Banking License in Germany

The list of requirements for licensing activities in Germany is rigorous. The requirements are established and reviewed by BaFin. They include several aspects, which we will consider in more detail below.

Form of Ownership

Only legal entities can conduct banking activities in Germany. Accordingly, it is necessary to register a company in the appropriate organizational and legal form to start a bank. Financial organizations can have the following forms of ownership:

• Public or closed joint-stock company. Typically, large banks prefer this company type.
• Limited liability company. This legal form is most often popular among small banks.

Also, legislation in Germany allows banks to be registered as open trading companies and limited partnerships.

The license holder may be a legal entity or an individual. If you register a limited liability company or a joint-stock company, the license is issued to the legal entity. This method is more practical, as changes to the license are not required if the shareholder composition changes.

However, individual partners may get the license for open trading or limited partnerships. In this case, each partner is responsible for the financial organization’s obligations. Consequently, if a partner leaves the partnership, the license must reflect this change.

Authorized Capital

The license’s authorized capital size differs depending on the enterprise’s activity type. The requirements are the strictest for banks and credit institutions. If a bank trades in securities, its authorized capital must be at least EUR 730,000. A bank must have a charter capital of at least EUR 5,000,000 if it provides depository services. To receive an EMI license in Germany, the authorized capital is EUR 350,000.

Deposit Guarantee

Financial institutions must guarantee the safety of all deposits. To achieve this, they must become members of an association that provides guarantees. For commercial banks, this association is called Entschädigungseinrichtung Deutscher Banken GmbH.

Business Plan and Organizational Requirements

A business plan must be provided for obtaining a banking license in Germany. It should be as detailed as possible and describe all aspects of the company’s activities. In particular, the bank must demonstrate how it will conduct its activities and how it plans to earn money. Plus, it should describe the sources of funds for bank opening, etc.

Also, financial organizations must meet several organizational requirements. Let’s uncover them:

• Compliance with requirements for monitoring and risk management.
• Availability of an internal control system.
• Protection of confidential information and security measures for software.
• Information about completed operations required by the BaFin control department.
• Protection mechanisms against money laundering and fraud.

These data are documented and submitted to BaFin during the licensing process. The regulator will assess whether the bank meets the requirements for internal control, security, and personal data protection.

Requirements for Shareholders and Staff

To obtain a banking license in Germany, you must meet staffing requirements. A financial organization must have at least two top managers. The managers should be persons with professional qualifications and be considered trustworthy by BaFin. Reputation and qualifications are checked not only for senior managers but also for shareholders.

Reputation checks are carried out by inspecting managers and shareholders for criminal records. Therefore, a certificate of no criminal record is a mandatory document. BaFin also reviews the reputation of the manager or shareholder based on previous employment.

A bank’s manager or shareholder in Germany must have professional qualifications and managerial experience. The director or shareholder must have at least three years of experience in a managerial position within the banking sector. The size of prior business experience is also considered. For instance, if a person is appointed as a director of a large bank, they must have previous experience working in a large bank.