After having stated that it will closely monitor the risk situation caused by the new coronavirus (SARS-CoV-2) with a view to potential reactions, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) has now taken initial steps to deal with the impact of the pandemic on the financial sector in Germany.
Relief for “less significant” credit institutions
On 12 March 2020, the European Central Bank (ECB) announced a number of temporary relief measures with respect to the capital and operational requirements applicable to “significant” credit institutions directly supervised by the ECB under the Single Supervisory Mechanism (SSM) established in the eurozone (see the related publication in our blog).
On the same day, BaFin published a notice that it will also apply these relief measures to “less significant” credit institutions that are not directly supervised by the ECB under the SSM rules.
Implementation of EBA recommendations
On 12 March 2020, the European Banking Authority (EBA) issued a statement setting out recommendations for mitigating the impact of COVID-19 on the European banking sector (cf. the related publication in our blog). As one of the key points, the EBA encouraged the national competent authorities to make full use of the flexibility already embedded in the existing regulatory framework where appropriate.
In its mentioned notice of 12 March, BaFin confirmed that it will take into account the recommendations of the EBA for its supervisory practice.
Transactions outside business premises / home office
Pursuant to BaFin’s circular 09/2017 (Mindestanforderungen an das Risikomanagement – MaRisk), the conclusion of transactions, as part of the trading activities by a credit institution or an investment firm, are only permissible outside of business premises if explicitly allowed by internal rules and with proper documentation of every transaction.
However, on 12 March 2020, BaFin published a press release stating that an institution may temporarily deviate from these strict rules for a “home office”-concept in a crisis. As part of the contingency plan, such a deviation may even be necessary in crisis situations: In case access to the business premises of the institution is difficult, alternative solutions have to be implemented in order to ensure business continuity. Any prohibition of transactions outside business premises in the internal rules of such institution needs to be expressly lifted to the extent conflicting with such “home office” concept. Any security measures and controls which are required may also be implemented electronically, according to BaFin.