The Bundesbank's role in banking supervision: Operational tasks
Pursuant to section 7 (1) of the German Banking Act (Gesetz über das Kreditwesen), the Deutsche Bundesbank is responsible for the ongoing supervision of credit institutions. This entails evaluating banks' documentation, reports, annual financial statements and audit reports. In addition, the Bundesbank conducts routine and ad hoc meetings with senior management or issues other requests for information. This oversight is the responsibility of staff at the Bundesbank's nine regional offices, in various locations across Germany.
Insight into capital and liquidity adequacy
In their oversight of the roughly 2,000 credit institutions and 1,500 financial services institutions throughout Germany, the Bundesbank's supervisors take account of the banks' solvency and liquidity positions, as well as their risk situation. Evaluation criteria include not only the size and structure of risks, but also the adequacy of the respective risk management. The supervisors also assess whether to approve banks' internal risk assessment methods for calculating capital requirements. The Bundesbank thus gains a deep insight into institutions' capital and liquidity adequacy. Other quantitative and qualitative aspects, such as business model sustainability and the internal organisational structure, also play an important role in supervision.
Based on their analyses, the Bundesbank's staff create a comprehensive risk classification and assessment for each institution at least once a year (the supervisory risk profile). If the Bundesbank's supervisors identify a need for action, they can make proposals on this to the Federal Financial Supervisory Authority (BaFin).
New structure since 2014
The launch in 2014 of the Single Supervisory Mechanism (SSM), a central system of banking supervision in Europe, introduced new lines of responsibility in the supervision of European credit institutions. Since then, entities classified as significant institutions (SIs) have been supervised directly by the European Central Bank (ECB). Bundesbank staff are members of the joint supervisory teams (JSTs) supervising these banks at the European level. Responsibility for supervising banks categorised as less significant institutions (LSIs) and financial services institutions remains at the national level; in Germany, it lies with the Bundesbank and BaFin. The ECB performs an indirect oversight function in this area in order to ensure high standards and consistency of banking supervision within the SSM.