The Federal Financial Supervisory Authority of Germany (BaFin) has set ten medium-term objectives for 2022 to 2025. These objectives relate to the stability, security, and operational resilience of the supervised companies; the identification of problem companies; the intensification of money laundering prevention; the strengthening of consumer protection; the financial reporting enforcement and market supervision; the consideration of aspects of sustainability and innovation in supervisory activities; and the modernization and human resource development BaFin.
Over the coming years, BaFin intends to make significant progress in all of the identified areas in the following ways:
- BaFin will work to ensure that the financial system and the companies it supervises are resilient to stress in multiple scenarios—particularly interest rate and market scenarios—in terms of both capital adequacy and liquidity adequacy. To this end, BaFin will focus on own scenario analysis and assess the long-term viability of business models, especially in light of digitalization.
- BaFin will monitor the resilience of the companies it supervises—with a focus on their technology platforms—in respect of their operational stability and security. It will focus on combating the sharp increase in cyber risks and the changes in companies’ risk profiles caused by the fragmentation of the value chain, especially due to the outsourcing of material activities and processes.
- BaFin will identify weak companies at an early stage—in addition to the companies with problematic business models, inadequate control systems, or insufficient governance. BaFin will take corrective measures and utilize well-prepared resolution strategies to oversee the market exits that become necessary, seeking to keep losses to a minimum.
- BaFin plans to step-up its supervisory activities in the area of anti-money laundering, will cooperate with all of the relevant entities in efforts to prevent money laundering, and will commit to effective European anti-money laundering supervision.
- BaFin considers issues of sustainability in its supervisory activities and will work to combat greenwashing. The focus will also be on the analysis and mitigation of financial risks for supervised companies and on their compliance with disclosure requirements.
- BaFin has a comprehensive understanding of how new technologies are being used in the market, the risks they involve, and their impact on new and old business models. It will continue to focus on the use of artificial intelligence in finance and the challenges this entails for effective supervision.
Keywords: Europe, Germany, Banking, Operational Resilience, Cyber Risk, Disclosures, Artificial Intelligence, Resolution Framework, BaFin
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