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

The financial regulator BaFin warns of the consequences of low interest rates and the Ukraine war. At its annual press conference, however, the authority must above all ask itself how powerful it has become.

Actually, the insurance and financial supervisory authority would have reason to celebrate. A little over 20 years ago, on May 1, 2002, BaFin was founded. “But it’s not the right time for a major ceremony with a detailed retrospective,” said the new BaFin President Mark Branson at the event in Frankfurt. “Now we have to show what we’re made of.”

The financial supervisors are under pressure after being accused of gross negligence in connection with the Wirecard scandal. So Branson is humble and still allows himself one or the other joke. To the journalists, some of whom have accompanied BaFin right from the start, he says: “I see there are gray hairs, I hope that doesn’t come from 20 years of BaFin watching.”

The supervisory authority should get more bite in the course of its reform last year. The core of this reform: supervisors can now check companies’ balance sheets without having to coordinate with other bodies. The institution has already completed twelve such procedures, and many others are ongoing. To this end, a number of tips from whistleblowers were followed up.

No fully comprehensive supervision

For the journalists in the Frankfurt Literaturhaus, the location of the conference, this is not enough proof of the new clout. Branson is asked why there are always irregularities, for example in connection with the real estate group Adler. He sees it positively that the auditors didn’t want to approve the company’s annual financial statements: “If an attestation is refused, that’s a sign for me that the controls are working.” And even if BaFin has a lot in view, there is no fully comprehensive supervision.

The supervisors also want to do more on the subject of money laundering. But when asked how well the German financial institutions are positioned, the BaFin president answers, as one is used to from the supervisors, very taciturnly: “There are institutions that do it very professionally and there are outliers,” says the Brit . Where necessary, one will intervene.

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

Harder, faster and more willing to take risks

The reformed financial supervisory authority wants to become tougher, faster and more willing to take risks. Britta Langenberg, who is responsible for consumer protection at the Finanzwende citizens’ movement, believes that this claim is already being met in part. “Viewed from the outside, BaFin seems more determined than before, we are already seeing a tougher approach.” Also compared to startups like the smartphone bank N26. BaFin had limited their business to 50,000 new customers per month because the risk and money laundering precautions were inadequate.

However, banking expert Hans-Peter Burghof from the University of Hohenheim still sees one 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 willingness to reform in the Federal Ministry of Finance, this has not yet been envisaged.

Role as supervisory authority strengthened

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

Krahnen also praises Branson, previously the chief financial supervisor in Switzerland and only since last August at the head of BaFin. “He started as a reorganizer and has clear ideas about how he can make the supervisory authority more effective,” says the Frankfurt financial expert. However, it remains to be seen whether he can actually implement it internally.