Banking Act

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Basic data
Title: Law on Credit
Short title: Banking Act
Abbreviation: KWG
Type: Federal law
Scope: Federal Republic of Germany
Legal matter: Commercial administrative law , banking law
References : 7610-1
Original version from: December 5, 1934
( RGBl. I p. 1203)
Entry into force on: January 1, 1935
New announcement from: September 9, 1998
( BGBl. I p. 2776 )
Last revision from: July 10, 1961
( BGBl. I p. 881 )
Entry into force of the
new version on: 		January 1, 1962
Last change by: Art. 4 G of 10 July 2020
( Federal Law Gazette I p. 1633, 1635 )
Effective date of the
last change: 		July 17, 2020
(Art. 5 G of July 10, 2020)
GESTA : D061
Weblink: Text of the law
Please note the note on the applicable legal version.

The German Banking Act ( KWG ) is a law in Germany , whose laws purpose of market regulation and market regulation of the credit system is.

The KWG applies to credit institutions and financial services institutions (see Section 1 Paragraph 1 Sentence 1, Paragraph 1a Sentence 1, Paragraph 1b ).

The main purposes of the KWG are:

  • securing and maintaining the functionality of the banking industry
  • protecting credit institution creditors from losing their deposits .

This is particularly evident in Section 6 of the KWG, which standardizes the tasks of the Federal Financial Supervisory Authority (BaFin). Accordingly, according to Section 6 (1), BaFin must, on the one hand, exercise so-called institutional supervision, i.e. the supervision of credit and financial services institutions, and, on the other hand, ensure the proper conduct of banking transactions and financial services within the framework of general supervision of deficiencies in the credit and financial services sector to prevent the occurrence of considerable disadvantages for the economy as a whole caused by these. However, this supervision is not carried out to protect the individual creditor or consumer, but rather serves to protect the creditors in general and public confidence in the functionality of the credit and financial service institutions. The KWG was adopted in 1934 in response to the German banking crisis and came into force in its first form in 1935.

Recording of risks

The KWG and supplementary ordinances ( Solvency Ordinance (as a German implementation of Basel II ), Liquidity Ordinance , GroMiKV ) impose restrictions on credit institutions that limit the ability of banks to take risks. The regulations can be categorized based on the type of risk to be limited:

Obligations of credit institutions to notify the Bundesbank and BaFin

The KWG provides the legal basis on which the Bundesbank and BaFin can obtain information from banks and exert direct influence on credit institutions. Obligations to notify the supervised institutions are derived from the KWG:

General obligation to provide information

Section 44 : Information and audits from institutes : The banks are generally obliged to provide information about all business matters, even without a specific reason.

Information on solvency

Section 10 in connection with the Solvency Ordinance : relates to the credit institutions 'adequate capital adequacy , whereby a monthly total number must be created. Approval and review of the bank's own models are also required.

Formerly Principle 1 and Principle Ia .

Information on liquidity

§ 11 in connection with the Liquidity Ordinance : The liquidity situation of the credit institutions is represented by the creation of a monthly liquidity ratio.

Formerly Principle 2 .

Large exposures

§§ 13, 13a, 13b : Large exposures : The banks are obliged to report their large exposures quarterly. Exceeding the individual upper limit for large loans is only permitted with the approval of BaFin. The amount exceeding the large exposure limit must be backed by additional own funds. More detailed provisions on large loans are set out in the GroMiKV large and multi- million loanregulations.

Monthly passes and annual accounts

§ 25 : Monthly statements (monthly balance sheet statistics) to the Deutsche Bundesbank, perceptible by BaFin

Section 26 : Submission of annual financial statements, management report and audit reports

Information obligations in the event of special events

§ 12a : Establishing corporate relationships

§ 14 : Millions of loans: These are loans with a volume of 1,000,000 euros or more.

Section 24 includes several special events:

  • Appointment and departure of a manager
  • Takeover and abandonment of a participation
  • Change of legal form
  • Loss of ≥ 25% of liable equity
  • Relocation of the branch or headquarters
  • Establishment, relocation, closure of a branch in a third country
  • Cessation of business operations
  • Taking up and ending non-banking business

BaFin's ability to influence management

Limitations

§ 12 : Limitation of Qualified Participations

§ 13 : Limitation of large exposures

§ 23 : Prohibition of abuses in the advertising of credit institutions

Section 15 : Possibility of limiting loans to governing bodies

Banking permit

Section 32 : Permission to conduct banking business

See also: Banking license # Germany

Interventions in the event of a violation of the norm

Sections 33, 35 : failure or revocation / expiry of the permit:

  • If there is insufficient equity
  • If the manager does not have the professional qualifications required to lead

Section 36 : Dismissal of managers, transfer of authority to special officers, removal of members of the administrative and supervisory body

Section 37 : Intervening against illegal business

Section 45 : Measures in the event of insufficient own funds or liquidity : After a reasonable period of time, BaFin is able to prohibit withdrawals, profit distributions and the granting of loans.

Influence in the event of imminent bankruptcy

Section 46 : Measures to avert impending dangers

  • Instructions for the managing directors by BaFin
  • Prohibition of accepting deposits

Section 46a : Measures in the event of a risk of bankruptcy

Section 47 : Defense against serious dangers for the economy as a whole

Requirements for process and organizational structure

The KWG sets a number of requirements with regard to the process and organizational structure:

Process organization

  • §§ 13 Paragraph 2 or 13a Paragraph 2 : A unanimous decision of all managers is necessary if a large loan is granted.
  • § 18 : Credit institutions must have the economic circumstances of borrowers whose loans exceed EUR 750,000 disclosed.
  • Section 33 : The four-eyes principle applies at management level, i.e. That is, at least two managers are required.

Organizational structure

  • Section 25a : A credit institution is obliged to set up a suitable system for risk control and risk monitoring. The details of Section 25a can be found in MaRisk.

Changes due to the implementation of Basel II

For the implementation of the new capital adequacy regulations according to Basel II in German law, the adjustment of the Banking Act is necessary (see implementation of Basel II ). This is done through the law for the implementation of the newly drafted Banking Directive and the newly drafted Capital Adequacy Directive , which was adopted by the German Bundestag on June 29, 2006 and by the Bundesrat on September 22, 2006 ; thus the parliamentary legislative process was completed. Have changed , among other things :

  • Regulations on the treatment of groups of institutions (including in Section 10a (determination of the capital adequacy of groups of institutions and financial holding groups), Section 10c (zero weighting of intra-group claims) and Section 2a (exceptions for institutions belonging to groups ));
  • Requirements for the capital adequacy of institutions, groups of institutions and financial holding groups ( Section 10 );
  • the term of the loan within the meaning of §§ 13 to 13b and 14 of the borrower: z. B. Inclusion of credit derivatives in the definition of credit ( Section 19 );
  • the expansion of the reporting and credit-relieving hedging instruments ( Section 20b );
  • Disclosure obligations by the credit institutions ( Section 26a );
  • Determination of examination content ( § 30 ).

In addition, the Federal Ministry of Finance has been authorized to issue more detailed provisions on adequate equity capital ( solvency , solvency ordinance) by means of a statutory ordinance in consultation with the Deutsche Bundesbank .

literature

  • Carl-Theodor Samm, Axel Kokemoor (eds.) And others: Law on the Credit System (KWG). Commentary with materials and supplementary regulations. Loose-leaf work, 168th edition, CF Müller Verlag, Heidelberg, August 2013, ISBN 978-3-8114-5670-9 .
  • Günther Luz et al. (Ed.): Banking Act. Comments on the KWG including SolvV, LiqV, GroMiKV, MaRisk. 2nd edition, Schäffer-Poeschl Verlag, Stuttgart 2011, ISBN 978-3-7910-2934-4 .
  • Friedrich Reischauer, Joachim Klein Händler (greeting) and others: Banking Act (KWG). Commentary for practice along with CRR, ancillary provisions and minimum requirements . Loose-leaf work, Erich Schmidt Verlag, Berlin 2015, ISBN 978-3-503-00060-9 .

Web links

Individual evidence

  1. ↑ Institute ( Memento of the original from October 9, 2007 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. , bundesbank.de (pdf) @1@ 2Template: Webachiv / IABot / www.bundesbank.de