Regulator BAFIN


 BaFin – Federal Financial Supervisory Authority of Germany. Refers to the Central regulatory bodies supervising the provision of financial services. Is the part of Federal government of Germany, which determines the close cooperation with the German Federal Bank. The financing structure is separated from the budget and is carried out through contributions from the regulated entities.

  • Important: BaFin license is mandatory for all financial institutions operating on financial markets of the country.

The history of BaFin began in 2002, when the three supervisory bodies that existed at that time were replaced with a single financial regulator with extensive powers.

In terms of reliability, this regulator belongs to the organizations of the highest level and even compare with the Cyprus CySec, which is quoted throughout the Europe. Note, however, that the requirements of the Cyprus regulator are more loyal, whereas BaFin is more conservative.

The management structure of the Central Board consists of 17 members appointed by the state. It makes a final decision on issuance of a license or imposition of sanctions. Full analysis and control over the broker lies on the Executive Board, which also supervises the work of all departments of BaFin. Advisory Management is responsible for information and advisory.

Functions and objectives of BaFin:

  • monitoring the stability of the financial system of Germany;
  • analysis of solvency and activities of actors in financial markets (banks, brokers, investment and pension funds, insurance companies), control over the performance of their obligations to clients;
  • market oversight of interactions of the subjects among themselves, development of standards of conduct and ethics to enhance the appeal for investors of the financial market;
  • protection of investors’ rights, the prevention of insider transactions, manipulating transactions, other misuses;
  • research and public activities aimed at raising the level of knowledge of investors about the tools and standards of financial markets;
  • development of measures aimed at minimizing the risks in the entire financial system of the country;
  • consulting support for the protection of the rights of consumers and investors;
  • issuing of the licenses;
  • counteractions to money laundering.

As is the case with other European regulator FCA, prefers strict measures of influence and control. It not be a surprise for the subject of the financial market, if the representatives of the organization come with the unscheduled inspection of the work and the company’s financial statements. The planned audit of the financial reporting occurs monthly. By the way, the individuals can also get under the sanctions.

The secret for the successful implementation of regulatory functions is the close co-operation of the regulator with other governmental agencies (Ministry of Finance, the Central Bank). A controller operatively receive the necessary information for analysis about the participants of the financial market and rechecks by cross method in the state courts. Leverage through all of the financial state structures allow BaFin to respond quickly to a potential threat.

As tools of influence BaFin can use fines or initiate criminal court proceedings and revocation of a license or the liquidation of the company.

The name BaFin is often heard in the global environment in relation to high-profile financial disputes. An example could be the prosecution of the regulator in violation of the corporate principles DeutscheBank AG (which often appears in such scandals lately), investigation regarding speculation on the part of the representatives of Commerzbank AG, and not mentioning the  violations of small brokers – such examples are few hundred.

For now BaFin successfully cope with tits tasks, but some of the functions of the regulator are transferred to other institutions. For example, part of control over financial institutions was transferred to the Federal Bank of Germany.  Similar changes may be in relation to insurance companies.

Official BaFin website:

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