Provision of Financial Services – Formation of a Bank – Bank License Germany

Formation of a Bank –  Bank License Germany

Bank License Germany (Setting up a German bank – financial institution taking deposits as defined by § 1 Para 31 of the German Banking Law)

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Bank License Germany: Setting Up a Bank in Germany

Our legal office supports clients when setting up a German bank (financial institution taking deposits as defined by § 1 Para 31 of the German Banking Law) and, consequently, when setting up a securities trading bank, an investment bank or institutions operating a business trading in E-money.

The legal fees depend on the time and effort involved. We will gladly send you a fee calculation.

As a rule, a German PLC is set up as  a “company of the bank”. The government charges (registration fees) come to between 5,000 and 30,000 euros.

In addition to the fees solely associated with setting up the bank and registration the following costs/services may also be relevant:

• banking contract law : drawing up of the terms and conditions of the business (General Terms and Conditions), agreements between customers and the bank, loan agreements
• online banking system and electronic interfaces
• SWIFT Code, IBAN: apppointment with SWIFT
• establishing links with credit card providers, Visa, MasterCard etc..
• participation in the deposit protection fund
• establishing a link with a recognised firm of auditors (statutory regulation, e.g. Moodys)
• search for suitable managers for the German bank (personal and professional suitability in accordance with the Banking Act)
• suitable business premises for the bank in Germany

A German bank is subject to the Basel II rules, in future Basel III. We support the client when it comes to the selection of a registered ratings agency. The annual fees payable to the ratings agency come to approx. 38,000.00 euros.

In addition, we support clients in arriving at the ideal configuration from the point of view of tax law, e.g. the setting up of an intermediate holding company.

Preconditions for the Issue of a Licence

As a result of § 33 Para 1 Clause 1 of the German Banking Law that governs the compulsory refusal of a licence, the Federal Institute may only issue a licence if the following preconditions are fulfilled:

• The necessary funds for the operation of the business must be available within the country. In particular, there must be sufficient start-up capital.
• In the case of financial institutions taking deposits, that is companies that intend to accept deposits or other repayable monies from the public and to operate a loan business, as well as in the case of central counterparties as defined by § 1 Para 31 of the German Banking Law, start-up capital of at least 5 million euros is required (§ 33 Para 1 Clause 1 No. 1d of the German Banking Law).
• In the case of securities trading banks the start-up capital is at least 730 000 euros (§ 33 Para 1 Clause 1c in conjunction with § 1 Para 3d Clause 3 of the German Banking Law.
• In the case of companies that only operate a business trading in E-money the start-up capital is at least 1 million euros (§ 33 Para 1 Clause 1 No. 1e of the German Banking Law).
• The start-up capital of an investment trust company must be at least 730,000 euros in accordance with § 11 Para 1 No. 1 of the InvG (Investment Act); in the case of the provision of certain ancillary services or the administration of special property assets this sum increases to at least 2.5 million euros.
• In addition to these minimum statutory requirements the following special requirements made of the start-up capital have developed out of the administrative practice of the Federal Institute:
• for the issuing of a licence to operate a mortgage bank start-up capital of at least  25 million euros is normally required
• for the setting up of a savings bank start-up capital of at least 15 million euros is normally required.
• for the issuing of a licence that is restricted to the operation of a guarantee business start-up capital of at least 1.5 million euros is required. If the guarantee business is operated exclusively through counter-securities from the public purse, liability capital amounting to at least 500 000 euros is required.

The requirements that are to be made of sufficient start-up capital are assessed in accordance with § 33 Para 1 Clause 1 of the German Banking Law in conjunction with § 10 Para 2a Clause 1 Nos. 1 to 6 of the German Banking Law. According to this, the start-up capital must consist of core capital composed of several equity capital components which are variously defined according to the specific nature of the financial institution under company law. A crucial characteristic in relation to the core capital is that it is freely availaible without limit of time and does not come from borrowing.

The Federal Institute reserves the right  to decide, on a case by case basis, whether the start-up capital in the amount of the above-mentioned sums is also actually sufficient and meets the actual situation of the new institution.

• There must be a least two professionally suitable and reliable managers available that are not just available to the institution in an honorary capacity (cf. §§ 32 Para 1, 33 Para 1 Clause 1 Nos. 2, 4 and 5 of the German Banking Law). At the same time, there must be no facts, as a result of which there are doubts as to the personal reliability of the applicant or a manager (cf. § 33 Para 1 Clause 1 No. 2 of the German Banking Law). Facts that may give rise to such doubts are, for example, the commission of criminal offences involving assets and/or property (such as disloyalty, deceit), the breaching of statutory regulatory provisions, in particular from the field of commercial, industrial, competition or tax law, or if the applicant has shown in his private or business conduct that sound business management cannot be expected of him.

The professional suitability of the managers requires, in accordance with § 33 Para 2 Clause 1 of the German Banking Law, that they have a sufficient degree of theoretical and practical knowledge of the banking operations concerned as well as experience of management. Professional suitability to manage a financial institution can normally be assumed where there is evidence of three years’ working in a managerial capacity for a financial institution of comparable size and type of business (§ 33 Para 2 Clause 2 of the German Banking Law). Anyone who was employed as part of the management of a financial institution or at least in a responsible position directly below managerial level must be regarded as having worked as a manager in this connection. However, meeting the assumed rules is neither a necessary precondition for a licence nor evidence of professional suitability, i.e. it can also be achieved in other ways. Therefore, professional suitability is the subject of an individual examination that takes in all the circumstances of each individual case and that takes into account all the special characteristics of the financial institution in question.

• The owner or the legal representative or partner with personal liability of a company that holds a significant stake in the financial institution (§ 1 Para 9 of the German Banking Law) must satisfy the demands made in the interests of the sound and prudent management of the financial institution. This requires, in particular, that the owner of the significant stake is reliable (§ 33 Para 1 Clause 1 No. 3 of the German Banking Law). Unreliability must also be assumed, in the case of doubt, if facts justify the assumption that he has come up with the funds raised by him for the acquisition of the significant stake through a transaction that objectively satisfies the facts constituting a criminal offence  (§ 33 Para 1 Clause 1 No. 3 in conjunction with § 2c Para 1a Clause 1 No. 1 partial clause 2 of the German Banking Law).
• The head officeof the financial institution must be in the country (§ 33 Para 1 Clause1 No. 6 of the German Banking Law).
• The institution must be prepared to or in a position to make the necessary organisational arrangements for the orderly operation of the businesses for which the licence has been applied for (§ 33 Para 1 Clause 1 No. 7 of the German Banking Law).

Overview of Third Party Costs within the Context of Setting Up a Bank in Germany

The following costs/fees are incurred, as a rule, within the context of applying for a bank licence. The present overview serves to give general information and guidance.

ETC has been asked for these costs and they have been listed to the best of our knowledge. Nevertheless, ETC assumes no responsibility for the accuracy of the information. The information is given subject to any change over which ETC has no influence.

The amounts in each case are to be paid directly by the client to those third parties involved.

SWIFT- IBAN Code

Typical modules to connect to SWIFT and get a BIC:

1. The Alliance Kits

The Alliance Kits pricing scheme consists of a one-time fee and an annual maintenance fee.

The modules vary by control, integration and solution:

• Control: do you want to use a private or shared infrastructure connectivity model?
• Integration: do you need back-office integration or is manual message entry sufficient?
• Complete solution: do you want to use a messaging interface from SWIFT or from a partner?

2. Alliance Lite

Alliance Lite is available in two different pricing models:

• Flat fee: 850 EURO all-inclusive fee per month, for up to 4,000 items sent or received per month. Above that, additional items will be charged at 1 EURO per item.
• Pay as you go: 200 EURO fee per month, and 1 EURO per item sent or received.

An item is 1 message, or 1 FileAct file chunk of 100 KB

These fees are all-inclusive and include:

• your own BIC code, and membership of SWIFT
• a set of 10 USB hardware security tokens
• a CD-ROM with the driver for the tokens, and the AutoClient software
• access to Alliance Lite from browser as well as AutoClient
• online Alliance Lite training
• Alliance Lite documentation
• SWIFT User Handbook (UHB), document
• online access to the full SWIFT User Handbook (UHB), including SWIFT Standards Message Reference Guides
• access to the BICPlusIBAN directory
• PKI certificates, certified by SWIFT
• award-winning SWIFT Standard support
• access to future Alliance Lite software updates

All packages require being a member of SWIFT.