The Act expands the authority of BaFin to impose higher capital requirements on institutions, groups of institutions and financial holding groups than those currently required under the German Banking Act (Kreditwesengesetz) (KWG) and the German Solvability Regulation (Solvabilitätsverordnung) (SolvV):

Up to now, in times of a crisis, BaFin was authorised to prohibit or limit withdrawals by shareholders or distribution of profits to shareholders of institutions only when certain barriers relating to regulatory capital requirements were breached and after the expiry of a specific grace period.

BaFin did not, however, have authority to intervene at an early stage of a crisis or distress.

The Act now provides that BaFin may resort to those measures as soon as an institution's asset position, earnings position or financial standing justifies the assumption that such institution will not be able to permanently fulfil the regulatory capital or liquidity requirements.

In addition, BaFin is now authorised to prohibit or limit disbursements of any kind of profits on equity instruments that are not entirely covered by an annual net profit, in case an institution is effectively in breach of regulatory capital or liquidity requirements. BaFin may also prohibit or limit specific accounting measures. All of these measures apply equally to parent companies (übergeordnete Unternehmen) or financial holding groups and groups of institutions.

BaFin may prohibit or limit payments to affiliated companies in times of a crisis.

The Act imposes new reporting requirements that will ensure that BaFin receives additional information about risk potentials of institutions. Institutions are now required to report specific variations of the so-called modified equity ratio (modifizierte bilanzielle Eigenkapitalquote).

That is the ratio of (a) equity (bilanzielles Eigenkapital) to (b) the sum of balance sheet total (Bilanzsumme), off-balance sheet liabilities (außerbilanzielle Verpflichtungen) and the assumed costs of transforming off-balance sheet liabilities into balance sheet items (Wiedereindeckungsaufwand für Ansprüche aus außerbilanziellen Geschäften).

If, on the basis of an institution's monthly reporting (Monatsausweis), the modified equity ratio varies at least 5% from the ratio calculated on the basis of the latest annual reports, such deviation must be reported to BaFin at the end of each fiscal quarter.

It has always been a requirement under applicable German corporate law that members of the supervisory board (Aufsichtsrat) must be reliable and have the relevant expertise to enable them to fulfil their control function and to assess and supervise the business of the relevant enterprise.

Under the Act, BaFin can now demand the dismissal of a member of the supervisory board, prohibit the further exercise of their mandate or even assign all or part of their competences to an appointed special representative, if that member:

In addition, the total number of supervisory board mandates (which are limited to ten under applicable German corporate law) have been reduced to five, unless these entities are members of the same institution related guarantee scheme. Moreover, the Act requires that not more than two former managers (including Geschäftsführer and Vorstände) of an institution may sit on its supervisory board.