Banks and financial services providers

Authorizations may only be granted if certain requirements are met, such as under the following circumstances:

1. When an institution is established, it has to demonstrate that it is endowed with a minimum amount of initial capital, which will depend on the nature of its intended business. For investment banks, for example, the initial capital required is at least EUR 730,000, while for CRR credit institutions it is at least EUR 5 million. It is also possible for a non-German institution to apply for a license for a branch established in Germany. In this case, the minimum capital must be provided in the form of “dotation capital,” which is a sum of money put at the disposal of the branch in the same manner as equity capital.
2. Credit institutions, financial services institutions and investment firms that in the course of providing banking, financial and investment services are authorized to obtain ownership or possession of funds or securities of customers must have at least two senior managers (executive directors) who must be “fit and proper persons.” Being a “fit” person means that the persons concerned have acquired during their professional careers sufficient theoretical knowledge and practical experience to enable them to carry out their new jobs properly. The BaFin consults the Federal Central Register (Bundeszentralregister) for criminal offenses and the Central Trade Register (Gewerbezentralregister) for business offenses in order to verify whether they are “proper” (i.e., reliable) persons.
3. The applicant must also declare any holders of significant participating interests (10% or more) in the proposed institution and the size of any such interests. Any such persons must also be “proper” persons. If they are not, or if they fail to meet the standards required in the interest of sound and prudent management of the institution for any other reasons, the BaFin may refuse to grant the license.
4. In addition, the authorization application must contain a viable business plan indicating the nature of the proposed business, the organizational structure, and the proposed internal control systems. The BaFin checks whether the applicant is ready and able to take the necessary organizational measures to conduct their business in a proper manner.

Payment services and e-money Issuers

As part of the licensing procedure, both groups of institutions are required to submit a business model, a business plan with a forecast P&L and balance sheets for the first three financial years, a description of the measures required to fulfill the segregation requirements in relation to client monies of section 10 of the ZAG in the case of payment services firms and section 11a of the ZAG in the case of e-money issuers, as well as a description of the internal organizational structure necessary to ensure compliance with the applicable laws, a description of intended outsourcings, the use of agents and branch offices, and the participation in national and international payment systems.

As in the case of banks, financial services providers and investment firms, there are certain minimum initial capital requirements, which are between EUR 20,000 and EUR 125,000 for payment services providers (depending on the type of business) and EUR 350,000 for e-money issuers.

There are also “fit and proper” requirements for managers and owners of significant participating interest. In addition, the applicant must submit copies of constitutional documents and register excerpts as well as the name of its external audit firm.

Fund managers

The licensing procedure is a fully-fledged authorization process with requirements equivalent to the requirements for granting permission under article 8 AIFMD or article 6 of the UCITS Directive. The licensing procedure checks requirements, such as sufficient initial capital or own funds, fit and proper requirements for the directors, reliability of shareholders, and a proper organizational structure for the manager.

Credit service providers

The license requirements are similar to the licensing of other BaFin-regulated entities, i.e., the senior managers must be "fit and proper," and among other things, a business plan must be submitted which not only describes the planned business activities, but also the organizational structure and the measures taken to comply with the organizational duties set out in section 14 KrZwMG. The company must also provide evidence of a segregated bank account if it intends to accept funds from borrowers as part of its business activities. There are no minimum regulatory capital requirements for credit service providers.

Insurance and reinsurance undertakings

Similar to banks and financial service providers, insurance and reinsurance undertakings have to demonstrate that they meet a number of requirements in order to obtain a license, in particular:

1. An insurance or reinsurance undertaking with its registered seat in Germany has to be endowed with a minimum amount of eligible own funds, which cover at least the statutory minimum capital requirement (depending on the nature of its intended business) and the solvency capital requirement (to be calculated on the basis of the balance sheet and profit and loss account estimates for the first three financial years), whichever is greater. With the exception of certain small businesses, the absolute floor for the minimum capital requirements currently ranges between EUR 1.3 million for captive reinsurance, EUR 2.7 million for health and property insurance, EUR 3.9 million for reinsurance and EUR 4 million for life and third party liability insurance. In addition, the (re-)insurance undertaking also has to set up an organization fund that is available to cover the expenses necessary for the establishment of the administration and the network of agents.

   If a non-EEA insurance undertaking applies for a license for a branch established in Germany, the solvency capital requirement has to be determined based on the business of the German branch. The underlying assets have to be located in Germany (at least in an amount covering the minimum capital requirement) and in the EEA and they must not be below 50% of the absolute floor for the minimum capital requirements applicable in case of an insurance license. Amounts of at least 25% of the absolute floor for the minimum capital requirements have to be placed on a bank account or deposit that requires BaFin's approval for any transaction. 

2. All members of the management board and of the supervisory board, as well as all other persons who effectively run the (re-)insurance undertaking and the responsible actuary (where required) as well as the additional persons who perform other key tasks, must be fit and proper. Fitness requires professional qualifications, knowledge and experience in the area of insurance business, which typically presupposes, in case of lead positions, having been in a leading role at a comparable insurance undertaking for at least three years. The properness requirement can be in doubt in case of past supervisory measures, relevant criminal or administrative offenses or conflicts of interest.
3. The identity of all direct and indirect holders of significant participating interests (of 10% or more) has to be disclosed together with the size of their participating interest; they also have to fulfil the requirements of a "proper" person.
4. In addition, upon application for a license, the (re-)insurance undertaking has to submit a viable business plan to BaFin, outlining, inter alia, the details of the organizational structure of the undertaking, the territory of the envisaged business operations, the articles of the corporate undertaking, the classes of insurance, the basic feature of reinsurance and retrocession, the own funds, the organization fund, estimates of the balance sheet and the profit and loss account for the first three financial years as well as estimates of the solvency capital and the minimum capital requirement. Besides such business plan, the applicant also has to submit evidence for the fulfilment of the fit and proper requirements, it has to provide information about enterprise agreements, about contracts on the outsourcing of important functions or activities and about direct and indirect holdings of significant participating interest and other close links.
5. In case of mandatory (compulsory) insurance and health insurance, the insurance undertaking also has to submit a copy of the general insurance terms to BaFin.
6. Reinsurance undertakings may only apply for a license for the reinsurance business. In the area of direct insurance, the business of life, health and non-life insurance undertakings always has be separated, so direct insurance undertakings who want to cover more than one of those areas have to apply for separate licenses.

(Re-)Insurance intermediaries

In order to obtain a license as (re-)insurance intermediary in Germany, the applicant has to submit the following documents to the competent IHK:

1. Evidence for the fulfilment of the fit and proper requirements of its management;
2. Evidence for the existence of a mandatory professional liability insurance policy of the intermediary according to the specific requirements of German law;
3. Evidence for the professional qualification of the intermediary (or of a representative of the intermediary in charge of supervising the employees carrying out insurance mediation).

The fit and proper requirements are typically fulfilled by a clean excerpt from the registry of debtors and from the trade register. In order to fulfil the professional qualification requirements, the intermediary or its representative has to pass a particular qualification exam in the area of insurance offered by the IHKs in Germany or the intermediary has to possess another professional exam that is recognized as equivalent (e.g. an exam as insurance salesperson).