Federal Financial Supervisory Authority
Federal Financial Supervisory Authority
|legal form||Institute of public right|
|Supervisory authority||Federal Ministry of Finance|
|founding||May 1, 2002|
|Headquarters||Bonn and Frankfurt am Main , Germany|
|Authority management||Felix Hufeld , President|
The Federal Financial Supervisory Authority ( short: BaFin ), is an independent German public institution of the Federal with headquarters in Frankfurt and Bonn . It is subject to the legal and technical supervision of the Federal Ministry of Finance .
As the financial market supervisory authority, BaFin supervises and controls all areas of finance in Germany within the framework of financial supervision . With the creation of the uniform European banking supervisory mechanism within the framework of the European banking union , BaFin handed over the supervision of important large banks to the European Central Bank in November 2014 .
BaFin was due to the Financial Act on 1 May 2002 established by merging the federal supervisory offices for (BAKred) , for securities trading and Insurance . By merging the three supervisory offices, overlapping competencies and supervisory gaps should be eliminated. With the uniform supervision, the interdependencies on the national and international capital markets and the associated risks should be better recorded and made manageable. In this way, BaFin is intended to contribute to Germany's stability and competitiveness as a financial center . In addition to the tasks of the predecessor institutions, other tasks can be assigned to BaFin, for example advising other states on setting up national authorities similar to BaFin.
The authority is headed by a board of directors consisting of the President Felix Hufeld and Elisabeth Roegele ( securities supervision division ), Raimund Röseler ( banking supervision division ), Frank Grund (insurance supervision division), Béatrice Freiwald (internal administration and law) and Thorsten Pötzsch (settlement division ) consists.
In addition to the specialist areas, the so-called operational pillars, there are departments at BaFin that do not directly control the market, but perform cross-sectoral or organizational and administrative tasks, such as risk modeling , money laundering and international tasks . The press and information department, internal auditing , the analysis & strategy department and the presidential office report directly to the president.
BaFin and its approximately 2,700 employees are fully financed by fees that are levied for administrative activities and by the annual allocation of the other costs to the supervised institutes and companies; it is therefore independent of the federal budget . A complaint to the Federal Constitutional Court regarding the constitutionality of the (compulsory) levy was rejected as unfounded in 2009. According to the court, the levy is intended to “ strengthen investors' confidence in the solidity and integrity of these companies as a necessary framework for a functioning financial market”.
In 2016, BaFin supervised around 1,665 German credit institutions , 47 housing companies with savings facilities, 700 financial services institutions , 40 payment and e-money institutions , 90 German branches of foreign institutions, 555 insurance companies , 29 pension funds and 260 capital management companies and more than 6,100 domestic funds. With the start of the SSM at the beginning of November 2014, the ECB in Germany has direct supervision of around 20 groups classified as significant. Direct supervision of around 3,600 insignificant institutions in the euro area will initially remain with the respective national supervisory authorities of the member states; these include around 1,630 German institutes that are still subject to direct supervision by BaFin.
The main task is the supervision of banks, insurance companies and trading in securities in Germany. This is to ensure the functionality, integrity and stability of the German financial system. As a (financial) market-oriented institution, BaFin is responsible for providers and consumers. On the supply side, it pays attention to the solvency of banks, insurance companies and financial services institutions. For investors, bank customers and insured persons, it ensures confidence in the financial markets and the companies operating in them.
It is also responsible for preventing the financial system from being misused for money laundering and terrorist financing purposes. For example, BaFin ensures that the institutions it supervises comply with the applicable requirements for the prevention of money laundering and terrorist financing.
Another task is collective consumer protection, which extends to all financial products and financial services with which BaFin is supervised. The aim is to protect consumers as a whole, for example by creating a more transparent and understandable range of financial and insurance products and financial services.
In order to maintain the integrity and stability of the financial system, in particular to combat money laundering , credit institutions are obliged under KWG to maintain an automated retrieval system for account master data with which BaFin can access customer data at any time. The banks themselves or affected customers do not find out about an account retrieval .
The central legal basis for banking supervision is the Banking Act . BaFin monitors compliance with the rules and requirements of the KWG with regard to credit and financial institutions during the “start-up” and as “ongoing supervision”.
The start-up of banks in Germany is subject to a statutory right of reservation of permission, i.e. anyone who wants to offer banking or financial services needs approval from BaFin as the competent authority. The prerequisites for this are, among other things, minimum capital requirements, reliability of the management, solid bank management and the viability of the business plan .
Financial institutions are subject to ongoing supervision by BaFin for the entire duration of their business activity. This is essentially intended to ensure that the prerequisites necessary for the foundation are not "softened" later. In particular, the financial situation in accordance with the Solvency Regulation (SolvV) and the Liquidity Regulation (LiqV) as well as the proper organization including suitable risk control and management systems ( MaRisk ) are monitored. The reliability of the management is ensured by the fact that appointments to the board of directors are checked by BaFin.
In addition to the annual financial statements , BaFin also receives information about the financial institutions from audit reports from auditors or banking associations. In addition, the banks and financial service providers submit monthly short balance sheets and reports on large loans and loans in the millions. Compliance with the Liquidity Ordinance and Solvency Ordinance must also be verified on a regular basis.
For penal and sanctioning purposes, the KWG provides BaFin with an extensive range of sanctions, ranging from written warnings and fines to the withdrawal of the banking license .
BaFin apparently kept an internal list to assess the risks in relation to the banks affected by the financial crisis from 2007 , which was made public at the end of April 2009.
If the threat to the continued existence of an institution cannot be averted with supervisory means and financial stability is jeopardized, BaFin, as the national resolution authority, also has extensive powers to intervene. This means that it can wind up an institution within the scope of its responsibility without endangering the stability of the financial market.
As with banking supervision, BaFin monitors insurance companies on the basis of the Insurance Supervision Act as part of insurance supervision . Insurance companies also require the approval of BaFin to commence and maintain their business activities; the requirements essentially correspond to those of banking supervision . Primary insurance companies , reinsurance companies , holding companies as well as security and pension funds are subject to supervision . This does not apply to insurers that only operate in a single federal state . These are subject to the supervision of the competent state supervisory authority.
The supervision includes in particular the monitoring of the coverage of the liabilities towards the policyholders by the guarantee assets and the solvency in order to guarantee the fulfillment of the concluded contracts. In the case of life insurance, the actuarial reserve is also monitored. In addition, BaFin generally monitors compliance with all laws that apply to the operation of insurance business.
The aim and purpose of the work of the third pillar of BaFin is to ensure the functionality of the German markets for securities and derivatives in accordance with the Securities Trading Act . This includes, in particular, the prevention of insider trading and other cases of abuse. The banks report to BaFin all purchases and sales of securities, as well as every ad hoc report from listed companies. This information forms an essential basis for tracking price and market price manipulation. In particular, proprietary transactions by executives are observed.
BaFin's options for intervening in market events range from summoning and questioning people, suspending or banning trading in financial instruments (securities, etc.) to the obligation to report certain suspicious facts to the public prosecutor. BaFin is expressly entitled to transmit personal data from suspects and possible witnesses, insofar as this is necessary for criminal prosecution.
In addition, BaFin monitors the notifications and publication obligations of significant shares of voting rights required by market transparency regulations and has been monitoring takeovers of listed companies on the basis of the Securities Acquisition and Takeover Act since 2002 .
In addition to these active tasks, BaFin is the central depository for sales prospectuses . BaFin only checks these stored prospectuses for formal correctness, but not for correctness of the content; the creditworthiness of the issuer is also not checked.
On September 19, 2008 , BaFin announced, as a reaction to the increasingly threatening proportions on the stock exchanges worldwide as a result of the financial crisis , short sales of eleven German financial stocks from September 20, 2008, 00:00 to December 31 2008, midnight. This measure was last extended until May 31, 2009. Similar measures have also been announced in the US and UK. This measure in accordance with (1) WpHG was taken for shares in the following financial service providers: Aareal Bank AG , Allianz SE , AMB Generali Holding AG , Commerzbank AG , Deutsche Bank AG , Deutsche Börse AG , Deutsche Postbank AG , Hannover Re , Hypo Real Estate Holding AG , MLP AG and Munich Re . Today, BaFin has express authorization to take such measures under (1) of the WpHG.
For the period from May 19, 2010 to March 31, 2011, the banking supervisory authority again prohibited uncovered short sales of government bonds from the euro zone and 10 companies in the German financial sector in order to support the stability of the entire financial system.
Role in law enforcement
BaFin is entitled, and in some cases even obliged, to report to the law enforcement authorities any facts it has ascertained in the course of supervision that justify a suspicion of a criminal offense (in particular insider offenses, market manipulation , unauthorized banking, capital investment fraud , inducement to speculate on the stock market) . Accordingly, it sees itself as a kind of law enforcement agency. The 2004 annual report (p. 83) says: "Together with the Deutsche Bundesbank, the police authorities and the public prosecutor's offices, BaFin is pursuing unauthorized transactions [...]." Since BaFin also forwards such data and facts to the law enforcement authorities according to the rules of Criminal Procedure Code do not have authorized access, there will be friction between German supervisory law and criminal procedural principles. The legislature counteracts this problem at least partially by creating the right to refuse or introducing investigation hurdles (e.g. KWG , according to which BaFin may only carry out certain investigations if there is initial suspicion of a criminal offense). Basically, it can be assumed that the results of the BaFin investigation will be passed on to the law enforcement authorities.
According to information from the Süddeutsche Zeitung, the authority has initiated special audits against four German banks on suspicion of manipulating the Euribor reference interest rate , and WestLB is also being investigated in connection with the Libor interest rate .
Legal and technical supervision
BaFin exercises after the Deposit Guarantee and Investor Compensation Act , the legal and technical supervision over the compensation schemes from. These include the compensation scheme of the securities trading company , the compensation scheme of the Federal Association of Public Banks in Germany and the compensation scheme of German banks .
Every private person has the right to complain about the companies supervised by BaFin. Such complaints are legally petitions. They are free of charge for consumers. A rejection of the complaint by BaFin has no negative consequences or costs for the complainant. The complaint statistics are published annually by BaFin. Complaints can be submitted in writing or online. It is recommended that you contact the relevant credit institution in writing before making a complaint. BaFin does not provide legal advice and does not intervene in ongoing legal proceedings. However, with every complaint, it checks whether supervisory measures are necessary or whether there is a violation of applicable legal provisions. If this is not the case, the complainant will be informed. Otherwise, BaFin will not inform the complainant of the result of the examination due to the statutory obligation of confidentiality .
BaFin maintains a company database, which is also publicly accessible, in which all banks, financial service providers, capital investment companies, insurers or pension funds are listed that have written permission, are notified or have a representative office in Germany. Companies are listed, their numerical ID, the license type, the license date, the type of company and, if available, the responsible arbitration board .
In March 2004, the Federal Examination Office of Koblenz determined that BaFin's internal control system was inadequate. For 2006, the Federal Audit Office uncovered the embezzlement of over 4 million euros by a senior government director of the agency, who was then indicted and convicted by the Bonn district court. In the reasons for the judgment, the BaFin was criticized for the "non-existent" control system.
In September 2006, an expert opinion by PricewaterhouseCoopers and the internal auditing department of BaFin showed that the federal government's guidelines for preventing corruption had not been implemented. In April 2008, the decision-making structures of BaFin were changed and a board of directors was set up, which has since headed BaFin together with the President. In addition to Jochen Sanio, the management board included four executive directors - with the following responsibilities: Sabine Lautenschläger-Peiter , who had previously been the head of the major banks department, was responsible for all banking supervision. Thomas Steffen remained in charge of insurance supervision until the end of 2010. Karl-Burkhard Caspari took over the securities supervision. Michael Sell became Executive Director for Cross-Sectional Tasks / Internal Administration . Most recently, he was group leader for tax policy in the Federal Chancellery.
In 2015, several experts in the finance committee of the German Bundestag criticized structural deficiencies in relation to timely intervention and advance warning of problematic financial products. A social science analysis of the time dimension of BaFin's activities showed that, on the one hand, it is in a position to increase the time budget for political decision-making and to stabilize the financial market in the long term, but on the other hand, it extends bureaucratic chains of action and has considerable tempo deficits. With the Small Investor Protection Act in 2015, an independent “financial market watchdog” was initiated at the Federation of German Consumer Organizations (vzbv) in order to protect faster and earlier against undesirable developments and dubious offers on the financial market.
BaFin was massively criticized in connection with the accounting scandal and Wirecard's bankruptcy application in early summer 2020. "You did not do enough research and trusted the management of Wirecard [too much]." On June 22, 2020, the President of BaFin Felix Hufeld admitted that his authority had made very serious mistakes in this connection.
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