other cases, i.e. if there has been some business activity of the applicant before, BaFin would most likely require the confirmation by an auditor in order to ensure that the initial capital is still available, irrespective of the actual cash available on the applicant’s bank account.