Since 1998, enterprises that provide financial services on a commercial basis or to an extent that requires a commercially established business operation (financial services institutions) have also been subject to supervision under the same rules as credit institutions and require authorisation pursuant to § 32 (1) Banking Act (Kreditwesengesetz, KWG). On 25 December 2019, two new EU legal acts entered into force to create a new European supervisory framework specifically for investment firms. This is a package consisting of the Investment Firms Directive (IFD) and the Investment Firms Regulation (IFR), which will be applicable in all EU Member States as of 26 June 2021. 

The new rules will be transposed into German supervisory law through the creation of three categories of investment institutions (WpI) in the Investment Institutions Act (Wertpapierinstitutsgesetz, WpIG), the Large Investment Institution, the Medium-sized Investment Institution and the Small Investment Institution. For each of these categories, a different level of prudential requirements is defined that an investment institution must meet once it is assigned to a category. 

It is therefore now always necessary to distinguish between investment services under the Investment Institutions Act (WpIG) and financial services under the Banking Act (KWG). 

Investment services according to WpIG include: 

• Placement business on a firm commitment basis
• Investment broking 
• Investment advice 
• Contract broking
• The operation of a multilateral trading system 
• The operation of an organised trading system 
• Placement business without a firm commitment basis 
• Portfolio management 
• Proprietary trading 

Financial services under the Banking Act include: 

• Crypto-custody business 
• The management of a crypto-asset register 
• Factoring
• Finance lease 
• Asset management 
• The restricted custody business 

In order to better monitor of the “grey capital market” 

• Non-EEA deposit broking and 
• Foreign currency dealing 

are treated as financial services in addition. 

Anyone who, in addition to providing financial services within the meaning of § 1 (1a) sentence 2 numbers 1 to 5, 11 and 12 of the KWG as well as §2 (2) number 1 to 10 of the WpIG, also wishes to purchase or sell financial instruments for their own account without fulfilling the conditions for proprietary trading also requires a written permission for this.

Minimum requirements for risk management of investment institutions (WpI MaRisk)

A flexible and compact set of rules has been developed to specify the proper business organization under WpIG. These rules are intended for small and medium-sized investment institutions and will enter into force on 1 January 2027. Large investment institutions must continue to apply MaRisk for credit and financial services institutions, as amended.