The recent financial crisis showed the magnitude of consequences that the uncontrolled accumulation of risks in the banking sector can have for the entire economy. It is therefore the aim of banking supervision to ensure that the banking system is efficient and stable. In Germany, the task of banking supervision is shared by the Federal Financial Supervisory Authority (BaFin) and the Deutsche Bundesbank. Banking supervision does not directly intervene in transactions conducted by banks, but sets the regulatory framework. The German Banking Act (Gesetz über das Kreditwesen) essentially forms the legal basis for the supervision of banking business and financial services, while the Payment Services Oversight Act (Zahlungsdiensteaufsichtsgesetz) is the legal basis for the supervision of payment institutions and e-money institutions.
The Bundesbank has the task of continuously monitoring the roughly 1,680 credit institutions, 1,300 financial services institutions and 100 payment institutions and e-money institutions active throughout Germany, in particular with regard to their solvency and liquidity. Besides the balance sheet guidelines, institutions must fulfil a range of requirements regarding their organisation and management. During on-site inspections, the Bundesbank is also able to gain insights into the business operations of the institutions and their risk management in particular.
As the structure and products in the area of finance are in a constant state of flux, the demands on banking supervision and the regulatory framework change, too. It is for this reason that the Bundesbank is involved at a national and an international level in the ongoing development of prudential regulations. For example, it has made wide-ranging contributions to the Revised Framework developed by the Basel Committee on Banking Supervision (“Basel II”) adopted in 2004 and to the adjustments (“Basel III”) agreed in 2010 and 2017, and is also actively involved in the implementation of these frameworks at the European and national levels. Recognising wrong incentives stemming from regulation at an early stage and tackling them with appropriate measures will continue to be one of the Bundesbank’s main tasks in the future.