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Federal Financial Supervisory Authority
The Federal Financial Supervisory Authority (German: Bundesanstalt für Finanzdienstleistungsaufsicht), better known by its abbreviation BaFin, is Germany's integrated financial regulatory authority. Since 2014, it has been Germany's national competent authority within European Banking Supervision. It is an independent federal institution with headquarters in Bonn and Frankfurt and falls under the supervision of the Federal Ministry of Finance.[citation needed] BaFin supervises about 2,700 banks, 800 financial services institutions, and over 700 insurance undertakings.[citation needed]
Prudential banking supervision in Germany essentially started as a consequence of the banking crisis of 1931, prior to which the only supervised credit institutions were the public savings banks.[citation needed] On 19 September 1931, a decree established the office of Reichskommissar für das Bankgewerbe (lit. 'Imperial Commissioner for Banking'), for which Chancellor Heinrich Brüning appointed Friedrich Ernst.[citation needed] In 1934, this was transformed into the Aufsichtsamt für das Kreditwesen, by new comprehensive banking legislation (German: Kreditwesengesetz of 5 December 1931).[citation needed] Initially the Reichsbank was associated with the supervisory process through a newly established Supervisory Office, but that role was transferred to the Economics Minister (German: Reichswirtschaftsminister) upon a legislative revision in 1939, and the Aufsichtsamt für das Kreditwesen itself was dissolved in 1944 with its duties taken over by the economics ministry.[citation needed]
After World War II, banking supervision was devolved in West Germany to the Länder, until a national banking supervisor was re-established in 1962 as the Bundesaufsichtsamt für das Kreditwesen (known as BAK or BAKred), located in West Berlin, which again cooperated closely with the Deutsche Bundesbank. BAKred relocated from Berlin to Bonn in 1999.[citation needed]
BaFin was formed on 1 May 2002 by the merger of the Bundesaufsichtsamt für das Kreditwesen, the Federal Insurance Supervisory Office (German: Bundesaufsichtsamt für das Versicherungswesen or BAV, est. 1952 in West Berlin and relocated to Bonn in 2000), and the Federal Supervisory Office for Securities Trading (German: Bundesaufsichtsamt für den Wertpapierhandel or BAWe, est. 1995 in Frankfurt).[citation needed] This was achieved under the Financial Services and integration Act (German: Gesetz über die integrierte Finanzaufsicht, known as FinDAG) enacted on 22 April 2002.[citation needed] The aim was to create one integrated financial regulator that covered all financial markets. Thus, uniform national supervision of banks, credit institutions, insurance companies, financial service companies, brokers and stock exchanges would be achieved, providing transparency and manageability and to make sure all financial activity was regulated.[citation needed]
In 2003 changes to the Kreditwesengesetz (KWG) gave BaFin further responsibility to monitor the creditworthiness of financial institutions and to collect detailed information from those institutions.[citation needed] The aim was to increase customer protection and the reputation of the financial system.[citation needed] It shares responsibility here with the Bundesbank. As of 2015, BaFin is in transition, after major responsibilities for banking supervision shifted to the purview of the European Central Bank in November 2014.
On 19 September 2008, in response to threats from the 2008 financial crisis and following measures taking by the United States, BaFin banned short selling on eleven German finance stocks.[citation needed] These were Aareal Bank, Allianz, AMB Generali, Commerzbank AG, Deutsche Bank, Deutsche Börse, Deutsche Postbank, Hannover Re, Hypo Real Estate, MLP AG and Munich Re. The ban expired on the 31 January 2010 and was not renewed at that time.
On 19 May 2010, in response to the euro area crisis, BaFin banned naked short selling of credit default swaps on euro-area government bonds until 31 March 2011.[citation needed] At the same time they re-introduced a ban on naked short selling of the previous 10 banks and insurers companies.
In 2019, BaFin banned short-selling in response to accusations of accounting fraud in Wirecard.[citation needed] Following the allegations, BaFin itself came under scrutiny the following year. In November 2020, the European Securities and Markets Authority (ESMA) published the results of its review which assessed the events leading to the collapse of Wirecard and the supervisory response by BaFin.[citation needed] This review identifies a number of deficiencies, inefficiencies and legal and procedural impediments relating to the following areas: the independence of BaFin from issuers and government; market monitoring by both BaFin and the Financial Reporting Enforcement Panel (FREP); examination procedures of FREP; and the effectiveness of the supervisory system in the area of financial reporting. In April 2021, German prosecutors in Frankfurt announced the opening of a criminal investigation into BaFin's supervision of Wirecard.
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Federal Financial Supervisory Authority
The Federal Financial Supervisory Authority (German: Bundesanstalt für Finanzdienstleistungsaufsicht), better known by its abbreviation BaFin, is Germany's integrated financial regulatory authority. Since 2014, it has been Germany's national competent authority within European Banking Supervision. It is an independent federal institution with headquarters in Bonn and Frankfurt and falls under the supervision of the Federal Ministry of Finance.[citation needed] BaFin supervises about 2,700 banks, 800 financial services institutions, and over 700 insurance undertakings.[citation needed]
Prudential banking supervision in Germany essentially started as a consequence of the banking crisis of 1931, prior to which the only supervised credit institutions were the public savings banks.[citation needed] On 19 September 1931, a decree established the office of Reichskommissar für das Bankgewerbe (lit. 'Imperial Commissioner for Banking'), for which Chancellor Heinrich Brüning appointed Friedrich Ernst.[citation needed] In 1934, this was transformed into the Aufsichtsamt für das Kreditwesen, by new comprehensive banking legislation (German: Kreditwesengesetz of 5 December 1931).[citation needed] Initially the Reichsbank was associated with the supervisory process through a newly established Supervisory Office, but that role was transferred to the Economics Minister (German: Reichswirtschaftsminister) upon a legislative revision in 1939, and the Aufsichtsamt für das Kreditwesen itself was dissolved in 1944 with its duties taken over by the economics ministry.[citation needed]
After World War II, banking supervision was devolved in West Germany to the Länder, until a national banking supervisor was re-established in 1962 as the Bundesaufsichtsamt für das Kreditwesen (known as BAK or BAKred), located in West Berlin, which again cooperated closely with the Deutsche Bundesbank. BAKred relocated from Berlin to Bonn in 1999.[citation needed]
BaFin was formed on 1 May 2002 by the merger of the Bundesaufsichtsamt für das Kreditwesen, the Federal Insurance Supervisory Office (German: Bundesaufsichtsamt für das Versicherungswesen or BAV, est. 1952 in West Berlin and relocated to Bonn in 2000), and the Federal Supervisory Office for Securities Trading (German: Bundesaufsichtsamt für den Wertpapierhandel or BAWe, est. 1995 in Frankfurt).[citation needed] This was achieved under the Financial Services and integration Act (German: Gesetz über die integrierte Finanzaufsicht, known as FinDAG) enacted on 22 April 2002.[citation needed] The aim was to create one integrated financial regulator that covered all financial markets. Thus, uniform national supervision of banks, credit institutions, insurance companies, financial service companies, brokers and stock exchanges would be achieved, providing transparency and manageability and to make sure all financial activity was regulated.[citation needed]
In 2003 changes to the Kreditwesengesetz (KWG) gave BaFin further responsibility to monitor the creditworthiness of financial institutions and to collect detailed information from those institutions.[citation needed] The aim was to increase customer protection and the reputation of the financial system.[citation needed] It shares responsibility here with the Bundesbank. As of 2015, BaFin is in transition, after major responsibilities for banking supervision shifted to the purview of the European Central Bank in November 2014.
On 19 September 2008, in response to threats from the 2008 financial crisis and following measures taking by the United States, BaFin banned short selling on eleven German finance stocks.[citation needed] These were Aareal Bank, Allianz, AMB Generali, Commerzbank AG, Deutsche Bank, Deutsche Börse, Deutsche Postbank, Hannover Re, Hypo Real Estate, MLP AG and Munich Re. The ban expired on the 31 January 2010 and was not renewed at that time.
On 19 May 2010, in response to the euro area crisis, BaFin banned naked short selling of credit default swaps on euro-area government bonds until 31 March 2011.[citation needed] At the same time they re-introduced a ban on naked short selling of the previous 10 banks and insurers companies.
In 2019, BaFin banned short-selling in response to accusations of accounting fraud in Wirecard.[citation needed] Following the allegations, BaFin itself came under scrutiny the following year. In November 2020, the European Securities and Markets Authority (ESMA) published the results of its review which assessed the events leading to the collapse of Wirecard and the supervisory response by BaFin.[citation needed] This review identifies a number of deficiencies, inefficiencies and legal and procedural impediments relating to the following areas: the independence of BaFin from issuers and government; market monitoring by both BaFin and the Financial Reporting Enforcement Panel (FREP); examination procedures of FREP; and the effectiveness of the supervisory system in the area of financial reporting. In April 2021, German prosecutors in Frankfurt announced the opening of a criminal investigation into BaFin's supervision of Wirecard.