BaFin Announces Supervisory Priorities for 2019

The supervisory priorities related to the digitization will involve addressing the digitization-related market changes through supervision and regulation; ensuring that the innovative technologies, IT systems, and data used by the supervised entities are safe; and transforming itself—internally and as an interface to the market—in the face of advancing digitization. Additionally, as Brexit affects all of the business areas of BaFin, dealing with the consequences of Brexit represents a supervisory focus for 2019 via the following key actions:

• Dealing with the consequences of the removal of the EU passport for new and existing business
• Arrangements to continue cooperation with the UK supervisory authorities in supervisory and regulatory areas of responsibility
• Maintaining and intensifying the (public) communication on Brexit

The supervisory priorities for banking include performing the less significant institution (LSI) Stress Test 2019 to review the impact on earnings and interest rate risk. The 2019 priorities for the activities related to securities markets include reviewing implementation of Markets in Financial Instruments Directive and regulation (MiFID II/MiFIR) and Packaged Retail and Insurance-Based Investment Products (PRIIPs) Regulation as well as preparing for the implementation of EU Prospectus Regulation. Additionally, the key priorities for the insurance sector involve the following: 

• Focusing on sustainability in the investment of insurance companies and pension funds
• Intensifying the monitoring of the premium situation of reinsurers in the non-life sector
• Examining "hidden" cyber risks in insurance policies
• Conducting tests of stochastic valuation models of standard insurance life insurance companies
• Performing in-depth study on how insurance companies using the standard formula deal with economic scenario generators (ESGs) in the evaluation
• Conducting audit and quality assurance of technical provisions in the solvency overview of property and casualty insurance companies
• Preparing for the efficient identification of risk-adequate capital backing through the use of the capital add-ons capital surcharge
• Preparing for Solvency II Review Procedures (Long Term Guarantees Review, Solvency II Review 2020)

Related Links (in German)

• Notification
• Priorities of BaFin
• Supervisory Priorities for Banking
• Supervisory Priorities for Insurance
• Supervisory Priorities for Securities

Keywords: Europe, Germany, Banking, Insurance, Securities, Supervisory Priorities, Regtech, Brexit, Stress Testing, Solvency II, BaFin