Authorised institutions

In 2017 BaFin was responsible for supervising a total of 1,577 German credit institutions (previous year: 1,655) and 47 housing enterprises with savings schemes (previous year: 47, see Table 31).

Table 31 German institutions

German institutions

* Two of these CRR credit institutions are neither SIs nor LSIs. ** The SIs are supervised directly by the ECB. This table lists the individual institutions. See chapter III 2.5.1. (SI groups). *** Two of these credit institutions provide financial market infrastructures and are therefore supervised by BaFin's Securities Supervision Directorate. BaFin

Of the total of 1,579 credit institutions, 1,522 were CRR credit institutions (previous year: 1,596). Of these 1,522 CRR credit institutions, 1,457 (previous year: 1,528) were subject to direct supervision by BaFin as less significant institutions (LSIs) under the Single Supervisory Mechanism (SSM) (see info box "Credit institution or not?"). The 25 securities trading banks, 32 other credit institutions and 47 housing enterprises with savings schemes referred to in Table 32 were supervised exclusively by BaFin.

German institutions directly supervised by the ECB under the SSM

63 of the German CRR credit institutions referred to in Table 31 of the German CRR credit institutions referred to in Table 31 (page xy) (previous year: 66) were directly supervised by the European Central Bank (ECB) (see Table 32) in 2017 as significant institutions (SIs) under the SSM. BaFin is involved in their supervision as part of the SSM.) (previous year: 66) were directly supervised by the European Central Bank (ECB) (see Table 32) in 2017 as significant institutions (SIs) under the SSM. BaFin is involved in their supervision as part of the SSM.

Table 32 German institutions supervised by the ECB under the SSM

German institutions supervised by the ECB under the SSM

BaFin

Calculation of the capital requirements

Use of IRB Approaches

As at the 31 December 2017 reporting date, a total of 12 less significant institutions and groups of institutions and one development bank were using internal ratings-based (IRB) approaches to calculate their capital requirements for credit risk. These institutions and groups of institutions and the development bank under supervision did not apply the internal assessment approach (IAA) for securitisation positions.

The IRB approach makes a distinction between whether, beyond its retail business, an institution estimates only the probability of default (foundation IRB approach) itself or whether it also estimates the loss given default and the conversion factor (advanced IRB approach). A total of 4 of the 12 less significant institutions and groups of institutions and one development bank used the advanced IRB approach on a group or individual basis, and 3 institutions applied the IRB approach on an individual basis exclusively for the risk positions arising from their retail business.

Operational risk approaches

The German institutions or groups of institutions in Germany employ all four available approaches to calculate their capital requirements for operational risk. The basic indicator approach (BIA) and the standardised approach (STA) are determined using the specified indicator, which is based on the income statement figures. At the 2017 year-end, just over 1,500 institutions and groups of institutions – almost exclusively LSIs – were using the basic indicator approach. Another 54 institutions or groups of institutions, of which 26 are supervised by the ECB and 28 directly by BaFin, were applying the standardised approach. Two institutions or groups of institutions were working with the alternative standardised approach (ASA), which uses a standardised earnings indicator instead of the specified indicator. BaFin is responsible for these institutions.

The advanced measurement approach (AMA) does not make use of indicators, but uses the actual loss experience, external data, scenarios and business environment and internal control factors of the institution itself. The capital requirement for the operational risk of an institution or a group of institutions is calculated on the basis of this information with the help of a complex model. At the close of 2017, a total of 13 institutions and groups of institutions, of which 6 were German and 7 foreign institutions, were applying the AMA. Of the German institutions, four are supervised by the ECB and 2 by BaFin. Of the foreign institutions, 5 are supervised by the ECB and 2 by BaFin.

Following the publication of the new framework for determining operational risk by the Basel Committee in December 2017, it will probably no longer be possible to use a model-based approach for Pillar I purposes from 2022 onwards. However, BaFin expects that model-based approaches will continue to be important for determining economic capital, especially for significant institutions, beyond 2022. Moreover, the AMA will be the legal reality for at least another four years. For those reasons, BaFin once again insisted on necessary model improvements and modifications under the AMA in 2017.

As in previous years, BaFin focused on the procedures for measuring, controlling and monitoring legal risks and IT risks. IT risks in particular have grown in significance and will become increasingly significant over the next few years.