Uncertainty in global politics and the economy has recently sent share prices on a rollercoaster ride. Despite the upheaval, however, markets have functioned well so far: price formation was possible at all times, there were no liquidity issues, and no financial institution ran into difficulties. Financial institutions in Germany are generally in a strong position currently. This is how Mark Branson, President of the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin), summarised the first few months of 2025 to journalists in Frankfurt am Main today.

According to Branson, two decisive factors will determine whether Europe’s financial markets emerge strengthened from the current phase of uncertainty: first, Europe should maintain the resilience and stability of its financial system while valuing and protecting strong, independent institutions. Second, he argues, the European Union can increase its attractiveness as a financial centre by reducing unnecessary complexity in regulation and making its financial supervision as a whole work more clearly, responsively and quickly. Barriers to a liquid single financial market should be reduced.

Wellfunctioning regulation must be kept strong

According to the BaFin President, regulation and supervision in Europe have been a success story in recent years: “We have the right calibration in our regulation. It has brought us stability in turbulent times,” Branson said. Capital and liquidity requirements such as Basel III and Solvency II have made banks, investment firms and insurers crisisproof. Taking an axe to this would be paving the way for the next financial crisis.

More efficiency with the same level of safety

The BaFin President called for action to further streamline regulation and supervision. Regulation should remain equally strict but be made less complex, he explained. Branson argues in favour of defining principles instead of rigid rules wherever possible, which would provide both companies and supervisors with more room for manoeuvre.

According to Branson, another guiding principle is proportionality: making rules and supervision appropriate and practical for companies of all sizes.

Relief for almost 1,000 banks and savings banks

BaFin plans to continue adjusting its own supervisory practice wherever possible. It has made good progress here over the past 12 months, for example by adapting stress tests and reporting requirements and by creating more flexibility for small and mediumsized institutions in terms of risk management – without reducing effectiveness. Almost 1,000 banks in Germany, i.e. three quarters of all banks and savings banks, are now benefiting from these changes. “That was an important first step, and more will follow,” Branson declared. “We will continue to take a critical look at our own practice.”

In 2025, BaFin will also review its Minimum Requirements for Risk Management (MaRisk). It wants to identify the sections that can be made simpler and more tailored to the respective institutions. BaFin is also advocating for regulators to reduce complexity and increase proportionality. “We will continue to make suggestions to national and European legislators as to where rules could be adapted or withdrawn,” Branson said.

Only partial application of some European guidelines

When applying European guidelines for the German market, BaFin will consider not always fully adopting some guidelines. In BaFin’s view, some of the guidelines are too granular for small institutions. For example, this is the case with the new ESG guidelines of the European Banking Authority (EBA): BaFin will not fully apply the guidelines to less significant institutions. However, Branson said, they are appropriate for larger institutions. BaFin had already largely anticipated the EBA’s requirements in its principles-based MaRisk, he explained: “We will not win the battle against climate change with reports from small banks.”

BaFin also plans to only partially adopt the EBA guidelines on processes and controls for monitoring financial sanctions. In BaFin’s opinion, Germany already has a tried and tested system consisting of foreign trade law and payment system monitoring by the Deutsche Bundesbank. Some of the EBA’s rules could therefore cause duplication in Germany.

BaFin's ongoing objective: to be a pioneer within Germany in reducing unnecessary bureaucracy and supervising in a proportionate manner.

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