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IMF Country Report No. 22/265
GERMANY
FINANCIAL SECTOR ASSESSMENT PROGRAM
TECHNICAL NOTE—REGULATION AND SUPERVISION OF LESS SIGNIFICANT INSTITUTIONS
August 2022
This Technical Note on Regulation and Supervision of Less Significant Institutions for the Germany FSAP was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed in October 2021 and February 2022 (Fintech).
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Title page
GERMANY
FINANCIAL SECTOR ASSESSMENT PROGRAM
July 22, 2022
TECHNICAL NOTE
REGULATION AND SUPERVISION OF LESS SIGNIFICANT INSTITUTIONS
Prepared By
Monetary and Capital Markets Department
This Technical Note was prepared by IMF staff in the context of the Financial Sector Assessment Program. It contains technical analysis and detailed information underpinning the FSAP’s findings and recommendations. Further information on the FSAP can be found at http://www.imf.org/external/np/fsap/fssa.aspx
Contents
Glossary
EXECUTIVE SUMMARY
INTRODUCTION
A. Context and Scope
MARKET STRUCTURE
INSTITUTIONAL SETTING
A. Supervisory Responsibilities, Objectives, and Powers
B. Cooperation, Information Exchange and Management Reporting
C. BaFin Reorganization
LEGAL AND REGULATORY FRAMEWORK
A. Legal Framework
B. Regulations and Guidance
SUPERVISORY APPROACH TOOLS AND REPORTING
A. Supervisory Approach
B. Supervisory Tools
C. Supervisory Reporting
DIGITALIZATION AND FINTECH
A. Fintech Landscape and Monitoring
B. Regulatory and Supervisory Approach to Fintech
C. Digitalization of Supervisory Processes and Tools
BOX
1. Definition of a Credit Institution and a CRR Credit Institution
TABLES
1. Recommendations on Regulation and Supervision of Less Significant Institutions
2. Financial Soundness Indicators for Banks, 2015–2020
APPENDICES
I. Progress on Implementing the BCP Assessment Recommendations (2016)
II. The German Corporate Governance Framework
Glossary
| AGRA | Committee for Risk Oriented Analysis |
| AOC | Auditor Oversight Commission |
| APAS | Audit Oversight Body |
| BaFin | Federal Financial Supervisory Authority |
| BBk | Deutsche Bundesbank |
| BCBS | Basel Committee for Banking Supervision |
| BCP | Basel Core Principles |
| BRRD II | Bank Recovery and Resolution Directive |
| COREP | Common Reporting (ECB) |
| CRD V | Directive 2013/36/EU |
| CRO | Chief Risk Officer |
| CRR | Capital Requirements Regulation (EU) No 575/2013 +CRRII |
| DG | Directorate General |
| EA | External Auditor |
| EBA | European Banking Authority |
| ECB | European Central Bank |
| ESA | European Supervisory Authority |
| EU | European Union |
| FinDAG | Act Establishing the Federal Financial Supervisory Authority |
| FINREP | Financial Reporting (ECB) |
| FinStabG | Financial Stability Act |
| FISG | The Act to Strengthen Financial Market Integrity, effective January 2022 |
| FMI | Financial Market Infrastructure |
| FOLF | Failing or likely to fail |
| FREP | Federal Reporting Enforcement Panel |
| FSAP | Financial Sector Assessment Program |
| FSC | Financial Stability Committee |
| GCGC | German Corporate Governance Code |
| ICAAP | Internal Capital Adequacy Assessment Process |
| IFRS | International Financial Reporting Standards |
| IPS | Institutional Protection Scheme |
| IT | Information Technology |
| JST | Joint Supervisory Team |
| KWG | German Banking Act (Kreditwesengesetz – KWG) |
| LCR | Liquidity Coverage Ratio |
| LSI | Less significant institutions or banking groups (LSIs) |
| MaRisk | Minimum requirements for management (Mindestanforderungen an des Riskomanagement – MaRisk) |
| MoF | Federal Ministry of Finance |
| NCA | National Competent Authority |
| NPL | Non-Performing Loan |
| NRA | National Resolution Authority |
| RiG | The Act on Risk Reduction and Proportionality in the Banking Sector, December 2020 |
| SI | Significant Institution |
| SNCI | Small and Non-Complex Institutions |
| SREP | Supervisory Review and Evaluation Process |
| SSM | Single Supervisory Mechanism |
| SupTeck | Supervision Technology |
| TN | Technical Note |