Banking supervision

from Wikipedia, the free encyclopedia

The task of banking supervision is to monitor the activities of credit institutions within the framework of state supervision of the financial market . The terms banking regulation and supervision are not strictly separated from one another and are sometimes used synonymously. Throughout this article, banking regulation means setting general rules, while banking supervision means enforcing them.

Banking supervision includes, on the one hand, the authorization to operate a credit and financial services institution and, on the other hand, the control of ongoing business activities with regard to compliance with regulations on equity , liquidity , limitation of participations and custody account audits . The financial institutions are subject to comprehensive reporting requirements ; these mainly extend to the submission of monthly reports, annual financial statements and the display of certain credit aggregates ( million loans , large loans and loans to organs ).

In the event of insufficient equity capital, the banking supervisory authority can restrict profit distributions, withdrawals and the granting of credit or even close the bank concerned.

European Union

In the European Union , banking supervision was primarily the responsibility of the national supervisory authorities until 2014. The European Banking Authority (EBA), based in Paris (formerly London), is primarily developing uniform supervisory standards for the 27 member states; there are only exceptional rights of direct intervention. Since November 4, 2014, the European Central Bank (ECB), headquartered in Frankfurt am Main, has directly taken over the supervision of those big banks in the countries of the euro zone with total assets of over 30 billion euros or 20 percent of the economic output of a country. The ECB thus replaced the previously competent national supervisory authorities.

Germany

aims

The main objectives of banking supervision are summarized in Section 6 of the German Banking Act (KWG). They are to counteract the bad credit situation

  • jeopardize the security of the assets entrusted to the institutions,
  • impair the proper conduct of banking business or
  • can have considerable disadvantages for the economy as a whole.

The KWG provides the institutions with rules that they must observe when setting up and running their business. These rules are designed to prevent undesirable developments that could disrupt the smooth functioning of the banking system. How closely banks are supervised depends on the type and scope of the business they conduct. The main focus of the supervisory authority is to ensure that institutions hold sufficient equity capital and liquidity and that appropriate risk control mechanisms are in place.

Banking supervision is carried out preventively and operationally on the basis of laws and ordinances that only apply in the relationship between credit institutions and supervisory authorities. These laws, on which banking supervision is based, are consistent with the principles of the free market economy. The Federal Financial Supervisory Authority (BaFin) does not intervene in the banks' business policy as part of its solvency supervision. The managers are solely responsible for this. However, the institutions must meet qualitative and quantitative framework conditions and are obliged to disclose their books to the supervisory authority.

Banking supervisors cannot (and should not) prevent bankruptcy in every case. As a preventive measure , Sections 46 , 46a and 46b KWG ensure that banking supervisors can intervene in the event of a crisis. However , there is a statutory deposit guarantee to protect customers against bankruptcy . Since 2010 it has covered deposits up to EUR 100,000 and liabilities from securities transactions up to 90%, but a maximum of EUR 20,000. In addition, however, there are also private security institutions of the banking associations that provide protection far beyond what is legally prescribed.

Task sharing

First of all, it must be taken into account that in Germany two institutions share the tasks of banking supervision, whereby overlaps or gaps are avoided.

BaFin and Deutsche Bundesbank share banking supervision. The cooperation is regulated in Section 7 KWG. As part of ongoing supervision, the Deutsche Bundesbank then evaluates reports and reports to be submitted regularly by institutions, among other things, and checks whether the institutions' capital adequacy and risk management procedures are appropriate. In coordination with the Deutsche Bundesbank, BaFin has issued a guideline for the implementation and quality assurance of the ongoing monitoring of credit and financial services institutions by the Deutsche Bundesbank (supervision guideline).

Legal basis

In Germany, banking supervision is carried out by the Federal Financial Supervisory Authority (BaFin) and the Bundesbank , in particular on the basis of the Bundesbank Act (BBankG), the KWG, the Solvency Regulation (SolvV) and the Minimum Requirements for Risk Management (BA) (MaRisk) .

Content of banking supervision

A distinction is made between start-up supervision and ongoing operational monitoring of credit institutions.

Establishing credit institutions

Anyone wishing to conduct banking business in Germany needs a written permit from BaFin ( Section 32 , Section 33 KWG). To do this, certain requirements must be met:

  1. When setting up a new institute - depending on the type of business sought - a certain minimum equity capital must be proven. For securities trading banks, for example, the required initial capital is at least 730,000 euros and for deposit-taking credit institutions at least five million euros.
  2. The institute must have at least two managers. These must be technically suitable and reliable. In terms of professional suitability, it is important that the person concerned has acquired sufficient theoretical knowledge and practical experience for the new job in their previous professional career. BaFin also strictly checks the reliability on the basis of the federal central register and the central commercial register.
  3. The founder has to indicate who has significant stakes in the planned institute and to what extent. These people must also be reliable. If they are not, or for other reasons do not meet the requirements in the interests of sound and prudent bank management, BaFin can refuse permission.
  4. In addition, the permit application must contain a viable business plan that shows the type of business planned, the organizational structure and the planned internal control procedures. BaFin checks whether the applicant is ready and able to take the necessary organizational precautions to be able to conduct his business properly.

Operational supervision

The banking supervisory authority continuously monitors the institutes in their operational business after their establishment. These include in particular:

  1. Credit institutions must provide evidence of adequate own funds ( Section 10 KWG). The minimum amount of equity a bank must hold depends on the risks it takes. The default risks of a bank, for example, must be backed by liable equity capital of at least 8 percent of the risk-weighted assets, i.e. above all loans. In the course of ongoing supervision, it is monitored whether the institutions have sufficient own funds for risks taken from balance sheet assets and off-balance sheet transactions - for example from receivables, securities, derivatives or participations. Since the SolvV came into force on January 1, 2007, not only default and market risks but also operational risks must be backed with adequate equity capital.
  2. In addition, the banking supervisory authority checks whether the liquidity is sufficient, i.e. whether the institutions invest their funds in such a way that sufficient solvency is guaranteed at all times ( Section 11 KWG).
  3. As part of the supervisory review process (so-called. Supervisory Review Process , SRP) BaFin also monitors even those risks that are not inferior to the solvency regulation with equity. The core elements of the SRP are the establishment of adequate risk management systems and their monitoring by the supervisory authority. Institutions must set up what is known as the Internal Capital Adequacy Assessment Process (ICAAP), which ensures that they have sufficient internal capital to cover all major risks. In addition, appropriate management, control and monitoring processes ( robust governance arrangements ) must be in place. The organization of a credit institution must be designed appropriately according to the type and scope of the business conducted in order to be able to meet MaRisk. As banking transactions are becoming more and more complex, institutions must put in place suitable arrangements to manage and monitor their various risks. It is therefore an important task for BaFin to check whether the bank's own risk control and management systems can do this.
  4. In addition to the annual financial statements, the main sources of information for banking supervision include the audit reports that the auditors or auditing associations prepare as part of the annual audit. In addition, the institutes must regularly submit monthly statements showing the most important balance sheet and risk items and their changes. In addition, the institutions must report important changes - for example, balance sheet losses or changes in management, in the domestic and foreign branch network or in the case of investments of 10 percent or more. Large loans, corporate loans and loans in the millions are also required to be reported. In addition, BaFin can obtain a more detailed insight into the economic situation of a bank in special on-site audits. BaFin can register these exams, but does not have to.

Security

In its solvency supervision, BaFin has a broad repertoire of supervisory decision-making powers. Measures to avert danger range from written warnings - so-called serious complaints - to fines and the withdrawal of permission to conduct banking business and the closing of business premises. If the managers are unqualified, BaFin can ask the supervisory body to remove them and replace them with a special representative. BaFin can also delegate the powers of a supervisory body to a special representative.

History of German banking supervision

In Nuremberg, the first banking supervisory authority was established in the 17th century around the Banco Publico . General banking supervision in Germany took place with the closure of the Darmstädter und Nationalbank (Danatbank) in July 1931 as a result of the global economic crisis of 1929 to 1932. In December 1934, the Reich Law on Credit , the forerunner of today's Credit Law (KWG), came into force . The KWG has been amended several times since it came into force in January 1962. In January 1998, Principle I was extended to include market price risks; SolvV has been in force since January 2007 with its risk quotas.

Austria

In Austria, the Financial Market Authority (FMA) is responsible. The Austrian banking supervision includes the performance of the official duties and powers set out in the Banking Act (BWG), Sparkassengesetz (SpG), Bausparkassengesetz (BSpG), the Introductory Ordinance to the Mortgage Bank Act and the Pfandbrief Act, the Mortgage Bank Act, the Pfandbrief Act, and the Act on Safeguarding Rights the owners of Pfandbriefe are regulated in the Bank Bond Act, the Depot Act, the E-Money Act and the associated ordinances and assigned to the FMA.

Switzerland

All banks operating in Switzerland require a license from the Swiss Financial Market Supervisory Authority FINMA. FINMA, which is a member of the Basel Committee on Banking Supervision, regulates and monitors all banks in Switzerland in accordance with the standards of the Basel Committee on Banking Supervision. These standards relate not only to the banks' adequate equity and capital resources, but also to the rules of precaution and behavior to be observed. As an additional security measure, Swiss law defines even higher capital requirements than the Basel Capital Accord .

The type, scope and institutional responsibility of banking supervision differ from country to country, although there is increasing international coordination ( Basel Committee , Basel I , Basel II ).

Other countries

In the UK, the Prudential Regulation Authority (PRA) acts as the successor to the Financial Services Authority . The PRA is subordinate to the Bank of England . In Cyprus , the Cyprus Securities and Exchange Commission is the banking regulator.

See also

literature

  • Thomas Hartmann-Wendels, among others: How banking supervision works against the background of the financial market crisis . Expert opinion of the Institut der deutschen Wirtschaft on behalf of the Federal Ministry of Finance , February 2009 (online) .
  • Ross M. Robertson: The Comptroller and Bank Supervision: A Historical Appraisal . Office of the Comptroller of the Currency, 1968.
  • Gerd Waschbusch: banking supervision. Supervision of credit institutions and financial services institutions under the Law on Credit . Oldenbourg Verlag, Munich 2000, ISBN 978-3-486-25506-5 .
  • Simon G. Grieser, Manfred Heemann (ed.): Banking supervision after the financial market crisis. Frankfurt-School-Verlag, Frankfurt 2011, ISBN 978-3-940913-25-8 .
  • Hartmut Bieg, Gregor Krämer, Gerd Waschbusch: Banking supervision in theory and practice . 4th edition, Frankfurt-School-Verlag, Frankfurt 2011, ISBN 978-3-940913-43-2 .
  • Natalia Kohtamäki: The reform of banking supervision in the European Union . Mohr Siebeck, Tübingen 2012, ISBN 978-3-16-151791-4 .

Web links

Individual evidence

  1. ^ Charles Albert Eric Goodhart: Financial Regulation . 1998, p. Xvii.
  2. ↑ BaFin on banking supervision
  3. ^ Markus A. Denzel: The Nuremberg Banco Publico, his merchants and their payment transactions (1621–1827) , Stuttgart 2012, p. 90