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Federal Financial Supervisory Authority in Germany

Germany has one of the largest economies in the world. As a result, it is important to learn more about the Federal Financial Supervisory Authority. It is often identified with its abbreviation BaFin. For those who are not familiar with BaFin, BaFin is an independent federal institution with headquarters in Bonn and Frankfurt, Germany. The Federal Ministry of Finance supervises BaFin.

The history of the Federal Financial Supervisory Authority dates back to 2002. German lawmakers passed the Financial Services and integration Act. It was a historic moment. Importantly, the aim of this legislation was to create one integrated financial regulator that covered all financial markets.

Interestingly, BaFin was created by the merger of the three supervisory agencies. The Federal Banking Supervisory Office, the Federal Supervisory Office for the Securities Trading as well as the Federal Insurance Supervisory Office.

The primary function of the Federal Financial Supervisory Authority is to ensure the proper functioning, stability, and integrity of the German financial system. Currently, BaFin has 2,722 employees working in Frankfurt and Bonn. They have to deal with a huge number of banks. For example, they supervise 1,630 banks.

Moreover, they supervise 720 financial services institutions, 40 payment services, and electronic money institutions. This is not the end of the story, as BaFin also handles 90 German branches of foreign credit institutions from the European Economic Area. Also, they supervise around 540 insurance undertakings and 30 pension funds. Furthermore, the agency takes care of about 6,300 domestic investment funds and about 400 asset management companies.

Importantly, under its solvency supervision, BaFin helps to ensure the ability of banks, financial institutions as well as insurance undertakings to meet their payment obligations.

Responsibilities of the Federal Financial Supervisory Authority

It is worth mentioning that BaFin is responsible for account supervision. They are also accountable for the supervision of ba Federal Financial Supervisory Authority in Germany nks, insurance, securities, and banks.

Let’s start with securities supervision. The objective of securities supervision is to ensure transparency as well as the integrity of the financial market and the protection of investors.

People should take into consideration that the supervision of individual stock exchanges is the responsibility of the stock exchange supervision authorities of the Federal States. Notably, the stock exchange supervisory authorities monitor the pricing process in cooperation with the exchanges’ own trading surveillance units.

The Federal Financial Supervisory Authority works with the stock exchange supervisory authorities when it comes to fulfilling the functions of a stock exchange regulator at an international level.

Interestingly, the key functions of BaFin’s securities supervision include: combating insider dealing, ad hoc disclosure, director’s dealings, market manipulation, major holdings of voting rights. Moreover, securities prospectuses as well as prospectuses for other forms of equity investment. Also, rules of professional conduct and organisational requirements, corporate takeovers, enforcement of financial reporting. Furthermore, financial analyses, supervision of domestic management companies, and the solvency supervision of financial services institutions.

Part Two

In the first of this chapter, we discussed securities supervision. Let’s discuss banking supervision and insurance supervision. Notably, insurance supervision is based on the Insurance Supervision Act.

Importantly, the legal basis for insurance supervision is the Insurance Supervision Act. Moreover, the primary objective of insurance supervision is the protection of policyholders and beneficiaries.

In accordance with the federalist system of the country, insurance supervision is divided between the Federal Government and the Federal States. BaFin supervises on behalf of the federal government private undertakings that operate in the country. In the case of the Federal State, local authorities take care of public insurers. Their activities are limited to the Federal State.

Notably, the primary legal basis for the supervision of banks is the Banking Act. Moreover, there are also a number of Special Acts, such as the Safe Custody Act, the Building and Loan Associations Act, and the Savings Banks Acts of the Federal States.

It is worth noting that, BaFin and the central bank of the Federal Republic of Germany are both responsible for the supervision of the banks. BaFin is responsible for the supervision of institutions under the Banking Act.

One of the tasks of BaFin is to get involved in the creation of a single European financial market. International co-operation is very important for BaFin. For example, the Federal Financial Supervisory Authority is a member of the International Organization of Securities Commissions (IOSCO). Also, BaFin is a member of the Basel Committee on Banking Supervision.

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