Banking Regulations in Germany

When considering entry into the German market of finances, the first question that always arises for new companies is banking regulations in Germany: Is a BaFin license needed for the scope of services? In German jurisdiction, BaFin is the regulator of sector of finances that applies a range of EU directives and administrative provisions to ensure the proper functioning of the sector. To stay compliant with applicable laws, companies entering the German/EU market should define whether they need to obtain a license to run their business.

Who needs a BaFin license?

The BaFin is Germany’s financial regulative authority. By now, the lion’s share of activities in the financial field requires prior licensing from this regulator. Small players do, sometimes, provide services for which they would get licensed – without acquiring such a permit. Implementing this practice is considered an infringement of German law and we strongly advise not to bypass the law. The best option to bypass any legal problems with the regulator is determining the eligibility under the licensing condition prior to starting operations in Germany. It should be also noted that a BaFin license is often bona fide for just certain offers listed in the company’s application.

Cryptocurrency businesses and crowdfunding platforms

Along with banks and PSP, cryptocurrency and crowdfunding businesses might also need to be licensed. This is subject to their business structure and the Payment Services Supervision Act (ZAG). The recent provisions of German law promulgated that virtual currency is now classified as a financial tool, or precisely as monetary units. If you are dealing with such assets professionally, then you require a license. This also refers to establishing a FinTech business in Germany.

Consequences for operating without a license

If an FSP continues to run unpermitted business, the company is usually informed by a letter from the regulator. The delivery of services without the appropriate authorization can entail serious consequences and penalties for the companies concerned and the individuals acting:

• Even implying operating negligently without the license falls within Section 54 of the KWG Act or Section 31 of the ZAG Act and is accordingly subject to punishments.
• A company or person who has once delivered such services without a license is no longer to be considered as “reliable”, which may create obstacles in further tries of obtaining a permit.
• Competitive market participants can sue for injunctive relief against unlicensed businesses. Such a business will then be banned from running its operations by temporary injunction or an administrative fine of up to 250,000 euros.
• Clients can make civil claims if they have suffered damage as a result of services delivered without an authorization. Under the “protective law”, anyone who commits this violation of the KWG is in charge of damages for this reason alone.

How much does a BaFin license cost?

The prices for applying for a license differ, depending on the certain services or operations for which a license is acquired.

Generally, the fee charged for a license in line with Section 32 (1) of the KWG varies between 2,000 and 17,000 euros for services with finances. Acquiring a license for banking transactions costs 5,000 – 20,000 euros.

If authorization is only issued for the delivery of

• 3rd country deposit brokerage business,
• Forex business,
• Invoice factoring business and
• Leasing business,

the BaFin fee is 2,600 euros. If an application is extensive, the fee may also be higher. In terms of expenses for licensing, there also should be taken into account the number of the lawyer’s fees, and other related payments.

Please contact us to get more information.

You can see our current offers in the categories “Cryptocoins and licensing of cryptocurrency operations”, “Ready-made companies”, “Banks for sale” and “Licenses for sale”.