Anyone wishing to conduct one or more of the banking activities specified in section 1 of the Banking Act on a commercial scale in Germany requires authorisation from the competent supervisory authority pursuant to section 32 of the Banking Act. The same applies for financial services institutions, payment institutions and e-money institutions.
Article 4 (1) number 1 of the Capital Requirements Regulation (CRR) defines a CRR credit institution as an undertaking the business of which is to take deposits and grant credits. The European Central Bank (ECB) is responsible for granting authorisation to conduct banking business in this case. In all other cases, BaFin grants the licence to conduct banking business. Irrespective of the responsible decision-maker, applications for a licence must always be submitted to BaFin.
The licensing requirements also apply, in principle, to undertakings which have their registered office in another country and which wish to conduct or offer the above-mentioned business through a branch in Germany. In these cases, however, under certain conditions, an existing licence granted by the home country can be recognised by the competent supervisory authority in Germany.
In addition, section 2 of the Banking Act specifies which enterprises are not deemed to be credit institutions and thus do not require authorisation from BaFin even though they conduct banking business or provide financial services. These include, for example, undertakings which conduct banking business solely with their parent undertaking or with their subsidiaries or affiliated undertakings. In cases of doubt, BaFin shall decide whether an enterprise is subject to the provisions of the Banking Act. Furthermore, in individual cases, BaFin, under certain conditions and upon application, may exempt an institution from the obligation to comply with specific provisions, especially if the enterprise does not require supervision in this respect given the nature of the business which it conducts. This would include paying out cash against a direct debit in retail shopping, for example. Certain types of business (eg deposit business), however, are not eligible for an exemption.
Section 32 of the Banking Act specifies the requirements for granting authorisation to conduct banking business.
- In addition to proof of initial capital of €5 million, the applicant must provide details about senior management, indicating name and address and a fit and proper assessment.
- Furthermore, the application must contain information making it possible to determine whether senior managers have sufficient time to dedicate to the performance of their tasks.
- The accompanying viable business plan must show the types of business envisaged, the organisational structure and the planned internal control mechanisms.
- If significant holdings are held in the institution, additional information must be included in the application for authorisation (eg details about the holder, the size of the holdings, the information required to assess the trustworthiness of these holders etc).
- Since the Sixth Act Amending the Banking Act, the application for authorisation must also include any facts indicating a close relationship between the institution and other persons or enterprises. This complements the supervision of significant holdings.
- Finally, the application must name the members of the supervisory board or the administrative board, providing details of names and addresses, and must include information on the assessment of trustworthiness and expertise.
Section 32 (1a) of the Banking Act contains clear wording regarding the authorisation requirement for proprietary business. It stipulates that proprietary business conducted together with banking business or financial services also requires authorisation.
The competent supervisory authority is entitled to grant authorisation subject to conditions or to limit it to specific types of banking business or financial services. The granting of authorisation is then announced in the Federal Gazette. The register of institutions in which all the domestic institutions which have been granted authorisation are entered can be found on BaFin's website.