Federal Financial Supervisory Authority (BaFin)

What is BaFin responsible for?

BaFin supervises credit institutions, financial and payment service providers, insurers, pension funds, asset managers and securities trading.

The primary objective is to ensure the proper functioning, stability and integrity of the German financial market.

Therefore, BaFin ensures that financial market participants comply with the relevant laws, so that bank customers, policyholders and investors can have full confidence in the financial system.

With its supervision, BaFin helps to ensure that credit institutions, insurers and financial service providers can meet their payment obligations. In addition, BaFin's market supervision aims to ensure fair and transparent conditions in the markets and, furthermore, to ensure the protection of the collective interests of consumers.

This protection extends to all products and financial services subject to BaFin's supervision.

BaFin is also tasked with preventing the financial system from being abused for the purposes of money laundering or terrorist financing. For this purpose, BaFin ensures, for example, that the entities it supervises comply with the applicable requirements for the prevention of money laundering and terrorist financing.

In Germany, banking, financial services and insurance businesses may not be conducted without official authorisation. BaFin monitors this prohibition and has far-reaching powers of investigation and intervention for this purpose.

BaFin is represented on numerous European bodies and is thus involved in creating a single European financial market. Furthermore, through its participation in international bodies, BaFin is involved in shaping global supervisory standards.

Banking Supervision

Only a stable financial system can provide the financial resources that an economy needs. Banking supervision makes an important contribution to this. Since 4 November 2014, BaFin has been part of the Single Supervisory Mechanism (SSM), which is led by the European Central Bank (ECB).

The SSM directly supervises the approximately 120 significant institutions and groups of institutions (SIs) in the eurozone, including around 20 from Germany. This is done through Joint Supervisory Teams, in which BaFin staff work side by side with supervisors from across the eurozone.

The less significant institutions (LSIs) – of which there are around 1,400 in Germany – are supervised indirectly by the SSM; they are therefore subject to national supervision as before.

Insurance Supervision

In the case of insurance, trust is of particular importance as a business foundation. Customers expect their private insurer to be a reliable contractual partner – often over a very long period of time.

BaFin wants to ensure that the interests of policyholders are protected and that insurers can meet their contractual obligations at all times.

Securities Supervision

For securities trading to function smoothly, it is important that all market participants can rely on fair and transparent market conditions. If there is a suspicion of market manipulation or insider trading, BaFin investigates the matter thoroughly. In addition, it monitors listed companies and their shareholders for compliance with their respective disclosure obligations.

Among other things, companies must publish ad-hoc announcements, directors' dealings and financial reports. Shareholders must report if they hold significant voting right proportions in a listed company. Anyone holding 30% or more of the voting rights must make an offer to the other shareholders to purchase their shares.

Furthermore, securities supervision also monitors financial service providers, asset management companies and the undertakings for collective investment they establish. In addition, BaFin also reviews prospectuses, including stock exchange listing prospectuses, and checks whether they contain the required minimum information.

BaFin is not responsible for verifying the factual accuracy of prospectus content. Together with the Financial Reporting Enforcement Panel (FREP, Deutsche Prüfstelle für Rechnungslegung – DPR), BaFin also examines the accounting of publicly traded companies (of which there are approximately 560). This enforcement of financial reporting requirements complements the company-internal audit of accounting by its supervisory board and external auditors.

BaFin was only established in 2002 – Was there no supervision before then?

Yes, of course there was. On 1 May 2002, the Federal Banking Supervisory Office (BAKred) was merged with the then Federal Securities Supervisory Office (BAWe) and the Federal Insurance Supervisory Office (BAV) to form the Federal Financial Supervisory Authority (BaFin).

To put it very simply, in 2002: BAKred + BAWe + BAV = BaFin

This enabled uniform national supervision of the local financial sector. This model was intended to ensure greater transparency and control, and to guarantee that all financial activities were regulated.

With the reform of the German Banking Act (KWG) in 2003, BaFin was given the additional task of monitoring the creditworthiness of financial institutions and obtaining detailed information from these institutions. The aim was to improve consumer protection and the reputation of the financial system.

BaFin shares responsibility here with the Deutsche Bundesbank. Since 2015, BaFin has been in a transformation process, after major tasks of banking supervision were transferred to the responsibility of the European Central Bank in November 2014.

Learn more about BaFin here.