BaFin

Topic BaFin Financing Financing

BaFin covers its expenditure entirely through its own cost allocations, fees and reimbursements. It receives no funding from the federal budget. BaFin raises the funds required to cover its costs from the undertakings it supervises instead.

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I. Introduction

The information below should provide you, as a supervised undertaking with an interest in BaFin’s activities, with an overview of how the financial supervisory authority is financed. For undertakings subject to supervision, non-binding information on the charging of costs to be expected as well as detailed information on cost allocation can also be found here. The relevant statutory provisions may be viewed under "Data & Documents".
BaFin finances its expenditure entirely out of its own income. This means that it receives no funding from the federal budget. Instead, BaFin raises the funds required to cover its costs from the undertakings it supervises. The legal foundation for this is the German Act Establishing the Federal Financial Supervisory Authority (Gesetz über die Bundesanstalt für Finanzdienstleistungsaufsicht – FinDAG).
Pursuant to section 13 (1) of the FinDAG, BaFin's sources of funding consist primarily of:

  • fees (section 14 of the FinDAG),
  • separate reimbursements (sections 15 and 17c of the FinDAG) and
  • cost allocations (section 16 et seqq. of the FinDAG)

The actual amount of fees is calculated in accordance with the German Regulation on the Imposition of Fees and Allocation of Costs Pursuant to the FinDAG (Verordnung über die Erhebung von Gebühren und die Umlegung von Kosten nach dem Finanzdienstleistungsaufsichtsgesetz – FinDAGKostV).

In certain circumstances, you, as an undertaking under BaFin's supervision, may also incur other costs, the most important of which are described briefly below.

  • Firstly, these are the so-called "costs in the wider sense". What is meant by this are any costs arising as a result of the execution of enforcement measures, especially coercive penalty payments, and the imposition of fines where administrative offences are committed.
  • Secondly, undertakings must bear the costs arising as a result of auditors and other experts being called in or undertakings meeting their statutory disclosure and reporting requirements. However, these costs are not charged by BaFin but are payable on the basis of a private-law agreement between the undertaking and the auditor(s) or expert(s) in each case. For that reason BaFin can provide no information on the charges that undertakings might expect to have to pay.
  • Finally, there are also the costs of the deposit guarantee and compensation schemes that credit institutions and financial services providers are required by law to be members of. These costs are not charged by BaFin either. If required, further information may be obtained on the websites of the German Banking Industry Committee (Deutsche Kreditwirtschaft – DK) and the Compensatory Fund of Securities Trading Companies (Entschädigungseinrichtung der Wertpapierhandelsunternehmen – EdW).

II. How BaFin is financed (in detail)

1. Fees (section 14 of the FinDAG)

The fees in question are charges under public law which are imposed for the availing of administrative services. Usually, fees are charged for the granting of a special authorisation or of an exemption. However, fees are not only imposed for specific services requested. Certain administrative services may also be subject to a fee even if they are not requested by the financial services providers but are nonetheless incurred in their area. For example, under section 3 (3) of the FinDAGKostV a fee must be paid by a credit institution if BaFin withdraws authorisation from the institution pursuant to section 35 (2) of the German Banking Act (Kreditwesengesetz – KWG).

The legal bases for the imposition of fees are primarily:

  • the FinDAGKostV,
  • the German Regulation on Fees under the Securities Acquisition and Takeover Act (WpÜG Fees Regulation),
  • the German Regulation on the Imposition of Fees under the Securities Prospectus Act (Wertpapierprospektgebührenverordnung – WpPGebV) and
  • the German Regulation on Fees Payable for Official Acts regarding Investment Prospectuses under the Capital Investment Act (Vermögensanlagen-Verkaufsprospektgebührenverordnung – VermVerkProspGebV).

1.1 Fees imposed under the FinDAGKostV

Part 1 (sections 1 - 3) and the appendix (schedule of fees) to section 2 (1) of the FinDAGKostV contain the applicable provisions on fees.

The core provision is section 2 of the FinDAGKostV, which refers to the schedule of fees. The different official acts subject to a fee are listed numerically in the schedule of fees. For example,

  • no. 1.1 regulates fees for official acts performed under the KWG,
  • no. 5 regulates fees imposed under the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG) and
  • no. 6 regulates fees imposed under the German Insurance Supervision Act (Versicherungsaufsichtsgesetz – VAG).

It is recommended to first examine the first digit with a view to the area for which an official act is desired. The respective service subject to a fee can be found under the other digits.
In addition, part 1 of the FinDAGKostV also provides for the possibility of imposing fees in special circumstances. For example, pursuant to section 3 BaFin imposes fees for the rejection of an official act, in cases where a request is withdrawn for the execution of an official act, for the withdrawal or revocation of an official act as well as for the repudiation of an objection according to the provisions of sections 2 to 5.

1.2 Fees imposed under the WpÜG Fees Regulation

In addition, BaFin imposes fees and charges in order to cover the administrative costs for actions taken under the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz – WpÜG) (section 1 of the WpÜG Fees Regulation). The regulation first lists the individual actions subject to fees (section 2) before then determining the respective fee amount in each case (section 4).

1.3 Fees imposed under the WpPGebV

BaFin also imposes fees for official acts under the German Securities Prospectus Act (Wertpapierprospektgesetz – WpPG) (section 1 of the WpPGebV). The individual official acts subject to a fee as well as the rates for these fees can be found in a schedule of fees attached to the regulation.

1.4 Fees imposed under the VermVerkProspGebV

Furthermore, BaFin imposes fees for official acts under the German Prospectus Act (Verkaufssprospektgesetz – VerkProspG) (section 1 of the VermVerkProspGebV). The individual official acts subject to a fee as well as the rates for these fees are determined here, too, on the basis of a schedule of fees attached to the regulation.

2. Separate reimbursement (sections 15 and 17c of the FinDAG)

The costs associated with a particularly expensive activity carried out for an individual undertaking are to be reimbursed separately by the latter. The relevant circumstances are listed in the act (section 15 (1) and section 17c of the FinDAG) and mostly relate to on-site inspections at the respective undertaking.
It should be noted that BaFin is to be reimbursed not only for the costs of its own staff deployed for the particular activity but also for the personnel and material expense incurred by the persons and institutions, the services of whom/which BaFin avails itself of in order to perform its duties. In particular, these include auditors as well as staff of the Deutsche Bundesbank.

3. Cost allocation (section 16 et seqq. of the FinDAG)

All provisions on BaFin's cost allocation have been laid down in the FinDAG since 1 January 2013. The previous provisions on cost allocation included in the FinDAGKostV were transferred to the FinDAG and have therefore acquired full force of law (section 16 et seqq. of the FinDAG).

The cost allocation, which must be imposed annually, usually constitutes the largest financial burden for the supervised undertakings. Insofar as BaFin's costs are not covered by fees or by "separate reimbursement", they have to be apportioned on a pro rata basis to all the undertakings under its supervision (section 16 of the FinDAG).

In order to cover its current year expenditure, each year BaFin levies an advance payment that is payable in two equal instalments by 15 January and 15 July. In the following year, the actual costs incurred are

  • determined,
  • apportioned among the individual undertakings subject to the cost allocation and
  • offset against the advance payments already made.

3.1 Determining the costs for the individual areas of supervision

For each undertaking subject to the cost allocation BaFin determines the relevant allocation amount on the basis of the annual statement of accounts that BaFin produces for the cost allocation year in question and that is assessed by the Administrative Board (section 16k (2) of the FinDAG). The annual statement of accounts contains a breakdown of the corresponding income and expenditure. The cost allocation year is the budget year for which the costs are to be reimbursed (section 16a (3) of the FinDAG).

Section 16b of the FinDAG provides an overview of how allocable costs incurred by BaFin are calculated.

BaFin deducts income from fees and "separate reimbursement" from the costs of the relevant area of supervision in each case (section 16b (4) of the FinDAG). Shortfalls or overpayments on the cost allocation from previous cost allocation years must also be added or deducted, as appropriate, on a category basis (section 16c of the FinDAG).

3.2 Calculation of the cost allocation within the area of supervision

When the costs for the particular area of supervision have been established, these costs are apportioned within the individual areas. To this end, the FinDAG provides a finely-structured apportionment system. It makes allowances for the financial capacity of the undertakings subject to supervision and is intended not to impose a disproportionate cost burden on them.

We should like to point out here that you, as an undertaking subject to supervision, may also in principle be liable for the allocation amounts of more than one area of supervision (section 16d sentence 2 of the FinDAG). It is therefore possible, for example, for credit and financial services institutions to be subject to cost allocations for both the "Banking and other financial services" and the "Securities trading" areas of supervision.

Insurance undertakings may at the same time also act as issuers and thus be subject to cost allocations for both the "Insurance" and "Securities trading" areas of supervision.

3.2.1 Area of supervision: "Banking and other financial services"

In the area of supervision "Banking and other financial services", credit institutions, financial services institutions, payment institutions, asset management companies, externally managed UCITS investment stock corporations, liquidation institutions under federal law as well as undertakings domiciled abroad but with branches in Germany (section 53 (1) sentence 1 of the KWG) must pay the allocation amounts (section 16d in conjunction with section 16e of the FinDAG).

In order that the individual categories of institutions only bear the costs attributable to them, within the area of supervision the costs are recorded according to the following categories:

  • credit and financial services institutions,
  • factoring and financial leasing companies,
  • liquidation institutions,
  • asset management companies and externally managed UCITS investment stock corporations.

Costs that are not directly attributable to one of these categories but are attributable to the area of supervision are also recorded separately and apportioned among the categories within the scope of an overheads cost allocation.
The cost allocation liability is for the cost allocation year in which an undertaking subject to cost allocation was subject to supervision by BaFin under the relevant supervisory legislation (e.g. the KWG). The start- and end-point of the authorisation are decisive here. However, the cost allocation liability exists even if the conditions were not met during the whole year (section 16e (4) of the FinDAG). In this case, the cost allocation liability is calculated on a pro rata basis according to the number of months or the assessment base is calculated on a pro rata basis (section 16f (2) no. 3 and (3) of the FinDAG).

3.2.1.1 Assessment base (allocation formula)

In order to be able to apportion costs, there must be an assessment base. This is defined in section 16f (1) no. 1 and no. 2 of the FinDAG for credit and financial services institutions, payment institutions, liquidation institutions under federal law as well as asset management companies and externally managed UCITS investment stock corporations.

3.2.1.1.1 Assessment base for credit and financial services institutions, including pure leasing and factoring companies

For credit and financial services institutions, payment institutions as well as liquidation institutions, the assessment base is the ratio of the balance sheet total of the individual undertaking subject to the cost allocation to the aggregate total of the balance sheet totals of all undertakings subject to the cost allocation in the category (section 16f (1) no. 1 of the FinDAG). With the exception of the liquidation institutions, it is the balance sheet figures for the financial year preceding the cost allocation year that are relevant. This means that for cost allocation year 2016, for example, the balance sheet figures for 2015 are used. In the case of the liquidation institutions, it is the balance sheet for the financial year ending in the cost allocation year that is relevant.

3.2.1.1.2 Reduction of the assessment base (balance sheet total to be applied)

If certain conditions are met, BaFin also bases the calculation of the assessment base on a different balance sheet total. Section 16f (2) sentence 1 of the FinDAG lists six cases in which the assessment base can be reduced.

  • Where the balance sheet shows more than one-fifth of the total as being trust business within the meaning of section 6 of the German Regulation on the Accounting of Banks and Financial Services Institutions (Kreditinstituts-Rechnungslegungsverordnung –RechKredV), the balance sheet total less the amounts relating to the trust business will apply (no. 1a).
  • Where the activity requiring authorisation is assessed under section 2 (3) or (6) sentence 2 of the KWG, that fraction of the balance sheet will be applied which corresponds to the ratio of the banking business conducted or financial services provided by these institutions or establishments and undertakings which are not typical of their normal business to their total business (no. 1b).
  • Where more than one-fifth of the business conducted is non-bank, non-financial or non-payment services business, that fraction of the balance sheet will apply which corresponds to the ratio of the business or financial services requiring authorisation to the total business (no. 1c).
  • In the case of sole traders, the balance sheet total will be reduced by a notional director's salary, which is limited to the net profit for the year (no. 1d).
  • In the case of undertakings which commence their business activity in the cost allocation year, that balance sheet total will apply which was shown in the business plan for the first trading year that has to be presented in accordance with section 32(1) sentence 2 no. 5 and sentence 3 of the KWG in conjunction with section 14 (7) No.1 of the German Reports Regulation (Anzeigenverordnung) before commencement of operations (no. 2).
  • Where the conditions for cost allocation liability were not met for the whole year, a fraction of the balance sheet total as determined will be applied. The fraction will correspond to the ratio of the months commenced in which the liability to cost allocation existed to the number of months in the cost allocation year (no. 3).

In the first four of the aforementioned cases the balance sheet total will be reduced only at the request of the undertaking subject to the cost allocation. To that end, the relevant conditions must be substantiated by appropriate documentary evidence by no later than 1 June of the year following the cost allocation year. Grounds that are presented late will not be taken into account. This means that any application for a reduction in respect of cost allocation year 2016 must have been received by BaFin by 1 June 2017.

Apart from that, institutions under supervision have to notify BaFin of their balance sheet totals – certified by auditors – by 30 June of the year following the cost allocation year (section 16f (4) of the FinDAG). Otherwise, BaFin will estimate the balance sheet total and set the cost allocation amount on the basis of the estimated data (section 16f (5) of the FinDAG). However, BaFin may, upon request, also grant an extension of up to one month.

3.2.1.1.3 Assessment base for asset management companies and externally managed UCITS investment stock corporations

In the case of asset management companies and externally managed UCITS investment stock corporations, the assessment base is the value of the investment funds managed by the asset management companies and the assets managed and invested by externally managed UCITS investment stock corporations for collective investment. The sum total of the values for the individual undertaking subject to the cost allocation is placed in proportion to the aggregate amount of the value attributable to all undertakings subject to the cost allocation (section 16f (1) no. 2 of the FinDAG.

3.2.1.2 Minimum amounts

The supervised undertakings will in any event have to pay particular minimum amounts, however. For the supervisory area "Banking and other financial services", the following minimum amounts laid down in section 16g (1) of the FinDAG apply:

  • a basic EUR 4,000 for all credit institutions with the exception of securities trading banks,
  • in derogation of which, EUR 3,500 for credit institutions with a balance sheet total under section 16f of the FinDAG of EUR 100 million or less,
  • EUR 2,500 for housing companies with a savings scheme (cf. no. 1a),
  • EUR 3,500 for financial services institutions with an authorisation under section 1 (1a) sentence 2 nos. 1, 1c, 2, 3 or 11 of the KWG (= investment broking, placement business, contract broking, portfolio management, investment management) where the authorisation allows for the undertakings to acquire ownership or possession of clients' funds or securities,
  • EUR 3,500 for financial services institutions with an authorisation under section 1 (1a) sentence 2 no. 1b of the KWG ("operation of a multilateral trading facility") or section 1 (1a) sentence 2 no. 4 of the KWG (= proprietary trading),
  • EUR 3,500 for financial services institutions with an authorisation under section 1 (1a) sentence 2 no. 11 of the KWG, if the authorisation includes permission to trade for their own account,
  • EUR 3,500 for securities trading banks within the meaning of section 1 (3d) sentence 3 of the KWG (cf. no. 1b),
  • EUR 2,500 for financial services institutions with an authorisation under section 1 (1a) sentence 2 nos. 1, 1c, 2, 3 or 11 of the KWG (= investment broking, placement business, contract broking, portfolio management, investment management) where the authorisation does not include permission to acquire ownership or possession of clients' funds or securities,
  • EUR 2,500 for financial services institutions with an authorisation under section 1 (1a) sentence 2 no. 1a (investment advice),
  • EUR 1,300 for financial services institutions with an authorisation under section 1 (1a) sentence 2 no. 5 or no. 7 of the KWG (=non-EEA deposit broking, foreign currency dealing) and for institutions within the meaning of section 1 (2a) of the German Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz – ZAG) (= payment institutions, electronic money institutions) (cf. no. 1d and no. 2),
  • if in the cases of nos. 1b to 1d (does not therefore apply for financial services institutions which only conduct factoring and financial leasing business) the balance sheet total of an undertaking does not exceed EUR 100,000, the minimum amount for this undertaking is in each case reduced by a half (cf. no. 1e),
  • EUR 7,500 for asset management companies and externally managed UCITS investment stock corporations (cf. no. 3).

Under certain conditions, these minimum amounts can be raised further. This affects, however, only those financial services institutions and securities trading banks referred to in section 16g (1) sentence 1 nos. 1b to 1d of the FinDAG which have a balance sheet total of EUR 750,000 or more (section 16g (2) of the FinDAG).

3.2.2 Area of supervision: "Insurance"

In the "Insurance" area of supervision the cost allocation amounts are payable by all insurance undertakings and Pensionfonds subject to cost allocation (section 16h (1) of the FinDAG). The liability to cost allocation exists for the cost allocation year in which an undertaking subject to cost allocation was under the supervision of BaFin pursuant to the VAG and had an authorisation from BaFin (section 16h (1) sentence 2 of the FinDAG). The liability to cost allocation exists even if the conditions were not met during the whole year.

3.2.2.1 Assessment base (allocation formula)

Here, too, BaFin apportions the costs on the basis of an assessment base. For insurance undertakings the assessment base is determined in accordance with section 16h (2) of the FinDAG. The calculation is based on the ratio of the gross premium income earned by the individual undertaking subject to the cost allocation to the aggregate amount of gross premium income of all undertakings subject to the cost allocation. The full amount of surpluses or bonuses returned to policyholders and 50% of the commission expenditure on inward reinsurance are to be deducted from gross premium income. The same also applies, mutatis mutandis, for Pensionsfonds in respect of Pensionsfonds contributions and beneficiaries.

If the conditions were not met for the whole year, the assessment base is to be calculated on a pro rata basis according to the number of months (section 16h (3) of the FinDAG).

In order to be able to calculate the assessment base, data which the supervised undertakings file with BaFin in accordance with their reporting obligations under the German Regulation on Reporting by Insurance Undertakings (Verordnung über die Berichterstattung von Versicherungsunternehmen) are used.

3.2.2.2 Minimum amounts

The minimum cost allocation for insurance undertakings is EUR 250 (section 16h (4) of the FinDAG).

3.2.3 Area of supervision: "Securities trading"

The cost allocation parameters for the "Securities trading" area of supervision are defined in sections 16i and 16j of the FinDAG.

In the category of investment services enterprises and investment managers, enterprises within the meaning of section 2 (4) of the WpHG and such institutions and enterprises to which section 2 (3) sentence 3 of the WpHG applies are subject to cost allocation.

In the category of issuers, issuers domiciled in Germany whose securities are admitted to trading on a German stock exchange or are traded on the regulated unofficial market (Freiverkehr) are subject to cost allocation.
An enterprise can be subject to cost allocation in more than one category.

3.2.3.1 Assessment base (allocation formula)

The allocation amounts for the individual issuers depend on the transactions in securities admitted to trading or included in the regulated unofficial market and which have been reported under section 9 of the WpHG.

In the category of investment services enterprises and investment managers, it is net income which constitutes the assessment base. In order to determine the allocation amount for the individual enterprise, the enterprise's net income is placed in proportion to the total net income for all investment services enterprises and investment managers. In each case, the income which the enterprise generated in the year prior to the allocation year is taken as a basis. When calculating in autumn 2017 the allocation for the allocation year 2016, for instance, it is the income from the year 2015 that is considered (section 16j (1) of the FinDAG).

The assessment base was supplemented by a provision on the voluntary reporting of deductible items (section 16j (2) of the FinDAG). Enterprises can request, for example, that net income from payments or from the broking of credit, savings, Bauspar and insurance contracts are removed from the calculation (section 16j (2) sentence 1 of the FinDAG).

If enterprises wish to take advantage of this option for allocation year 2016, they must submit by 1 February 2017 corresponding applications to BaFin requesting a reduction of their calculable income for the year 2015. BaFin only considers these requests if the deductible items amount to more than one-fifth of the fee and commission income and the enterprise can prove by way of suitable documentation that it meets this condition. The amounts indicated for deductible items have to be confirmed by an auditor (Wirtschaftsprüfer), a sworn certified accountant (vereidigter Buchprüfer) or an accounting firm (Buchprüfungsgesellschaft) (section 16j (2) sentence 2 of the FinDAG).

It should be borne in mind that credit institutions and insurance undertakings frequently also act as issuers on the securities trading market. It regularly follows from this that credit institutions, for example, are subject to cost allocation both for the "Banking and other financial services" area of supervision as well as for the "Securities trading" area of supervision as investment services enterprises and as issuers.

The liability to cost allocation exists even if the conditions were not met during the whole year.

3.2.3.2 Reduction of the assessment base (balance sheet total to be applied)

When calculating income relevant from the point of view of cost allocation, enterprises subject to cost allocation in the category of investment services enterprises and investment managers may submit an application to have the following items deducted from their fee and commission income (section 16j (2) of the FinDAG):

  1. net income from payments,
  2. net income from foreign trade business,
  3. net income from travel funds business,
  4. net income from trust loans and administered loans,
  5. net income from the broking of credit, savings, Bauspar and insurance contracts,
  6. net income from loan processing and guarantee business,
  7. net income from remuneration received from foreign subsidiaries for deposit business,
  8. net income from estate processing,
  9. net income from electronic banking services,
  10. net income from the delivery of expert opinions and
  11. net income from other processing fees.

For enterprises subject to cost allocation in the category of investment services enterprises and investment managers which were not subject to cost allocation for the whole year, in derogation from section 16j (1) and (2) of the FinDAG that fraction of their income will be considered which corresponds to the ratio of the months commenced in which the liability to cost allocation existed to the number of months in the cost allocation year (section 16j (3) of the FinDAG).

3.2.3.3 Minimum amounts

For all enterprises subject to cost allocation in the "Securities trading" area of supervision, the minimum cost allocation amount is EUR 250 (section 16j (6) of the FinDAG).

3.3 Advance payments on the cost allocation

As soon as the German Federal Ministry of Finance has approved the budget, BaFin fixes advance payments on the cost allocation amounts for this cost allocation year (cf. section 16l of the FinDAG). So that the cost allocation amounts can be apportioned first to the various areas of supervision and then to the individual enterprises, the ratios of the last invoiced cost allocation year will be taken as the basis in the first instance.
Should it later emerge that the cost allocation amount finally set has resulted in overpayments, these will be refunded. Supervised enterprises must make good any shortfalls subsequently.

4. Cost allocation in the area of financial reporting enforcement (section 17d of the FinDAG)

In order to finance financial reporting enforcement costs, BaFin uses the cost allocation procedure of advance payments and billing described above. However, the advance payment amount calculated in each case has to be paid by the enterprises concerned in one amount to BaFin by 15 December. Details on the imposition of cost allocation can be found in the German Regulation on the Allocation of Financial Reporting Enforcement Costs (Bilanzkontrollkosten-Umlageverordnung – BilKoUmV).

III. Concluding remarks

As became clear over the course of this article, supervised undertakings face costs of many different types. Here, a distinction must be made between costs incurred on the basis of BaFin's supervision of an undertaking (fees, separate reimbursements and cost allocations) and other costs. These are the so-called "costs in the wider sense", which are incurred through the execution of enforcement measures or administrative fines as well as through costs for auditors or deposit protection schemes.
If you have any further questions, you can always contact BaFin's Cost Allocation Division (ZII 2) by e-mail: ZII2@bafin.de.

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