1. Securing and maintaining the functioning of the banking industry.
  2. The protection of creditors of credit institutions from losing their deposits.

On the one hand, it ensures the proper execution of banking transactions and, on the other hand, provides protection for bank clients by requiring deposit insurance for each financial services institution.

The supervision is divided into the approval of credit and financial services institutions as well as the subsequent supervision by the Federal Financial Supervisory Authority (BaFin). This supervision does not protect the individual creditor or consumer; rather, it serves to protect the creditors in their general public as well as the public confidence in the functioning of banks and banks.

That includes the KWG

Before admission, BaFin checks, for example, whether sufficient own funds are available and that the management of the institute is carried out by persons who have proven their professional and personal competence. Whether the risks assumed by the institutions with sufficient own funds have been deposited is ultimately the focus of ongoing supervision.

Unauthorized banking transactions are pursued by the BaFin. According to the KWG, banks and credit institutions are required to inform the Federal Authority of certain information. As a result, the Bundesbank and BaFin can directly influence the supervised credit institutions.

The KWG is often used to record risks in order to protect creditors from investment losses. The ability of banks to take risks is thereby limited. For example, it is possible to prevent banks from carelessly lending money and putting themselves at risk.

For the applicant, rejecting a credit check for credit checks may be frustrating, but it protects the claimant from a debt trap. In addition, bank secrecy is also prescribed in the KWG.

Solvency and liquidity

Solvency and liquidity

The KWG derives from the duty of disclosure of the supervised institutions to the Bundesbank and the BaFin. This includes information on solvency and liquidity. The so-called Solvabilitätsverordnung concretizes §§ 10 and following of the KWG. This is an adequate capital adequacy regulation to ensure the safety of deposits.

The Liquidity Regulation, on the other hand, sets out the requirements for the solvency of a bank. These state that banks must have sufficient funds at all times to meet their short-term payment obligations. This ordinance, in turn, invokes section 11 of the KWG.

Basel II

As of January 1, 2007, the previously applicable equity capital agreement Basel I was superseded by the new agreement Basel II. The term refers to the capital requirements proposed by the Basel Committee on Banking Supervision.

The professional handling of credit, market, liquidity and other risks is one of the main tasks of financial intermediaries. It should be prevented that these risks lead to solvency risks for institutions and instabilities in the financial sector. For this reason, special prudential rules have been established under which capital adequacy rules play a significant role.

While Basel I was based solely on minimum capital as a key driver of risk limitation, Basel II aims to strengthen the security and soundness of financial systems. Investments should be made more dependent than previously on the risk is taken. In addition, recent developments in the financial markets and in the risk management of the institutions are to be taken into account.

Basel II is divided into a total of three pillars, of which pillars two and three have been newly added: minimum funding requirements, regulatory review process, and market control.

The rules must be applied to all institutions in the member states of the EU since 01.01.2007. Management in Germany is governed by the Banking Act, the Solvency Regulation and the minimum requirements for risk management.

Regulations and obligations of credit institutions

credit institutions


The KWG and the related regulations (such as the solvency regulation) mean that credit institutions are exposed to residual risks, which limits the banks’ ability to take risks. Clear guidelines are given on which risks may be incurred when lending.

The KWG undertakes to largely exclude all of these risks through a detailed credit rating before granting a loan. The individual rules are listed according to their type of risk to be limited:

credit risk In general, default risk denotes the risk of loss if borrowers fail to meet all or part of their payments. Especially in the banking sector, there is the danger that borrowers will not or only partially meet their contractually agreed interest and principal payments.
Furthermore, there is the risk that additional costs and losses for the bank may arise due to a deterioration in creditworthiness (credit risk). To a limited extent, such risks also exist for investors if the company whose shares or securities the investor has acquired becomes insolvent. Under the Solvency Regulation, all institutions are required to provide such own funds with sufficient own funds.
market risk This is understood to mean the risk relating to the risk of loss of investors as a result of changing market conditions. A distinction is made between three different types of market risk, depending on the respective parameters that are the cause of the change. On the one hand, this is the general market risk, which is one of the special risks associated with investments, and on the other, the equity price risk and interest rate risk, whose changes are based on influencing market conditions, which are independent of general market movements.
liquidity risk Such a risk arises from the mismatch of deposits and withdrawals, so there is a risk that the bank will no longer be able to meet its payment obligations. The bank must remain solvent according to the Liquidity Ordinance.
It has sufficient liquidity if more cash is available within one month than is paid out in the same period. The liquidity ratio must be determined in advance for the following month and communicated to BaFin.
Operational risk This risk defines the risk of losses arising as a result of inadequacy or failure of internal processes, people and systems or as a result of external events. This includes legal risks. Banks must have internal controls in this case, the nature and scope of which are appropriate. The supervisory authorities must ensure that the management ensures such control procedures.
information risk An information risk occurs when investors are informed about a situation with a delay, inaccurate or incomplete information in the media. This may involve the risk that investors may be able to access important information too late or make a decision to sell or sell securities based on misinformation.

FINANCIAL CHECK Best interest guarantee conditions:

  • The offer of a competing contract must be binding and the details of the credit applicant / s as well as the contractually defined services (eg loan amount, term) must be identical to the one we have arranged and disbursed.
  • The competing contract offer must be from the same bank as the loan brokered and disbursed by us.
  • The competing offer was made no later than two weeks after the conclusion of the loan we brokered.
  • Dealer, the manufacturer and special conditions, as well as mortgage loans, are excluded from the guarantee.
  • The best interest guarantee applies to loan amounts of € 1,000 – € 50,000 and a term of 12 – 84 months.
  • The loan brokered by us will not be revoked by you within the contractual withdrawal period.

If you have been offered a lower rate of interest outside of the FINANCIAL CHECK  credit comparison and the above conditions are met, then please send a bank statement showing the payment of the first monthly installment of the loan we have brokered together with a full copy of the competitive offer to the address below. Please note that the documents must be received by us no later than four weeks after the expiry of the revocation period (or if the first installment has not been debited to date, at the latest four weeks after deduction of the first installment) of the loan arranged by us- improve the quality. We will review your records and contact you as soon as possible. Please do not forget to include your bank details so that we can pay you the interest difference.

Notification obligations of credit institutions

The German Banking Act sets out the obligation that banks and credit institutions must notify the Bundesbank and the Federal Financial Supervisory Authority (BaFin) of certain information. In this way, a proper execution of banking transactions should be ensured.

With the help of this information, the Bundesbank and the BaFin can directly influence the institutions. To do this, you must fulfill the following notification requirements:

  • General information obligation
    Even without any special reason, banks have a general duty to provide information under §44.
  • Solvabilitätsangaben
    According to § 10, institutions must be provided with sufficient equity capital and an overall key figure must be prepared each month in advance for the following month. It is also necessary to approve and review in-house models.
  • liquidity information
    In conjunction with the Liquidity Ordinance and Section 11 of the KWG, a liquidity ratio must be drawn up each month in advance for the following month in order to prove the liquidity of the individual institution.
  • large exposures
    According to §§ 13, 13a, 13b, banks are required to report their major loans on a quarterly basis. Exceeding the large single credit limit may only be made with the approval of BaFin. The excess amount must be backed by own funds in this case. Further provisions on large-scale lending are laid down in the GroMiKV Large- and Loan Loan Ordinance.
  • Monthly statements and annual accounts
    According to § 25, banks must forward monthly balance sheet statistics (monthly statement) to the Bundesbank and make them accessible to BaFin. The regulation on the submission of annual financial statements, management report and audit reports is also anchored in § 26.
  • Information duties on special occasions
    According to § 12a, these include the establishment of a corporate relationship, pursuant to § 14 the allocation of million credits (credit with a volume of 1,000,000 euros or more) as well as according to § 24 several special events such as appointment and departure of a manager, takeover and abandonment of one Participation, change of legal form, relocation or establishment, cessation of business etc.

Influence of BaFin on the management

BaFin has the right to intervene decisively in the management. The reliability of the management is also ensured on a regular basis by appeals to the Management Board being examined by the BaFin.

  • limitations
    The BaFin is entitled to limit large loans (§ 13) and can also prohibit certain types of advertising to counteract maladministration in advertising (§ 23). Furthermore, it has limitations on organ loans (§ 15).
  • Admission of banks
    For the operation of banking or financial services business, a written permission is required. This permission is granted by the European Central Bank in close cooperation with the BaFin on the basis of §§ 32, 33 of the KWG. The BaFin continues to be responsible for granting permission to operate financial services. Requirements include minimum capital requirements, the reliability of management, sound institutional governance and the viability of the business plan.
  • Measures were taken by BaFin in the event of standard violations
    For sanctioning purposes, the KWG provides a comprehensive set of sanctions, ranging from a written warning against fines to withdrawal of the bank license and closure of the business premises, depending on the offense.
    For example, BaFin may require the supervisory body to ensure that managers who are not sufficiently qualified or not reliable are dismissed and replaced by a special representative (§§ 33, 35, 36). The same applies to inappropriate members of supervisory bodies. In addition, BaFin has the right to demand special audits in order to gain insights into the economic situation, risk situation, and organization of a bank. These visits can also be made without registration.
    It may also intervene in unlawful transactions (§ 37) and take action in the event of insufficient own funds or liquidity. For example, it is possible to prohibit withdrawals, dividend distributions and lending after a reasonable period of time has elapsed. Even in the case of imminent insolvency, it takes various measures to avert imminent dangers (§§ 46, 46a, 47).