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Some of these changes have been effective since the beginning of the year while others will come into effect as per 1 March, 2013.
Regulations pertaining to the supervisory structure
According to the 10 key points on the reform of national financial supervision, specific rules pertaining to macro-prudential supervision by the Bundesbank were to be established and the Bundesbank’s macro-prudential supervisory activities expanded. At the same time, the definition of the interface between macro- and micro-prudential supervision was to ensure a clear separation of tasks between Bundesbank and BaFin as well as a smooth exchange of information between the two. Furthermore, a structured system of collaboration between Bundesbank, BaFin and the Federal Government was to be established via the Financial Stability Commission (Ausschuss für Finanzstabilität), which has replaced the Standing Committee on Financial Market Stability (Ständiger Ausschuss für Finanzmarktstabilität).
The creation of the Financial Stability Commission (section 2 of the FinStabG) represents a core element of the new Act. The Financial Stability Commission will consist of representatives of the Bundesbank, the Federal Ministry of Finance (BMF) and BaFin. It will also include one representative of the Financial Market Stabilisation Agency (Bundesanstalt für Finanzmarktstabilisierung – FMSA) who will not have any voting rights. Due to the Bundesbank’s macro-economic and financial market expertise, section 1 of the FinStabG confers upon it the responsibility of contributing towards safeguarding financial stability. The Bundesbank is tasked with analysing all relevant factors in order to identify threats to financial stability, suggest respective warnings or recommendations for corrective measures and submit such warnings or recommendations to the Financial Stability Commission. This will place the Financial Stability Commission in a position to issue warnings and recommend corrective action if threats to Germany’s financial stability arise (section 3 of the FinStabG).
As regards cooperation between BaFin and the Bundesbank, section 5 of the FinStabG stipulates a duty to keep each other informed of any observations, findings and assessments that BaFin and the Bundesbankrequire to perform their respective functions. In addition, theBundesbank now has the right to obtain information from financial corporations if the information required to perform its functions cannot be obtained from BaFin or other authorities (section 6 of the FinStabG). Section 7 governs the confidentiality requirement applicable to the members of the Financial Stability Commission.
Additional competences for the Bundesbank
In reaction to the challenges of the financial crisis, the Financial Stability Act has established a macro-prudential supervisory system in Germany and conferred additional competences upon the Bundesbank to facilitate its supervision of financial market stability. Accordingly, the Bundesbank is now responsible for suggesting warnings and recommendations to ensure timely recognition and early intervention against any threats that may develop into a systemic crisis. Resolutions regarding such warnings and recommendations are passed by the members of the Financial Stability Commission at their quarterly meetings. The Commission is also tasked with defining concerted reactions to emerging threats to financial stability by issuing warnings and recommendations and publishing them if appropriate. The recipients of such warnings or recommendations are obliged to report on the implementation of respective measures.
The Commission thus ensures that a structured and transparent dialogue on financial stability issues takes place between the institutions relevant to the supervision and regulation of the German financial centre. Key information and findings on financial stability are gathered in one place and incorporated into relevant decisions.
Amendment of the FinDAG
The amendment of the FinDAG is also aimed at strengthening national financial supervision. It should be noted that BaFin’s integrated financial services supervision pursuant to section 4 of the FinDAG will remain unaffected. The amendments pertain to the payment structure fo rBaFin staff (sections 10a and 10b of the FinDAG) and the composition of BaFin’s Administrative Council (section 7 of the FinDAG).
Furthermore, a consumer advisory council has been set up and the complaints procedure for consumers and other customers of supervised enterprises as well as consumer protection organisations has been incorporated into the FinDAG (sections 8a and 4b) for the first time to ensure that consumer issues will play a larger role in BaFin’s supervisory approach. The regulations pertaining to cooperation between BaFin and the Bundesbank under the FinStabG has been complemented with an (escalation) mechanism in section 4a of the FinDAG in order to adopt a uniform approach to complex issues in ongoing supervisory activities.