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Clarification of the administrative practice in relation to section 32 (1) sentence 1 of the KWG
Pursuant to section 32 (1) sentence 1 of the German Banking Act (KWG), a written permit is required for anyone who wants to conduct banking or financial services in Germany on a commercial basis or to an extent that requires a commercially established business operation. I am assuming that there is "conducting banking business or providing financial services in Germany" not only when the provider of the service is domiciled or habitually resident in Germany, but also when the provider of the service is domiciled or habitually resident in Abroad and has targeted the market in Germany in order to repeatedly and commercially offer banking transactions or financial services to companies and / or persons who have their registered office or habitual residence in Germany.
Providers from non-EEA countries who want to sell banking and financial service products in Germany in a targeted manner must therefore have a subsidiary in order to obtain the necessary license (Section 32 (1) in conjunction with Section 33 (1) sentence 1 no. 6 KWG) or set up a branch (Section 32 (1) in conjunction with Section 53 KWG) in Germany. In principle, this also applies to providers from EEA countries who cannot use the so-called European passport for their banking and / or financial services offered in Germany. The businesses operated under license are to be booked in the German business unit; the accounts and custody accounts opened as part of the business relationship are to be kept with this unit.
For companies from the EEA states - under the requirements of Section 53b KWG (so-called notification procedure / European passport) - in addition to the option of setting up a branch (Section 53b (2) KWG), there is also the option of conducting business that requires authorization cross-border trade in services - without a corresponding domestic presence - (Section 53b (2a) KWG).
There are no restrictions on the so-called passive freedom to provide services 1, d. H. the right of domestic residents and companies to request services from a foreign provider on their own initiative. Transactions that have come about on the initiative of the customer do not result in an authorization requirement under Section 32 (1) KWG.
The recording of cross-border banking and financial services primarily affects the private customer segment as well as the (mass) business customer segment, since foreign companies from third countries regularly want to tap into new customer groups through targeted measures in Germany. In particular, it should be noted that the foreign institutions concerned have a broader framework for structuring their business activities in connection with the regulation of Section 25a (2) KWG and the recognition of the admissibility of outsourcing in the distribution and processing of banking and financial services. For example, the banking business can continue to be performed by the foreign subsidiary / sister / parent company on the basis of an agency agreement concluded with the domestic parent / subsidiary / sister company, which then carries out the business in the name and for the account of the domestic parent / subsidiary / Sister company provides to customers.
The interpretation explained here has no further effects on the activities that representative offices within the meaning of Section 53a KWG are permitted to carry out. Even according to the previous legal situation - in the absence of permission from BaFin - the representative offices were not allowed to provide any banking and / or financial services requiring authorization, in particular not to be involved in the initiation, conclusion or processing of banking transactions and financial services. Such physical branches in Germany must be limited to representative functions.
Incidentally, the foreign provider knows whether he intends to enter a foreign market in order to offer banking and financial services products in Germany. He must therefore expect the application of German supervisory law. The connecting features developed in the past remain important for the proof of a corresponding intention. In this context, the criteria mentioned by the European Commission on questions of interpretation about the free movement of services must be observed as well as the standards that the supervisory authorities responsible for the Internet sales of foreign investment units and for offers of securities over the Internet developed before the creation of the BaFin ( Letter from BAKred dated June 2nd, 1998, replaced by BaFin circular 1/2007 of January 5th, 2007 as well as BAWe announcement on the Securities Prospectus Act of September 6th, 1999).
In order to take account of the need for legal certainty, I will present examples of typical case constellations for the cross-border provision of banking and financial services, for which I assume a permit requirement under Section 32 (1) KWG. I then state in detail the standard requirements under which I can grant individual exemption in accordance with Section 2 (4) KWG for certain business areas.
The criteria listed here in more detail reflect the standards to be applied by me and can be applied accordingly to comparable situations. In view of the variety of contractual and actual arrangements, however, I reserve the right to examine each individual case, in which I will assess the question of the licensing requirement as part of an overall assessment.
1. Relevant case constellations that justify a license requirement under Section 32 (1) KWG
In principle, a permit requirement according to Section 32 (1) KWG must always be assumed if a foreign company intends to target the market in Germany in order to contact companies and / or persons who have their registered office or habitual residence in Germany, repeatedly and commercially to offer the banking transactions listed in section 1 (1) sentence 2 and / or the financial services listed in section 1 (1a) sentence 2 KWG.
- Lending business / loan syndicate
If, on the other hand, only existing customer relationships are continued or the initiative to conclude loan agreements comes from the customer from the outset, as is regularly the case with large business customers or institutional investors, this does not result in a license requirement (passive freedom to provide services).
In principle, these standards also apply to the assumption of loans within the framework of loan consortia. In practice, however, the establishment of a consortium is often preceded by a so-called "beauty contest" initiated by the borrower, during which several banks apply for the mandate with their concepts tailored to the borrower. A consortium is usually only formed when the borrower's conditions are specified in more detail. A loan consortium is then formed based on his or her individual needs and grants a loan tailored to this borrower. Such an approach falls under the passive freedom to provide serviceswhich is not affected by my administrative practice.
- Customer visits by (freelance) employees of a foreign institute
- Placement by domestic institutes / (freelance) employees
- Third country deposit brokerage
2. Possibility of exemption according to Section 2 (4) KWG
According to § 2 para.4 KWG, there is the option of exempting foreign institutions from the licensing requirement pursuant to Section 32 (1) KWG and other provisions of the KWG for certain business areas.
1. Requirements for an exemption in accordance with Section 2 (4) KWG
The legal requirement for an exemption is that "the company does not require supervision because of the type of business it conducts". Therefore, an exemption under Section 2 (4) KWG can only be considered if BaFin can deny the need for supervision that exists in connection with the conduct of banking and financial services business.
This is usually only the case if the company is approved by the competent authority (s) in its home country effectively according to international standardssupervised and the competent authority (ies) in the country of origin with BaFin working together / working together satisfactorily.
In addition, the applicant company has a Certificate from the competent home state authority (s) to be submitted in which this confirms / confirms to BaFin,
- that the foreign company concerned has been granted a license for banking and / or financial services that it intends to provide cross-border in Germany,
- that there are no supervisory concerns against the commencement of the intended cross-border services in Germany and
- in the event that such concerns arise at a later date, this will be communicated to BaFin.
If a third country company also has Brancheswho are located in other third countries and want to operate across borders in Germany, expands the confirmation of the home state supervisory authority to the effect that
- that so far no problems have arisen in the cooperation with the respective supervisory authorities of the countries in which the branches are located, that there are no regulatory complaints with regard to the business activities of the branches (individual designation required) and that problems or complaints that arise later are reported to BaFin. In addition, it must be shown to what extent there is adequate supervision, in particular with regard to corporate insolvency and money laundering prevention, in the countries in which the branches are located.
Another requirement is that the company making the application appoints an authorized recipient in Germany.
2. Scope of the cross-border banking transactions and financial services that can be exempted under Section 2 (4) KWG
Taking into account the above-mentioned prerequisites, the areas that BaFin considers to be exemptable under Section 2 (4) of the KWG are specified in more detail below. However, the exemption is an individual decision in which the respective circumstances of the business transaction must be taken into account. In view of the various contractual and actual forms of business processing, it must be checked in each individual case under which conditions an exemption according to Section 2 (4) KWG can be granted. In addition to the prerequisites presented here, additional requirements may arise in individual cases from supervisory, in particular from anti-money laundering aspects
- Institutional investors / interbank transactions
In relation to institutional investors and between banks (with the exception of the financial transfer business), all banking transactions and financial services that require a permit in accordance with Sections 32, 1 (1) and (1a) of the KWG can be exempted.
In the opinion of BaFin, institutional investors are:
- Federal government, states, local authorities and their institutions,
- Credit and financial services institutions within the meaning of Section 1 Paragraph 1 and Paragraph 1a KWG, including capital investment companies within the meaning of Section 2 Paragraph 6 of the Investment Act (InvG),
- private and public insurance companies and
- Corporations within the meaning of Section 267 Paragraphs 2 and 3 of the Commercial Code.
- Private customers
3. Exemption procedure in accordance with Section 2 (4) KWG
The application for exemption in accordance with Section 2 (4) KWG must be submitted in writing to BaFin by the company. Unless otherwise agreed with individual foreign supervisory authorities, the application must be submitted2 - regularly attach the following documents:
- Copy of the articles of association or the articles of association;
- Proof of the company's entry in the register, insofar as this is required;
- the most recent annual financial statements including all related documents (such as management report, audit report), insofar as these had to be prepared;
- Personal details of the applicant or of each manager of the applying company (board member / managing director): surname, all first names, maiden name, date and place of birth, home address, nationality, maiden name of the parents
- a declaration by the applicant or each manager of the company making the application (member of the board / managing director), whether criminal proceedings are pending against him, whether criminal proceedings have been pending against him because of a crime or misdemeanor or whether he or a company he manages is a debtor Was or is involved in insolvency proceedings or a procedure for submitting an affidavit or in comparable proceedings ("declaration of impunity");
- in the form for such a declaration can be found on the website http://www.bafin.de;
- detailed description of the intended business activity, which in particular must contain the description of the specific business transaction as well as the planned market presence in Germany and the designation of the customer groups that are to be addressed; in addition, to the extent that this is relevant to the intended business activity, it must be explained how the money and securities transfer will be processed;
- (Sample) contract forms and (sample) agreements that are to be used in the planned business activity in Germany;
- Appointment of an authorized recipient in Germany;
- Certificate from the competent authority (ies) of the home state that has carried out the tasks listed in Section 2.a. meets the requirements set out in this leaflet.3
4. Conditions and obligation to pay fees
The exemption under section 2 (4) of the KWG can be subject to conditions and is required in accordance with section 14 of the Federal Financial Supervisory Authority Act (Finanzdienstleistungsaufsichtsgesetz - FinDAG) in conjunction with section 2 (1) no the allocation of costs according to the Financial Services Supervision Act - FinDAGKostV - subject to a fee. As a rule, the fee for exemption in accordance with Section 2 (2) No. 1a FinDAGKostV and for refusing an exemption in accordance with Section 3 (2) sentence 1 FinDAGKostV is € 5,000. The withdrawal of an application for exemption in accordance with Section 2 (4) KWG after the factual processing has commenced in accordance with Section 14 FinDAG in conjunction with Section 3 (1) FinDAGKostV is also subject to a fee; a fee range of € 50 to € 2,500 is generally provided for this (Section 3 Paragraph 2 Clause 2 and Paragraph 4 FinDAGKostV).
The provisions of the Money Laundering Act (GwG), according to which all credit and financial services institutions - including those to which certain provisions of the KWG do not apply in accordance with section 2 (4) of the KWG - must fulfill specific duties of care against money laundering and the financing of terrorism (identification , Recording and retention obligations, the obligation to report suspicious cases and to create adequate security measures against money laundering and the financing of terrorism) is pointed out. For further details, reference is made to the relevant publications on the Internet site http://www.bafin.de.
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