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PLC Global Finance update for November 2010: Germany
Practical Law UK Articles 9-504-0713 (Approx. 3 pages)
PLC Global Finance update for November 2010: Germany
by Simmons & Simmons
| Published on 30 Nov 2010 • Germany |
The Germany update for November 2010 for the PLC Global Finance multi-jurisdictional monthly e-mail.
Financial institutions
Review of control requirements for supervisory boards at institutions
Ingrid Kalisch and Sandra Pfister
In response to "negative experience" with its leaflet (Merkblatt) pertaining to control of members of supervisory boards at institutions published on 22 February 2010, the Federal Financial Supervisory Authority (BaFin) has recently held a conference and discussed the following anticipated amendments:
- Use of the instruments relating to the setting of priorities of audit contents (see section 30, German Banking Act (KWG)) and, potentially, those relating to notification obligations/special audits (see section 44, KWG) also in respect of supervisory board members at institutions.
- The regulatory means relating to increased equity and liquidity buffers are to be applied pre-emptively, that is, even before the relevant legal thresholds have been breached.
- With regard to internal governance, the CEBS Guidebook of 13 October 2010, the contents of which are likely to be implemented into German law with only minor modifications by 30 September 2011, will be authoritative. The paper is in consultation until 14 January 2011.
- Introduction of rules on whistle blowing.
- Review of the Ordinance of Notifications (AnzV) in relation to criminal offences and conflicts of interest due to economic amalgamation (for example; loans to board members).
Presentations of the related BaFin event are available for download at the BaFin website.
Financial markets regulation
First rating agency registered in Europe
Sandra Pfister
On 16 November 2010, BaFin registered the first rating agency (Euler Hermes Rating GmbH) under Regulation (EC) 1060/2009 on Credit Rating Agencies (Regulation), which entered into force in December 2009.
On 16 November 2010, BaFin registered the first rating agency (Euler Hermes Rating GmbH) under Regulation (EC) 1060/2009 on Credit Rating Agencies, which entered into force in December 2009 (Regulation).
BaFin is responsible for registering and supervising rating agencies in Germany until these tasks are transferred to the new European Securities and Markets Authority (ESMA).
The Regulation subjects rating agencies to government supervision for the first time. The heart of the Regulation is the registration procedure, under which a rating agency is granted EU-wide authorisation to perform credit rating activities provided that it meets the application requirements. As such, the Regulation lays down strict rules on the conduct and organisation of rating agencies. In particular, they must take extensive measures to prevent or minimise conflicts of interest in their activities. In addition, registered agencies may not simultaneously provide consulting and rating services for a company. A rotation principle has also been introduced for rating analysts. In future, rating agencies must regularly provide the BaFin (and later ESMA) with information on their working methodologies, models and ownership structure. However, supervisory authorities may not interfere in the agencies’ rating models themselves.