The ‘Federal Financial Supervisory Authority’ or ‘Bundesanstalt für Finanzdienstleistungsaufsicht’, an autonomous federal supervisory body established under the ‘Financial Services and Integration Act’ in 2002, is in charge of regulating the banks, insurance companies, financial service providers such as Forex brokerage firms, investment firms, and financial advisors in Germany. Also, the overall operation of ‘BaFin’ is supervised by the German Federal Ministry of Finance. Back in 2002, three regulatory entities namely ‘the Federal Banking Supervisory Office,’ ‘the Federal Supervisory Office for the Securities Trading,’ and ‘the Federal Insurance Supervisory Office’ were unified to create BaFin. This unification brought all the financial institutions such as banks, insurance firms, credit providers, brokerage companies as well as stock exchange markets under an all-out regulatory supervision which oversaw all the financial related conducts of Germany. The priority of BaFin is to make certain that the German economy stays safe, healthy and above all transparent. Additionally, it strives to promote investors’ confidence in the integrity of the market. BaFin oversees a lot of financial institutions including 1780 banks, 573 insurance firms, 676 financial service providers, and much more in Bonn and Frankfurt am Main alone. BaFin sees to it that the banks and financial service providers are solvent enough to fulfill their obligations toward their clientele and treat them according to the standard code of professional conduct to create a safe and trustworthy financial environment for the investors.
To further guard the investing parties, BaFin watchfully interferes with the financial providers that do not have the proper authorization. The scope of its supervision extends to both, the financial services issuers and the customers. The former is scrutinized regarding their solvency, quality of products, and fair dealing practices, whereas the latter is made sure to have sufficient confidence in the overall financial system. To establish a stable and sound market atmosphere, BaFin, under the Banking Act (KWG), is determined to uproot money laundering using a centralized computer system to record all the accounts data (including their owners’ information) provided by all the BaFin authorized companies. The credit and financial institutions (e.g. banks) are regulated in matters such as management status and ability, credibility, capital requirements, etc. before receiving the license. BaFin also runs regular investigations into these institutions to confirm their conformity with the laws and regulations. The regulated companies, firms, as well as financial investment organizations are required to submit their financial statements/audit records, records of monthly internal operations, and solvency/liquidity status to BaFin. If the investigated firms act outside the framework of the laws and provisions, BaFin will deal with them by sanctioning penalties which in severe cases may even come to license annulment. The same set of rules and regulations apply to all the insurance companies, pension fund providers (also burial funds), and holding companies under BaFin regulation. The assessments and evaluations of BaFin are in complete unison with the ‘Deutsche Bundesbank.’ Furthermore, it is to make the German Markets a safe and secure environment for securities and derivatives in compliance with the ‘Securities Trading Act’ (WpHG). Additionally, BaFin must keep an eye out for financial misdemeanors such as insider trading that could tarnish the reputation of German Markets. Its responsibilities also extend to monopoly issues, under the ‘Securities Acquisition and Takeover Act 2002,’ when a company’s ownership is being transferred or merged with that of another.
