Banking Regulations in Germany (BaFin) And The EU
Legal services for financial regulation
When new financial service providers want to approach German clients, the first question that always comes up is the licensing requirement: Do I need a BaFin license/BaFin permit for my activity?
BaFin is the German Federal Financial Supervisory Authority. Financial supervision in Germany is a complex endeavor. Numerous EU-directives (such as the AIFM-directive) and administrative provisions (such as MaRisk and MaComp) do exist. In addition to relevant German laws, companies and entrepeneurs entering the German/European market should determine if they require a banking license to operate their business.
Who requires a BaFin license?
The BaFin is Germany's financial regulator, i.e. it regulates Germany's financial world. By now, the majority of activities in the banking sector require a BaFin license. Small companies do, at times, offer services for which they would require a BaFin license - without having one. Doing so is punishable under German law and we strongly advise against it.
The best way to avoid any issues with the BaFin is checking before starting operations in Germany. An experienced and qualified financial regulation lawyer can prove as a great advantage. However, at times, companies are offering financial services without a valid BaFin-license and get contacted by the BaFin. We can help with such cases as well.
Please also note that a BaFin license is often valid for just the particular purposes you listed in your application. Chances are, you need a new license when offering new financial services.
Bitcoin businesses & crowdfunding platforms
Bitcoin businesses & crowdfunding platforms might also need a BaFin license. This depends on their business model and the German Payment Services Regulation Act (Zahlungsdiensteaufsichtsgesetz, ZAG). New currencies, such as Bitcoin or other virtual currencies are classified as financial instrument, or precisely as units of account by the BaFin. If you are trading with such coins in a professional manner, chances are high that you require a BaFin-license. This also applies for setting up a FinTech business in Germany.
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Consequences of not having a required BaFin license
If a financial service provider pursues unauthorized business, this is usually brought to the attention of the company by a letter from BaFin and a statement is requested. The provision of banking transactions, financial services or payment services without the required permit can have serious consequences for the companies concerned and the persons acting:
- Even merely acting negligently without the required permission pursuant to Section 54 of the German Banking Act (KWG) or Section 31 of the German Banking Supervision Act (ZAG) is punishable by law.
- Anyone who has once knowingly provided such services without a permit can no longer be classified as "reliable", which may stand in the way of a permit being granted in the future.
- In addition, competitors can sue for injunctive relief against unauthorized business. The company will then be prohibited from continuing its business operations by temporary injunction on pain of an administrative fine of up to EUR 250,000.
- Finally, there is the threat of civil claims by customers who have suffered damage as a result of services provided without authorization. According to the German Federal Court of Justice, Section 32 of the German Banking Act (KWG) is a so-called "protective law". Anyone who commits this violation of the KWG is liable for damages for this reason alone.
How much does a BaFin license cost?
The costs for applying for a BaFin license can vary greatly. In addition to the lawyer's fees, there is also a processing fee at the licensing authority itself, the amount of which is determined by the annex to the so-called FinDAGKostV. The amount of the fee depends on the specific financial services or banking transactions for which a license is sought.
In our experience, the fee charged by the supervisory authority for a license pursuant to Section 32 (1) of the KWG ranges between EUR 2,000 and EUR 17,000 in the case of licensing procedures for financial services, while the range for the granting of a license for banking transactions is between EUR 5,000 and EUR 20,000.
If, on the other hand, a license is only granted for the provision of
- third country deposit brokering,
- foreign exchange business,
- factoring and
- finance leasing
the BaFin fee is a uniform EUR 2,600. In the case of extensive license applications, the fee may also be higher. The amount of the lawyer's fees, on the other hand, depends to a large extent on the time required for coordination and correspondence with the client on the one hand and the authority on the other.
"We will work with you to prepare your license application in a way that guarantees confirmation by the regulatory authority."
Dr. Annette Wagemann
Certified Specialist for Banking and Capital Markets Law
You can rely on us
You want to submit a license application? Our team will prepare your application together with you in such a way that confirmation by the supervisory authority is guaranteed. Thanks to our many years of experience, we know exactly what conditions BaFin and the Bundesbank impose on a license application. Provided your cooperation, we will prepare the application in such a way that it is guaranteed to be approved by the authorities.
We will be happy to answer your questions on +49 69 76 75 77 80 or email@example.com.
Legal advice on BaFin permit before entering the German market
We help you examining if your buisness requires a license and prepare you as good as possible to obtain one, by elaborating on points such as:
- What kind of financial service(s) will you offer? Do you already plan to implement additional services in the forseeable future? Where could potential conflicts arise?
- What personal requirements do you have to meet and how much capital is required?
- Which risk control measurements should be implemented and how do you integrate them with compliance guidelines?
- What model contracts should you submit to BaFin?
You should also know that consultation regarding capital markets investments requires you to observe certain documentation laws. Money laundering, authentification (both are part of KYC - Know your customer) and risk management are further important points.
Your financial regulation lawyer in Germany
Our advisors are looking forward to addressing any question regarding financial regulation in Germany, including BaFin licenses.
You can contact us via e-mail (firstname.lastname@example.org) or by phone (+49 69 76 75 77 80).
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