Financial supervision after reform: The giant BaFin is gradually waking up

Status: 05.03.2022 6:18 p.m.

Financial regulator BaFin warns of the consequences of low interest rates and the war in Ukraine. But during its annual press conference, the authority must above all question its power.

In fact, the insurance and finance supervisory authority would have cause for celebration. Just over 20 years ago, on May 1, 2002, BaFin was founded. “But now is not the right time for a big ceremony with a detailed retrospective,” BaFin’s new chairman Mark Branson said at the event in Frankfurt. “Now we have to show what we are made of.”

Financial supervisors are under pressure after being accused of gross negligence in connection with the Wirecard scandal. So Branson is humble and always allows himself some joke. To reporters, some of whom have accompanied BaFin from the start, he said, “I see there are gray hairs, I hope it’s not from 20 years of observing BaFin.”

The supervisory authority should win by biting as part of its reform last year. At the heart of this reform: supervisors can now check companies’ balance sheets without having to coordinate with other authorities. The institution has already carried out twelve such procedures, and many more are in progress. To this end, a number of tips from whistleblowers have been followed.

No full supervision

For journalists at the Literaturhaus in Frankfurt, the venue of the conference, this is not sufficient proof of the new influence. Branson is asked why there are always irregularities, for example in connection with the real estate group Adler. He sees with a good eye that the auditors did not want to approve the annual accounts of the company: “If a certificate is refused, it is for me the sign that the controls work. And even though BaFin has a lot in mind, there is no full oversight.

Supervisors also want to do more on the subject of money laundering. But when asked to what extent German financial institutions are well positioned, the president of BaFin replies, as is customary from supervisors, very taciturnly: “There are institutions that very professional way and there are outliers,” said the Briton. If necessary, we will intervene.

BaFin’s new boss, Mark Branson, wants to make the authority more efficient.

Image: dpa

A few days ago, representatives of BaFin, among others, raided Deutsche Bank. According to the bank, the focus was on the money laundering suspicion reports that the institute itself had submitted.

Harder, faster and more ready to take risks

The reformed financial supervisor wants to become tougher, faster and more willing to take risks. Britta Langenberg, head of consumer protection at the citizens’ movement Finanzwende, believes that this demand has already been partly met. “From the outside, BaFin seems more determined than before, we are already seeing a tougher approach.” Also compared to startups like smartphone bank N26. BaFin had limited its business to 50,000 new customers per month because precautions against risk and money laundering were insufficient.

However, banking expert Hans-Peter Burghof from the University of Hohenheim still sees a shortcoming: BaFin remains directly subordinate to the Federal Ministry of Finance. Burghof, on the other hand, demands: “In order to avoid any form of political influence, banking supervision should be as independent as possible. However, despite all the reform efforts of the Federal Ministry of Finance, this has not yet been considered.

Reinforced supervisory authority role

After all, a Wirecard case should not be repeated in this form, at least Jan Pieter Krahnen, Scientific Director of the Leibniz Institute for Financial Markets Research SAFE, is convinced. “Because the reform allows the BaFin to obtain much better information about capital market-oriented companies and, above all, to decide for itself which group of companies it wants to obtain which information.” This would considerably strengthen the role of the supervisory authority.

Krahnen also praises Branson, previously Switzerland’s chief financial supervisor and only since last August at the helm of BaFin. “He started as a reorganizer and has clear ideas on how he can make the supervisory authority more efficient,” explains the financial expert from Frankfurt. However, it remains to be seen if he can actually implement it internally.

Bafin warns of risks from low interest rates and war in Ukraine

Ursula Mayer, HR, May 3, 2022 5:31 p.m.

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