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    German Regulators Issue Updates Under IFR and AnaCredit Rules

    February 02, 2023

    Deutsche Bundesbank published Version 16 of the manual for AnaCredit validation rules, which will become valid from August 01, 2023. Additionally, the Federal Financial Supervisory Authority of Germany (BaFin) proposed the criteria for exemption from liquidity requirements for small securities institutions and the framework for supervision and governance of retail banking products. BaFin also announced that it is conducting audits of the business operations of a total of eight credit institutions in accordance with Section 44 of the German Banking Act (KWG) and published a report that examines risks to the stability of the financial system in Germany.

    Below is a summary of the key regulatory developments:

    • BaFin is seeking comments, until February 10, 2023, on a draft circular on the criteria for exemption from liquidity requirements in accordance with Article 43(1) of the Investment Firm Regulation (IFR or Regulation 2019/2033). The Article 43 paragraph 1 subparagraph 1 of the Investment Firm Regulation allows small securities institutions to be exempt from the liquidity requirement on a case-by-case basis. The draft circular will serve as a guide to implement the European Banking Authority (EBA) guidelines, which define additional criteria that must be considered when exempting smaller investment firms from the liquidity requirement. The circular will come into force on February 28, 2023.
    • Another consultation addresses the supervision and governance of retail banking products, with the comment period ending on February 28, 2023. This draft circular provides a framework for the introduction of regulations for the monitoring and governance of banking products, payment services and e-money products in the private customer business of credit institutions, in accordance with the German Banking Act and the German Payment Services Supervision Act (ZAG). The scope relates to the internal processes, functions, and strategies for the design, launch, and verification of these products throughout their life cycle. The circular applies to manufacturers and distributors of products offered and sold to consumers and details arrangements for product oversight and governance.
    • In another development, BaFin examined the real estate holdings of credit institutions to determine whether this could result in stability risks for the financial institutions. To this end, BaFin conducted audits of business operations and the annual financial statements of eight credit institutions in accordance with sections 44 and 30 of the German Banking Act, respectively. The audit began in October 2022 and will be continued in the first half of 2023. The audit is focused on the question of how valuable the real estate investments of the audited institutions are and how they are taken into account in the balance sheet. Going forward, BaFin plans to formulate clear expectations on how institutions should ensure appropriate business organization in the area of ​​own investments in real estate.
    • Finally, BaFin published a report that examines the risks that could pose the greatest threat to financial stability and the integrity of the German financial system in 2023. The report identified six risks: interest rate risk, risks from corrections in real estate markets, risks from significant corrections in the international financial markets, risks from the default of loans to German companies, cyber risk, and money laundering risk. Also identified were key future trends that will shape business models in the financial sector in the long-term—namely, issues related to sustainability, digitization of financial sector, and geopolitical upheavals. 


    Related Links (in German)

    Keywords: Europe, Germany, Banking, Basel, AnaCredit, Validation Rules, Reporting, Investment Firms, IFR, Liquidity Risk, Financial Stability, Credit Risk, Cyber Risk, ML TF Risk, Interest Rate Risk, BaFin, Bundesbank

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