Bank Rating – Normative Banking Regulation in the Financial Market Crisis

Books

Oliver Everling and Karl-Heinz Goedeckemeyer (publisher): Banking Rating – Normative Banking Regulation in the Financial Market Crisis, 2nd Edition, Wiesbaden 2015, Springer Gabler, http://www.springer.com, Copyright Springer Fachmedien Wiesbaden 2004, 2015, ISBN 978- 3-8349-4734-5, DOI 10.1007 / 978-3-8349-4735-2, eBook ISBN 978-3-8349-4735-2, 529 pages.

Particularly after the financial market crisis, the serious, sound assessment of the creditworthiness of banks is of particular importance. High-ranking experts from various perspectives (banking, auditing, commercial law firms, rating agencies, management consultancy) provide competent, useful assistance in this work. Since the first edition of this book, a plethora of topics has been added, particularly concerning the regulation of banks. Bank ratings are being influenced by state regulations, as hardly ever before. Thus, the focus of the contributions of this editorial work shifted to the resulting issues.

The content:

  • Assessment aspects of the business strategies of European banks
  • Methods of business assessment of banks
  • Interpretation of the bank accounting
  • Implications of ratings for the valuation of banks and bank rating systems
  • Overall bank management and credit risk management
  • Banking regulation
  • Rating and financial market communication

Oliver Everling und Karl-Heinz Goedeckemeyer (Herausgeber): Bankenrating – Normative Bankenordnung in der Finanzmarktkrise, 2. Auflage, Wiesbaden 2015, Springer Gabler, http://www.springer.com, Copyright Springer Fachmedien Wiesbaden 2004, 2015, ISBN 978-3-8349-4734-5, DOI 10.1007/978-3-8349-4735-2, eBook ISBN 978–3-8349-4735-2, 529 Seiten.

person dropping paper on box

Countercyclical Capital Buffer in the Election Year

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To avoid speculation about the state of banks and the economy in the election year, there are no more capital adjustments.

Bank capital should be accumulated when cyclical systemic risk is judged to be increasing, creating buffers that increase the resilience of the banking sector during periods of stress when losses materialise. Since the decision on the formation of equity capital is not left to the banks themselves, but is controlled by the German Federal Financial Supervisory Authority (BaFin), the decisions of BaFin are of high political importance and symbolism.

The countercyclical capital buffer (CCyB) is set every quarter by BaFin which takes into account recommendations of the AFS Financial Stability Committee and the European Systemic Risk Committee (ESRB) when making its decision. The CCyB is part of a set of macroprudential instruments, designed to help counter pro-cyclicality in the financial system.

Unfortunately, these measures themselves have a pro-cyclical effect. The capital requirements and their changes are themselves signals for the market. Exaggerated reactions on the part of market participants are possible, both in the event of easing as well as increased capital requirements.

In response to the corona pandemic, BaFin lowered the CCyB from 0.25 percent to 0 percent in April 2020 and has kept it there ever since. The amount BaFin will set the countercyclical capital buffer after the corona pandemic will largely depend on how the cyclical vulnerabilities and risks in the banking sector develop, writes BaFin: “It is currently not foreseeable when the pandemic will be over.”

In contrast, it is possible to predict when the general election in Germany will take place. The Federal Ministry of Finance is responsible for BaFin. Although being member of only the third strongest party in the German Bundestag, the Federal Minister of Finance is entering the election campaign as a candidate for Chancellor and the top candidate of the Social Democratic Party.

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BaFin’s decision shall help maintain the supply of credit and dampen the downswing of the financial cycle. The CCyB can also help dampen excessive credit growth during the upswing of the financial cycle. BaFin’s decision may therefore not reflect economic realities, but rather the need to keep the issue of the fragility of the economy and the vulnerability of banks out of the election campaign. Normally a quarterly review of the decision would be undertaken.

APIs Allow Next Generation Financial Services

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Application programming interfaces—or APIs—have already had a fundamental impact on the digital banking industry by creating grounds for an array of new financial products.

According to Marius Galdikas, CEO at ConnectPay, APIs can help further improve financial services, as they create the opportunity to ensure coherent multi-channel services and introduce personalized experiences, fostering repeat usage.

In the payments industry, an API is an intermediary which enables to securely transfer account data between payment service providers (PSPs) and third parties. It is an essential part of open banking, a concept based on open, yet secure access to financial information with the end goal of creating better products for consumers.

According to M. Galdikas, APIs are at the heart of any forward-thinking financial technology company focused on driving innovation. He outlined one example of how APIs can support online businesses to refine the customer experience.

“One crucial consideration for businesses is the consistency at which the services they provide are offered across different digital channels: ‘does it offer the same efficiency, speed, or transparency?’ Ensuring a coherent multi-channel experience may very well be the thing that gives the company that competitive edge. This coherence can be achieved by correctly utilizing APIs – a responsibility that falls upon the payment service provider supporting the business,” explained Galdikas.

“An API is the main element that allows a company to isolate services into something granular and adapt it, with ease, to different channels and platforms. For example, you can easily customize specific elements for different channels, thus creating a more personalized experience for the user, based on the devices used to access the service,” said Galdikas.

M. Galdikas noted that ConnectPay is also looking to utilize APIs by launching a new payment initiation service for their EU-residing merchant customers. The solution will enable them to securely collect funds from their customers’ bank accounts. For this matter, the company is teaming up with Sensedia – experts in managing complex API ecosystems. Outsourcing an API provider gives more room to focus on innovation, as more resources can be diverted towards the product, instead of building the system from the ground up.

Rating of Financial Institutions – Properly Assessing Banks and Financial Services Providers

Books

Zafer Diab and Oliver Everling (publisher): Ratings of Financial Institutions – Banks and Financial Services Correctly Assess, Wiesbaden 2016, Springer Gabler, Springer Fachmedien Wiesbaden, http://www.springer.com/, 217 Pages, ISBN 978-3-658- 04194-6, ISBN 978-3-658-04195-3 (eBook).

The financial crisis leaves a completely different banking landscape. In a very short time not only former big banks disintegrated, but completely different institutions formed from mergers and takeovers. Increased competition among banks is not only under the yoke of an unresolved sovereign debt crisis, but also under increased pressure from banking supervision and the next generation of financial services providers. Many business models were only possible through new information and communication technologies and await probation in practice. The legislation now covers every financial institution and places it under supervision. The book not only highlights the consequences of regulation and competition for banks’ credit rating, but also sets standards, criteria and procedures for assessing the existential risk of other financial institutions.

Zafer Diab und Oliver Everling (Herausgeber): Rating von Finanzinstituten – Banken und Finanzdienstleister richtig beurteilen, Wiesbaden 2016, Springer Gabler, Springer Fachmedien Wiesbaden, http://www.springer.com/, 217 Seiten, ISBN 978-3-658-04194-6, ISBN 978-3-658-04195-3 (eBook).

Click here to find more books supported by our company.

Next Generation Financial Services: Digital transformation and new services

Books

Oliver Everling and Robert Lempka (editors): Next Generation Financial Services: Digital Transformation and New Services, Frankfurt am Main 2020, Frankfurt School Verlag, 480 pages, ISBN (print) 978-3-95647-176-6.

The digital transformation of the financial industry is in full swing. On the one hand there are consolidation and cooperation processes between banks and fintechs as well as between fintechs among themselves, on the other hand new digital providers, services and products keep coming onto the market. These new offers open up strategic and market potential for the industry and generate new customer behavior. The entire industry is subject to constant change and a high degree of innovation on the part of both the provider and the customer.

The book presents this digital transformation process in the financial sector and describes various digital services and business cases. Established providers discuss their digital strategy, established fintechs describe their business models and new start-ups present their innovative products and services. The book thus provides a profound overview of the status quo and the further progress of digitization in the financial industry.

The authors come from the financial services industry, fintechs, consulting firms and academia. They give the book a high topicality and practical relevance. The book is aimed at those in the industry who are involved in digital strategy and product development and who are significantly driving the digital transformation of the financial industry.

Oliver Everling und Robert Lempka (Herausgeber): Finanzdienstleister der nächsten Generation – Digitale Transformation und neue Dienstleistungen. Frankfurt am Main 2020, Frankfurt School Verlag, 480 Seiten, ISBN (print) 978-3-95647-043-1.

Double-edged Strengthening of Banks’ Equity

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A few days after the European Central Bank and the German Federal Financial Supervisory Authority (BaFin), the European Systemic Risk Board (ESRB) is now recommending that distributions continue to be restrictive in view of the corona pandemic. General Board of the European Systemic Risk Board held its 40th regular meeting on December 15, 2020.

According to the ESRB, banks, investment firms, insurers and reinsurers should not make any distributions until the end of September 2021, unless they are extremely careful and observe the requirements of the responsible supervisory authorities. The ESRB advises them to set conservative thresholds and take into account the specifics of the individual financial sectors.

With its decision, the ESRB is moving away from its previous position of foregoing distributions across the board. One background is the prospect of a Covod-19 vaccine, which makes even more severe scenarios less likely. The General Board recognised the importance of distributions in enabling financial institutions to raise capital externally.

“The decision of the ESRB is a confirmation of our previous supervisory practice”, comments BaFin President Felix Hufeld. This also applies to the latest ECB decision on this issue. “We support the general appeal unreservedly and make binding decisions in individual cases – if necessary.” Only those companies are allowed to pay out that are sufficiently solid and that comply with the minimum legal requirements even under corona stress conditions.

Although the General Board recognised the importance of distributions in enabling financial institutions to raise capital externally, the question arises as to how government intervention in the dividend policy of financial service providers should not strain their ability to raise equity.

Since the reasons for and extent of such political interventions are difficult to predict for both investors and analysts, investments in banks are becoming less attractive. Since all of the above-mentioned organizations are aware of these implications, the question of whether nationalization of banks can be avoided must be investigated.

At first sight, the restriction on distributions strengthens the equity base, banks’ resilience and thus also the creditworthiness of financial institutions. However, rating agencies need to consider both short-term and long-term implications. The corona-related interventions make it difficult for the rating agencies to make their forecasts.

computer desk laptop stethoscope

Credit Rating Information Failed to Deliver

Performance, Read

AvP Deutschland GmbH is an example of a rating dilemma: The company is too small to belong to the group of companies closely monitored by recognized rating agencies automatically, and too large to be ignored as a risk.

In general, credit reference agencies only use the financial statements and other official information available from the registry courts. So also in the case of this company. Therefore, the last data of the annual financial statements available from the German Federal Gazette are more than 18 months old. As a financial service provider, the insolvency application can only be submitted with the approval of the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin).

Until recently, the company had comparatively good ratings therefore: Credit Index 2.5, Risk Score 70 and an International Score B, indicating a Probability of Default of only 0.34 %. The default risk was reckoned to be medium. The business connection was rated “acceptable”. By end of 2018, due to the existing profit and loss transfer agreement, equity remained unchanged at EUR 3,191 thousand. The capital structure is balanced; the equity ratio was 22.9% with constant equity (previous year 19.9%).

On September 14, 2020, BaFin appointed Ralf R. Bauer as a special commissioner at AvP Deutschland GmbH. BaFin has given him sole management responsibility. On September 15, 2020, the special commissioner filed for bankruptcy at the insolvency court of the Düsseldorf district court for AvP Deutschland GmbH. The annual average number of employees was 60 (based on the fiscal year from January 1 to December 31, 2018).

For public pharmacies, hospital pharmacies, medical supply stores and other service providers, AvP Deutschland GmbH takes on the billing of prescriptions to the statutory cost carriers, such as AOK, BEK, DAK, TK, etc. in the context of German statutory health insurance.

The situation regarding new functions of the “Elektronische Gesundheitskarte” (electronic health card) was still unaffected by changes in the year 2018. The company’s dependence on the development of legal framework conditions is considerable. The e-prescription must not become a plaything of lure offers, advertising terror and discount battles on the patient’s cell phone. Something like this is conceivable with “apps” that want to access them before redeeming the e-prescription and promise the patient supposed advantages. These can be online platforms or mail order data dealers, for example. The Patient Data Protection Act (PDSG) passed in summer 2020 is intended to exclude influencers and advertising in this context.

AvP Deutschland GmbH expected competitive market conditions in Germany to continue. The specific business risks were primarily in competition with other billing service providers. In addition, products such as the aid contract database, ScanAdhoc, in particular with Pharma-Control, but also other services such as a. Clearing and the Dialog Center worked on maintaining a technological and service-oriented role.

Fundamental risks lay in the default rate of the company’s customers. Should the company’s customers, due to a changed interest situation, decide not to carry out any more business in the area of ​​factoring, this leads to falling income and thus possibly to a worsening of the company’s financial situation.

For the company, due to the business model it operates, there were market price risks in the area of ​​loan interest from the refinancing banks. Given the interest rate level in 2018 and the market forecast, the company correctly expected no significant increase in market interest rates in the medium term. According to 2018 financial statements, liquidity risks were also not discernible to the management due to the regular monitoring of all incoming and outgoing payments as well as income and expenses.

By establishing a syndicated loan, the company had strengthened its cooperation with a banking consortium with a contract term of 3 + 1 years. The financial risks lay in the company’s high transaction volume and the variable interest rates on the billing accounts. Changes in interest rates had a direct impact on the amount of interest paid. This risk was countered by using interest rate hedges (SWAPs). The company saw essentially no default risks because the billing fees to be paid by the pharmacies can be taken directly from the incoming payments from the cost units on the billing account.

By May 31, 2019, in accordance with Section 322, Paragraph 3, Clause 1 of the German Commercial Code, the auditing company stated “that our audit did not lead to any objections to the correctness of the annual financial statements and the management report.”

The rating of group companies is particularly difficult. The interdependencies between companies can be complex. The accounting rules are not suitable for providing the information required for rating complicated corporate structures with sufficient up-to-date information.

Management Board Members Must Submit a Certificate of Good Conduct for Official Purposes

Certifications, Read, Registrations, Regulations

Depending on their nationality and place of residence, management board members must submit the original copy of a “certificate of good conduct for presentation to a German authority (certificate of good conduct for official purposes)” (document type “O”) issued by the Federal Office of Justice (Bundesamt für Justiz – BfJ). This document is issued in accordance with section 30 (5) of the German Federal Central Register Act (Bundeszentralregistergesetz – BZRG). Alternatively, it could be a “European certificate of good conduct for presentation to a German authority” in accordance with sections 30 (5) and 30b of the BZRG or certificates of good conduct equivalent to those named above, or certifications of reputation assessments performed by supervisory authorities in the country of residence after consultation with the relevant division of BaFin (“equivalent documents”).

The German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) provides information on what certificate is used to establish a bank management board member’s reputation rating in its Guidance Notice on management board members. This is pursuant to the German Banking Act (Kreditwesengesetz – KWG), the German Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz – ZAG) and the German Capital Investment Code (Kapitalanlagegesetzbuch – KAGB).

Management board members who have resided in different countries in the previous ten years must submit certificates of good conduct and relevant documents from each country. The relevant division of BaFin has to be provided with detailed information regarding any legal obstacles to their furnishment. If the relevant documents are already available, they have to be submitted to BaFin together with the other documents to be appended to the notification of intent. However, subsequent submission is also possible.

In countries in which certificates of good conduct are issued by a public agency, other documents may not be used as a substitute. The “certificate of good conduct for presentation to a German authority” should not be confused with the “extended certificate of good conduct” referred to in section 30a of the BZRG.

Section 30a of the BZRG determines the following: An extended certificate of good conduct is issued to a person on request, if the grant is provided for in statutory provisions with reference to this provision or if this certificate of good conduct is required for professional or voluntary supervision, care, education or training of minors or an activity which, in a manner comparable to letter a, is suitable for making contact with minors. Anyone who applies for an extended certificate of good conduct must submit a written request in which the person who requests the extended certificate of good conduct from the applicant confirms that the requirements are met.

Every person who has reached the age of 14 is given a certificate on the contents of the register concerning them on request (certificate of good conduct). If they have legal representation, this is also entitled to apply. The application must be submitted in writing to the registration authority in person or with an officially or publicly certified signature. When submitting the application, the identity and, in the case of legal representation, the power of representation must be proven. The applicant and their legal representative cannot be represented by an authorized representative when submitting the application. The registration authority receives the fee for the certificate of good conduct, keeps two fifths of it and pays the remaining amount to the federal treasury.

If the person making the application lives outside Germany, they can submit the application directly to the registry authority. Sending the certificate of good conduct is only permitted to the applicant. If the certificate of good conduct is requested to be presented to an authority, it must be sent to the authority immediately. The authority must allow the applicant to inspect the certificate of good conduct upon request. The applicant can demand that the certificate of good conduct, if it contains entries, is first sent to a local court designated by him for inspection by him. The registration authority must inform the applicant of this possibility in the cases in which the application is submitted to them. The district court may only grant the applicant person access to it personally. After inspection, the certificate of good conduct is to be forwarded to the authority or, if the applicant objects, to be destroyed by the local court. A foreign applicant can demand that the certificate of good conduct, if it contains entries, is first sent to an official representation of the Federal Republic of Germany designated by him for inspection.

The management board member must submit a request for a “certificate of good conduct for presentation to a German authority” and a “European certificate of good conduct for presentation to a German authority” to his or her local registration office (Meldebehörde) (section 30 (2) sentence 1 of the BZRG) or electronically to the Federal Office of Justice (section 30c of the BZRG). German nationals who reside outside the Federal Republic of Germany may apply directly to the Federal Office of Justice as the registration authority (section 30 (3) sentence 1 of the BZRG).

To allow BaFin to allocate the certificates of good conduct which it receives to the undertaking to which the relevant management board member is to be appointed, the name of the notifying undertaking and the BAK number have to be indicated as the reference. The BAK number is a six-digit number which BaFin assigns to each institution for internal classification purposes. It forms part of the BaFin reference number under which correspondence with an institution is registered and is listed in BaFin’s database of undertakings as the “ID”. BaFin is responsible for issuing and publishing a BAK number. The BAK number of an institute can be found on the website of the Federal Financial Supervisory Authority (www.bafin.de).

The certificate of good conduct for official purposes must be up-to-date, i.e. at the time of notification of intent it may not be more than three months old. The date of the document’s issue will be key for this purpose.

In the event that a certificate of good conduct is to be used within BaFin for further checks as to the reputation of a person, this document may not be more than twelve months old. The Federal Office of Justice will send both the “certificate of good conduct for presentation to a German authority” and the “European certificate of good conduct for presentation to a German authority” directly to BaFin. There is no need to request additional copies for the Deutsche Bundesbank or the auditing association, in the case of credit institutions that are members of one.

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Professional and Personal Requirements for Persons Appointed as Management Board Members

Certifications, Compliances, Read, Registrations, Regulations

The Federal Financial Supervisory Authority of Germany (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) provided a Guidance Notice on management board members pursuant to the German Banking Act (Kreditwesengesetz – KWG), the German Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz – ZAG) and the German Capital Investment Code (Kapitalanlagegesetzbuch – KAGB). The following introduces the approach how to check compliance with the law in the context of a forensic rating of financial institutions.

The methodology applies to all credit institutions and financial services institutions supervised by Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht- BaFin) under the Banking Act (Gesetz über das Kreditwesen – KWG) and all payment and electronic money institutions supervised by BaFin under the Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz – ZAG). It is also intended for undertakings supervised by BaFin under the Capital Investment Code (Kapitalanlagegesetzbuch – KAGB). The Banking Act, the Payment Services Supervision Act and the Capital Investment Code impose stringent requirements regarding the qualifications of a management board member. The major significance of these requirements is reflected in the fact that it is the claim of BaFin to issue a licence only when all conditions are met to conduct banking business and e-money business and to provide financial services and payment services.  The licences under the Investment Code, too, are only issued if the management board members fulfil the professional and personal requirements stipulated in the respective law. BaFin may withdraw this licence if these requirements are no longer fulfilled.

The European provisions were enshrined in the Banking Act through the ” Act on the Implementation of the Directive 2013/36/EU on Access to the Activity of Credit Institutions and the Prudential Supervision of Credit Institutions and Investment Firms and on the Regulatory Alignment to the Regulation (EU) No 575/2013 on Prudential Requirements for Credit Institutions and Investment Firms” (Gesetz zur Umsetzung der Richtlinie 2013/36/EU über den Zugang zur Tätigkeit von Kreditinstituten und die Beaufsichtigung von Kreditinstituten und Wertpapierfirmen und zur Anpassung des Aufsichtsrechts an die Verordnung (EU) Nr. 575/2013 über Aufsichtsanforderungen an Kreditinstitute und Wertpapierfirmen – CRD IVUmsetzungsgesetz) of 28 August 2013, Federal Law Gazette I p. 3395, and the ” Act Amending Laws Relating to the Financial Market” (Gesetz zur Anpassung von Gesetzen auf dem Gebiet des Finanzmarktes – FinMarktAnpG) of 15 July 2014, Federal Law Gazette I p. 934. Moreover, the recommendations of the European Banking Authority “EBA Guidelines on Internal Governance” (GL 44) of 27 September 2011 and the “EBA Guidelines on the Assessment of the Suitability of Members of the Management Body and Key Function Holders” of 22 November 2012 have been transposed into German law. The second edition of this Guidance Notice outlines the professional and personal requirements for persons appointed as management board members under the relevant supervisory legislation. It provides an overview of the associated notification obligations, including the documents which must be submitted. It considers in detail the expanded requirements for management board members resulting from the changes to the Banking Act.

The credit institutions which are members of a cooperative auditing association (genossenschaftlicher Prüfungsverband) or which are audited by the auditing body of a savings bank and giro association (Sparkassen- und Giroverband) are to send the notification and any documents to be appended via their association, together with an extra copy intended for that association. The role of the associations must be observed in Germany.

Since 4 November 2014, the European Central Bank (ECB) has served as the supervisory authority for significant German credit institutions within the scope of the Single Supervisory Mechanism (SSM). The ECB supervises these significant institutions on the basis of national supervisory legislation, except where European law is directly applicable. Significant institutions submit notifications concerning the appointment and resignation of management board members – including all of the documents to be appended – to BaFin and the Deutsche Bundesbank.

The European Central Bank is responsible for assessing the professional suitability, the reputation and the available time of a management board member and will notify the institution of the result of its assessment directly. This assessment is made on the basis of the provisions of the Banking Act. However, the ECB is not bound by an existing national interpretation or administrative practice.

The European Central Bank, BaFin and the Deutsche Bundesbank shall be notified of other activities of a management board member of a significant institution and of any direct participating interests. The notifications and all documents and declarations to be appended must be submitted in German. The following deviating provisions apply to significant institutions directly by the ECB. Where documents are not issued in German, a certified translation or a translation prepared by a publicly appointed or sworn interpreter or translator will be required in addition to the original version. The relevant BaFin division may waive the translation of English-language documents. Significant institutions directly supervised by the ECB may submit the notification as well as all documents to be appended in either German or in English. The notifications prescribed by the Banking Act, the Payment Services Supervision Act and the Capital Investment Code shall be submitted without delay. As a rule, BaFin will no longer assume that a notification has been submitted without delay if a period of four weeks has been exceeded following the decision made by the relevant body. BaFin may require further documents and information if this appears necessary in an individual case. BaFin will not assume the costs associated with the required documents.

On their websites, BaFin and the Deutsche Bundesbank provide the following forms which are to be used for the individual notifications and for the declarations to be made.

Banking Act

  • Personnel changes relating to management board members,
  • Details of reputation, available time and additional mandates,
    • Declaration concerning criminal proceedings and proceedings for administrative offences, decisions under trade law and insolvency or enforcement proceedings,
    • Declaration concerning familial relationships,
    • Declaration concerning business relationships,
    • Details of additional mandates as a management board member or as a member of administrative and supervisory bodies,
    • Details of available time,
  • Secondary activities of management board members,
  • Participating interests of management board members.

Capital Investment Code

  • Personnel changes relating to management board members,
  • Details of reputation,
    • Declaration concerning criminal proceedings and proceedings for administrative offences, decisions under trade law and insolvency or enforcement proceedings,
    • Declaration concerning familial relationships,
    • Declaration concerning business relationships,
  • Secondary activities of management board members,
  • Participating interests of management board members.

Payment Services Supervision Act

  • Details of reputation,
  • Secondary activities of management board members,
  • Participating interests of management board members,

An intention to make an appointment, its realisation, its withdrawal (Banking Act) or a change of this intention to appoint (Banking Act) a management board member shall be reported without delay. The institution or the KAGB undertaking must submit this notification. Management board members within the meaning of the Banking Act and the Payment Services Supervision Act are those natural persons who are appointed according to law, articles of association, articles of incorporation or a partnership agreement to manage the business of and represent an institution organized in the form of a legal person or a commercial partnership. Management board members within the meaning of the Capital Investment Code are those natural persons who are appointed according to law, articles of association, articles of incorporation or a partnership agreement to manage the business of and represent a capital management company as well as natural persons who actually manage the business of the capital management company without being formally appointed as management board members. This notification obligation also applies for the appointment of an acting management board member to fulfil the function of a management board member if the latter is unable to do so.

In its long-standing administrative practice, BaFin has refrained from forwarding appointment notifications submitted by the relevant association of auditors for credit cooperatives’ board members serving in an honorary capacity. However, notice must be provided of an intention to appoint a part-time management board member. Already the intention to appoint a management board member is subject to notification.

Basic documents

The following documents/declarations have to be appended to the notification:

  • Curriculum vitae,
  • Details of management board members’ reputation,
  • “Certificate of good conduct for presentation to a German authority”, “European certificate of good conduct for presentation to a German authority” or “equivalent documents” from another country,
  • Excerpt from the Central Trade and Industry Register,
  • Details of additional mandates as a management board member and in administrative and supervisory bodies,
  • Details of available time.


By submitting the information and declarations from the management board member which have to be appended to the notification, the notifying institution or the notifying KAGB undertaking confirms that the information submitted is accurate to the best of its knowledge. If the management board member who is to be appointed has been, or is already a management board member or a member of the administrative or supervisory body of an undertaking supervised by BaFin, all of the documents/declarations to be presented in connection with this notification have to be re-submitted. BaFin may waive this requirement in individual cases.

A curriculum vitae has to be appended to the notification of intent. This curriculum vitae must be complete and truthful and must be personally signed and dated. The curriculum vitae shall focus primarily on the positions held during the management board member’s professional career. For these individual positions, the CV has to indicate not only the year, but also the month in which this position began or ended. In the description of positions held, in particular details of this person’s powers of representation, his or her internal decision-making powers and the divisions within the undertaking overseen by him or her shall be provided. Job references for employment positions within the last three years prior to submission of the notification have to be appended to the curriculum vitae, if available. Within the scope of the Capital Investment Code and the Payment Services Supervision Act, job references must only be submitted as required by BaFin. The curriculum vitae has to include the following details:

  • surname, all first names,
  • birth namedate of birth,
  • place of birth,
  • place of residence,
  • nationality,
  • a detailed description of relevant education and training,
  • the names of all undertakings for which the management board member currently works or has previously worked,
  • details of the nature and duration of the relevant activity, including secondary
    activities.

If a management board member has resided outside Germany within the last ten years, the period and country in question must be indicated. If the principal place of residence of the management board member and his or her place of work did not lie within the same country, this also has to be indicated. This information is relevant for BaFin insofar as this affects the register excerpts which must be submitted.

The social credit rating is comprehensively checked: Details of the management board member’s reputation, a “Certificate of good conduct for presentation to a German authority”, “European certificate of good conduct for presentation to a German authority” or “equivalent documents” from another country, excerpt from the Central Trade and Industry Register, details of additional mandates as a management board member or in administrative or supervisory bodies (Banking Act), details of available time (Banking Act). Comprehensive additional regulations must be observed for these points.

Rating of Financial Institutions – Properly Assessing Banks and Financial Services Providers

Books

Zafer Diab and Oliver Everling (publisher): Ratings of Financial Institutions – Banks and Financial Services Correctly Assess, Wiesbaden 2016, Springer Gabler, Springer Fachmedien Wiesbaden, http://www.springer.com/, 217 Pages, ISBN 978-3-658- 04194-6, ISBN 978-3-658-04195-3 (eBook).

The financial crisis leaves a completely different banking landscape. In a very short time not only former big banks disintegrated, but completely different institutions formed from mergers and takeovers. Increased competition among banks is not only under the yoke of an unresolved sovereign debt crisis, but also under increased pressure from banking supervision and the next generation of financial services providers. Many business models were only possible through new information and communication technologies and await probation in practice. The legislation now covers every financial institution and places it under supervision. The book not only highlights the consequences of regulation and competition for banks’ credit rating, but also sets standards, criteria and procedures for assessing the existential risk of other financial institutions.

Zafer Diab und Oliver Everling (Herausgeber): Rating von Finanzinstituten – Banken und Finanzdienstleister richtig beurteilen, Wiesbaden 2016, Springer Gabler, Springer Fachmedien Wiesbaden, http://www.springer.com/, 217 Seiten, ISBN 978-3-658-04194-6, ISBN 978-3-658-04195-3 (eBook).

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Bank Rating – Normative Banking Regulation in the Financial Market Crisis

Books

Oliver Everling and Karl-Heinz Goedeckemeyer (publisher): Banking Rating – Normative Banking Regulation in the Financial Market Crisis, 2nd Edition, Wiesbaden 2015, Springer Gabler, http://www.springer.com, Copyright Springer Fachmedien Wiesbaden 2004, 2015, ISBN 978- 3-8349-4734-5, DOI 10.1007 / 978-3-8349-4735-2, eBook ISBN 978-3-8349-4735-2, 529 pages.

Particularly after the financial market crisis, the serious, sound assessment of the creditworthiness of banks is of particular importance. High-ranking experts from various perspectives (banking, auditing, commercial law firms, rating agencies, management consultancy) provide competent, useful assistance in this work. Since the first edition of this book, a plethora of topics has been added, particularly concerning the regulation of banks. Bank ratings are being influenced by state regulations, as hardly ever before. Thus, the focus of the contributions of this editorial work shifted to the resulting issues.

The content:

  • Assessment aspects of the business strategies of European banks
  • Methods of business assessment of banks
  • Interpretation of the bank accounting
  • Implications of ratings for the valuation of banks and bank rating systems
  • Overall bank management and credit risk management
  • Banking regulation
  • Rating and financial market communication

Oliver Everling und Karl-Heinz Goedeckemeyer (Herausgeber): Bankenrating – Normative Bankenordnung in der Finanzmarktkrise, 2. Auflage, Wiesbaden 2015, Springer Gabler, http://www.springer.com, Copyright Springer Fachmedien Wiesbaden 2004, 2015, ISBN 978-3-8349-4734-5, DOI 10.1007/978-3-8349-4735-2, eBook ISBN 978–3-8349-4735-2, 529 Seiten.

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Next Generation Financial Services: The New Digital Power of Customers

Books

Oliver Everling and Robert Lempka (Publisher): Next Generation Financial Services: The New Digital Power of Customers, 1st Edition Frankfurt am Main 2013, Frankfurt School Verlag, 462 pages, ISBN 978-3-940913-62-3.

The Internet and the digital revolution have changed society and the economy on an unprecedented scale. After industries such as publishing or retail have been fundamentally reoriented in recent years, the financial sector is still lagging behind in this development. The book shows how the financial industry is changing and what new business models and opportunities are emerging.

This book is about presenting trends in the financial industry and presenting new business models made possible by the digital revolution and the resulting strengthening of the customer. It identifies adaptation processes and changes that the financial sector faces not only through the potential of the Internet, but also through the use of a wide range of different end-user devices that bank customers of the past will use to communicate with their financial service providers. As a scientifically founded and practice-oriented compendium, the book offers concrete benefits for investors and decision-makers.

It will address internet industry readers as well as bankers and other financial service providers, as well as rating agencies, venture capitalists, seed financiers, business angels, investors, consultants, headhunters, academics and business journalists.

Oliver Everling und Robert Lempka (Herausgeber): Finanzdienstleister der nächsten Generation: Die neue digitale Macht der Kunden, 1. Auflage Frankfurt am Main 2013, Frankfurt School Verlag, 462 Seiten, ISBN 978-3-940913-62-3.

Legal Issues in Ratings

Books, News, Notching, Platforms, Procedures, Registrations, Regulations, Repositories

Ann-Kristin Achleitner and Oliver Everling (Editor): Legal Issues in Ratings: Fundamentals and Implications of Ratings for Agencies, Investors and Companies Advised, Betriebswirtschaftlicher Verlag Th. Gabler, Wiesbaden 1st edition November 2005, http://www.gabler-verlag.de, hardcover, 470 pages, ISBN 3-409-14314-9.

The issuing of ratings by external rating agencies as well as internal ratings are of increasing relevance for the refinancing processes as well as for investment decisions on the part of investors. The book outlines the main legal implications of ratings for agencies, investors and rated companies.

Ann-Kristin Achleitner und Oliver Everling (Herausgeber): Rechtsfragen im Rating: Grundlagen und Implikationen von Ratings für Agenturen, Investoren und geratete Unternehmen, Betriebswirtschaftlicher Verlag Dr. Th. Gabler, Wiesbaden 1. Auflage November 2005, http://www.gabler-verlag.de, gebundene Ausgabe, 470 Seiten, ISBN 3-409-14314-9.

Bank Rating

Books

Oliver Everling and Karl-Heinz Goedeckemeyer (publisher): Bank Ratings: Banks under Scrutiny, Dr. Th. Gabler, Wiesbaden 1st edition April 2004, http://www.gabler-verlag.de, hardcover, 581 pages, ISBN 3-409-12513-2.

There is a close correlation between the rating of a bank or savings bank by a rating agency and the rating created by a credit institution: Only if the bank is able to correctly assess and manage its own risk potential can it receive a positive rating from a rating agency. This is of central importance, because credit rating agencies de facto dictate to banks on what conditions they can place financial instruments on the international money and capital markets and obtain capital and thus fulfill their economic functions.

In this anthology, renowned experts give a practical insight into the process of bank rating, explain prerequisites for a good rating and explain instruments and methods of risk identification and control. The book also provides impulses for the theoretical discussion of the role of rating agencies.

Oliver Everling und Karl-Heinz Goedeckemeyer (Herausgeber): Bankenrating: Kreditinstitute auf dem Prüfstand, Betriebswirtschaftlicher Verlag Dr. Th. Gabler, Wiesbaden 1. Auflage April 2004, http://www.gabler-verlag.de, gebundene Ausgabe, 581 Seiten, ISBN 3-409-12513-2.