German Regulators Publish Updates for Financial Sector Entities

Below are the key details of the recent updates:

• The Deutsche Bundesbank and the Federal Financial Supervisory Authority of Germany (BaFin) announced launch of their fifth stress test to assess the earnings situation and resilience of less significant institutions. As with the previous stress tests for less significant institutions, the results are to be used to determine the supervisory capital adequacy recommendation. The design of the stress test for 2022 is similar to that of the stress test for 2019, with the far-reaching consideration of proportionality being a key difference. If institutions do not exceed supervisory thresholds in individual risk categories, they do not have to fill out the questionnaire in full. This will relieve the institutions that are classified as small and non-complex institutions. Banks must submit the data collected in the stress test to the regulator by the end of May 2022. Bundesbank and BaFin are expected to publish the results at the end of September 2022.
• Bundesbank published a document specifying the method for identifying institutions with reduced reporting requirements under the AnaCredit regulation.
• BaFin published a general decree introducing a sectoral systemic risk buffer of 2.0% for risk-weighted assets on loans secured by residential real estate as of April 01, 2022. Banks have until February 01, 2023 to meet the buffer requirement.
• BaFin issued a general decree revoking the earlier 2016 decree on capital requirements for IRRBB. The 2016 general decree is no longer necessary, as BaFin has now defined an individual assessment and capital requirement for all institutions under its Supervisory Review and Evaluation Process.
• BaFin announced that it will end most of its COVID relief measures on June 30, 2022. In March 2020, BaFin had decided to use the flexibility of the existing regulations to temporarily adapt some of its requirements to the special circumstances of the pandemic. However, an examination by BaFin has shown that most of the relief measures are no longer required, as the effects of the COVID-19 crisis on the supervised companies and financial stability can now be managed. However, some of the relief measures will continue for the time. These are related to government subsidy programs, supervisory requirements for trading from home, exceptions to on-site audits permitted under certain circumstances, and amended rules on trades for investment funds.

Related Links (in German)

• Joint Press Release on Stress Test 2022
• Bundesbank Document on Reduced Reporting Frequency (PDF)
• BaFin Press Release on Systemic Risk Buffer
• BaFin Press Release on Revoked Rule on IRRBB
• BaFin Announcement on Discontinuation of Relief Measures

Keywords: Europe, Germany, Banking, Stress Testing, Less Significant Institutions, AnaCredit, Reporting, Systemic Risk, Systemic Risk Buffer, Regulatory Capital, Basel, IRRBB, Covid-19, SREP, Bundesbank, BaFin