Private Banking and Wealth Management
What are the main sources of law and regulation relevant for private banking?
The main sources of law and regulation relevant for private banking are the German Banking Act, the German Securities Trading Act and the German Civil Code.
The German Banking Act is particularly concerned with the licence requirements for private banking activities. The German Securities Trading Act is particularly relevant to private banking owing to its rules of good conduct towards clients. The German Civil Code is the basis for the contractual relationship between the banker and the client.
The aforementioned sources of law are supplemented by EU law, such as the EU Capital Requirements Rules and Directive 2014/65/EU (MiFID II) Rules.
What are the main government, regulatory or self-regulatory bodies relevant for private banking and wealth management?
The main government bodies relevant for private banking and wealth management are the German Financial Supervisory Authority (BaFin) and the German Federal Bank (Deutsche Bundesbank). BaFin is responsible for the day-to-day supervision of banks and wealth managers. The Deutsche Bundesbank is particularly concerned with reporting and data gathering from private banks and other financial institutions. The supervisory function is shared with regard to larger credit institutions with the European Central Bank.
Private wealth Services
How are private wealth services commonly provided in your jurisdiction?
Private wealth services are typically provided by private banks or by banks with a private client department. Single- or multi-family offices are also a significant player in the area of providing services to highnet- worth individuals (HNWIs).
Definition of private banking
What is the definition of private banking or similar business in your jurisdiction?
There is no specific definition of private banking. Rather, private banking is understood as banking or wealth management services tailored to the financial needs of wealthier individuals.
What are the main licensing requirements for a private bank?
The main licensing requirements for private banking services depend on the type of services. If the private bank also offers deposit-taking services, the main licence requirements are:
- initial capital of €5 million;
- at least two managing directors;
- sufficient good repute, sufficient knowledge, skills and experience as well as availability of the managing directors;
- sufficient suitability of shareholders holding 10 per cent or more in the institution;
- a head office in Germany; and
- a sufficient business plan providing information on the intended organisational structure, compliance measures and projected business development.
What are the main ongoing conditions of a licence for a private bank?
The requirements for granting the licence must be maintained on an ongoing basis. This applies in particular to the required capital and the sufficient compliance structures. As additional ongoing requirements, banks are subject to several regular and ad hoc reporting obligations to their supervisory authorities. Furthermore, banks are required to finance a deposit guarantee scheme.
What are the most common forms of organisation of a private bank?
The most common form of organisation of a private bank is an entity, often as a subsidiary of a German bank or of a foreign bank. The entity is typically a German limited liability company or a German stock corporation. There are also some branches of foreign banks.
Read this article in full:
Lexology GTDT_Private Banking and Wealth Management 2020_Germany
This article was first published in: Law Business Research 2019, Lexology Getting the deal through, Private Banking & Wealth Management 2020, pp. 19-25, September 2019