If a loan is postponed as part of a general payment moratorium, the postponement does not in itself result in classification as a “forbearance measure” within the meaning of Article 47b of the CRR (see EBA/GL/2020/02, margin no. 11). Similarly, postponement on a case-by-case basis is not always classified as a forbearance measure under Article 47b of the CRR (and in particular paragraphs 240-268 of Part 2 of Annex V of Commission Implementing Regulation (EU) No 680/2014) which would have to be reported in template F 19. This is the case if an institution grants a postponement to an obligor that is not experiencing financial difficulties. The criteria to be applied when determining whether a postponement is to be regarded as a forbearance measure and, in particular, whether an obligor is deemed to be experiencing financial difficulties, are the same criteria, in compliance with the relevant statutory requirements, as those applicable before the COVID-19 crisis. If, based on these criteria, a postponement is not to be regarded as a “forbearance measure” within the meaning of Article 47b of the CRR, it need not be reported in template F 19.

Likewise, if a loan is postponed as part of a general payment moratorium, the postponement does not in itself result in classification as distressed restructuring within the meaning of Article 178(3)(d) of the CRR (see EBA/GL/2020/02, margin no. 11). Under certain circumstances, the postponed loan could be regarded as defaulted within the meaning of Article 178 of the CRR. In such cases, the loan must then be classified as non-performing within the meaning of Article 47a(3)(a) of the CRR and reported as a non-performing exposure in template F 18. For more information, please see the following FAQs:

“General payment moratorium: If a claim for repayment of a loan is postponed as part of a general payment moratorium, is the obligor considered defaulted within the meaning of Article 178 of the CRR?” and ”Credit risks: Do liabilities that have been postponed on a case-by-case basis (e.g. postponement of instalments) have to be regarded as defaulted? When does postponement on a case-by-case basis lead to a deduction from own funds and is this in line with the Minimum Requirements for Risk Management (Mindestanforderungen an das Risikomanagement – MaRisk)?”

In light of the current unprecedented crisis, the criteria BaFin will apply to the creditworthiness assessment are different to those applicable under normal circumstances; this is particularly the case for loans granted to undertakings whose financial difficulties started as a result of the coronavirus crisis and are currently expected to receive a loan through the KfW support programme. With regard to the submission of annual accounts, BaFin interprets section 18 of the KWG to mean that the latest available annual accounts are sufficient. In general, a waiver of the creditworthiness assessment on the part of the lender, as required under section 18 of the KWG, is not advisable and must be refused.

The statutory regulations in section 18 of the KWG also do not prevent BaFin from doing so.

Under section 18 (1) sentence 1 of the KWG, a credit institution may only grant a loan in excess of €750,000 if it instructs the borrower to disclose its financial circumstances, such as by submitting its annual accounts. However, the law does not specify which annual accounts are to be submitted. Logically, what is meant are the most current annual accounts. The decision to grant a loan can thus also meet the requirement of section 18 (1) sentence 1 of the KWG if the balance sheet date of the most current annual accounts submitted is more than 12 months in the past. If a legislative amendment should result in a deferral of the date of approval of the annual accounts, the most current annual accounts available (in this case, those of the previous year) must be submitted. BaFin will not be establishing any further detailed rules on how credit institutions must fulfil obligations to disclose their financial situation; the institutions themselves are solely responsible for making this decision.

Likewise, in terms of compliance with the MaRisk (i.e. the process for the granting of loans contained therein), the current documentation must always be used. If there are not yet any balance sheets available for the borrower, such also cannot be deemed a contravention of the MaRisk.

BaFin and the Deutsche Bundesbank are supporting government programmes that have been launched via promotional banks to mitigate the economic impacts of the coronavirus crisis. The framework conditions presented by KfW (see the key facts on KfW coronavirus aid) were coordinated with BaFin and the Deutsche Bundesbank and are expressly endorsed. Notable examples include the streamlined application process and the simplified requirements for the documents to be submitted.

Please refer to the general information on contacting BaFin and the Deutsche Bundesbank (available here: BaFin; Deutsche Bundesbank).

BaFin and the Deutsche Bundesbank are following the federal government’s current recommendations to reduce personal contact as far as possible. Specifically, this means that many of our employees are working from home. Nevertheless, your BaFin contacts can still be reached by e-mail and at their known telephone extension.

Hard copies of notifications and other documents may still be sent by post. However, we kindly ask that institutions communicate with BaFin and the Deutsche Bundesbank solely by e-mail until further notice.

If electronic communication should be impossible in an exceptional case, we ask that you discuss the matter with us in advance if possible.

For cases in which communication with BaFin is subject to a legal form requirement (e.g. notifications requiring the “written" form), BaFin urges institutions to send the documents in question by e-mail to qes-posteingang@bafin.de, using a qualified electronic signature, which in accordance with section 3a (2) sentence 1 of the German Administrative Procedure Act – (Verwaltungsverfahrensgesetz) may replace the written form: it is therefore not necessary to submit hard copies of such documents (further information on this topic can be found here).

For data/documents submitted electronically in the past (e.g. via the MVP Portal), no changes will be necessary.

Anyone submitting confidential information to BaFin by e-mail should, in their own interests, ensure that these e-mails are encrypted. More information on this subject is available here.

Regarding the submission of audit reports: generally, audit reports in accordance with section 5 sentence 1 of the Audit Report Regulation (Prüfungsberichtsverordnung – PrüfbV) must be submitted in paper form. Under section 5 sentence 2 of the PrüfbV, an electronic version of the report must additionally be submitted via the MVP Portal. Due to the current exceptional circumstances, BaFin and the Deutsche Bundesbank will, during the pandemic, raise no objections if institutions do not submit audit reports in paper form, provided the electronic version has been submitted. In order to give institutions subject to the submission requirement planning security, we would like to advise that this practice will also apply to audit reports for institutions’ annual financial statements 2020. BaFin and the Deutsche Bundesbank expressly reserve the right to request submission of the paper version at a later date. Institutions are requested to use the MVP Portal to submit electronic copies of audit reports. Audit reports signed with an electronic signature can also be submitted via this portal.

For certain reports, particularly those based on the German Financial and Internal Capital Adequacy Information Regulation (Finanz- und Risikotragfähigkeitsinformationenverordnung – FinaRisikoV) and the reporting of large exposures and loans of 1 million euros or more, BaFin and the Deutsche Bundesbank will not be taking supervisory measures with regard to any late submissions; rather, institutions will be permitted to use an additional modified submission procedure for master data reports for reporting large exposures and loans of 1 million euros or more. Please send your questions in this respect to MIO-Evidenz@bundesbank.de or MIO-DTA@bundesbank.de.

Due to current travel restrictions and the requirements to limit personal contact, the possibilities for conducting the otherwise obligatory external and particularly internal inspections of real estate to be mortgaged are currently very limited at best. For the time being and in light of these factors, in such cases BaFin will tolerate Pfandbrief banks (both SIs and LSIs) using mortgages as Pfandbrief coverage on , BaFin will tolerate in such cases if Pfandbrief banks (both SIs and LSIs) use as Pfandbrief coverage mortgages on the basis of valuations within the meaning of the German Regulation on the Determination of the Mortgage Lending Value (Beleihungswertermittlungsverordnung – BelWertV) of the corresponding real estate property encumbered without a prior inspection of the property to be mortgaged, under the following conditions:

• All other requirements for determining a mortgage lending value under the BelWertV must be met, including sufficient relevant documentation on the property, to ensure that the valuation expert can be sufficiently precise in assessing the condition of the property and, if necessary, identify any differences, such as between the planning documents and the actual property to be valued.
• In the case of properties as described in section 24 (1) of the BelWertV (small loan properties) that do not already fall under the applicable provisions of section 24 (3), (3a) of the BelWertV, the result of the mortgage lending valuation must be reduced by at least 10%.
• In the case of all other real estate, if no inspection is carried out, the result of the mortgage lending valuation must be reduced by at least 20%. If only the interior inspection is waived, the minimum discount will be reduced to 15%. The discount is to be taken into account and documented in deriving the mortgage lending value (section 4 (1) BelWertV).
• If instead of an on-site inspection, an online visual survey (e.g. by means of mobile phone) is performed enabling the valuer to gain near-complete insight into the entire real estate property and its surroundings, the respective discounts may be reduced by 5 percentage points or, in case of small loans (section 24 (1) BelWertV), be omitted entirely. The online visual survey of the real estate property is to be documented in respect of its extent as well as corresponding findings and by means of photographic evidence (screenshots).
• Any persistent, crisis-related effects on the mortgage lending value, which can arise particularly in the case of operator-run properties as a result of a reduced occupancy rate, must be adequately taken into account in the valuation.

The waived inspection must be carried out without delay once the above restrictions no longer apply. If this should result in a reduction of the mortgage lending value, it may be necessary to reduce such value further. If the result of the mortgage lending valuation is confirmed, the precautionary discount occasioned by the lack of an inspection can be omitted. If, instead of an inspection, an online visual survey is performed, the inspection requirement for real estate within the meaning of section 24 (1) of the BelWertV (small loan properties) may be waived.

BaFin will raise no objections if, for the purpose of granting state-aided loans, institutions carry out identification procedures that are based on section 14 of the German Money Laundering Act (e.g. by carrying out the verification of identity based on a copy of an identity document) and if any risk of money laundering or terrorist financing is addressed by means of appropriate and ongoing client and transaction monitoring during the business relationship.

If information indicating a higher risk emerges after the business relationship is established, additional appropriate measures must be taken subsequently at a suitable point in time. This may include subsequent personal identification procedures based on identity documents, for instance.

It is important to ensure that crime, especially money laundering and terrorist financing, is effectively tackled, even during the coronavirus crisis.

Capital requirements such as the capital conservation buffer (CCB), the counter-cyclical capital buffer (CCyB) and Pillar 2 Capital Guidance (P2G) are intended to function as buffers for times of stress, such as the present situation. As such, institutions can use these capital buffers to mitigate the potential impacts of the crisis.

Whilst failure to meet the capital conservation buffer results in restrictions on distributions, among other things, (see the relevant FAQ), failure to comply with P2G (up to the amount of the capital conservation buffer) has no direct consequences.

In contrast to the SREP capital add-on, gross Pillar 2 Capital Guidance (P2G), which the capital conservation buffer is counted towards, is not a strict supervisory requirement but rather an expectation on the part of BaFin. Pillar 2 Capital Guidance tells an institution how much additional capital it should, as a minimum, maintain from a supervisory point of view in order to ensure that it is able to comply with the SREP overall capital requirement at all times over the medium term and after taking into account potential losses in periods of stress. If an institution fails to comply with P2G, this should result in closer supervision.

As it is now beyond doubt that the current situation constitutes a period of stress, institutions are currently subject to no additional requirements provided the amount covered by the capital conservation buffer remains unused. However, if institutions fail to meet the capital conservation buffer requirements, the restrictions on distributions tied to the use of the buffer, among other things, would apply.

Until now, in the event that institutions fail to comply with Pillar 2 Capital Guidance, BaFin has requested a written statement at least explaining the reasons for this (or where applicable, explaining the reasons for an expected failure to comply in the capital planning period) and the planned remedial measures and measures to reinforce the capital base including the use of contingency reserves pursuant to section 340f of the German Commercial Code (Handelsgesetzbuch – HGB).

Currently, it is expected that the institutions merely inform BaFin of the fact that they do not comply with Pillar 2 Capital Guidance; BaFin will discuss further steps with the institutions in due time.

The rules contained in the MaRisk in the area of credit business stipulate minimum requirements in particular for the segregation of duties and voting (BTO 1.1, including with regard to the involvement of the front office and back office in risk-relevant exposures) and for credit business processes (BTO 1.2.). The latter concerns the granting of loans (BTO 1.2.1), intensified loan management (BTO 1.2.4) and the treatment of problem loans (BTO 1.2.5). BTO 1.2.4 stipulates in particular the necessity of fixed criteria governing when an exposure is to be subjected to heightened observation and intensified loan management: responsibility for the development of these criteria, as well as their regular review, must lie outside the front office. In defining these criteria, the institution must in particular include in its analysis exposures subjected to forbearance measures. For normal and intensified loan management, the organisational requirements and processes applied are similar, but the intensity of observation with regard to the credit exposure is different. The minimum organisational requirements applicable to the treatment of problem loans and recovery loans differ from this. In particular, responsibility for the treatment and management of such loans must lie outside the front office (BTO 1.2.5).

The current valid version of the MaRisk governs the requirements relating to the organisational and operational structure which institutions must comply with in connection with the granting of loans and the ongoing management of exposures. However, the MaRisk does not specify the criteria and conditions under which postponement for the benefit of the borrower or the granting of a new loan as a bridging loan would be allowed. This decision falls to the individual institutions and must be taken in line with their respective business policy within the scope of compliance with due diligence requirements customary in the industry. Naturally, in the event of a crisis or an external shock resulting in an unexpected number of problem loans and loans requiring intensified supervision, the criteria used to determine what is considered customary in the industry are different to those applicable under normal circumstances. BaFin will take this into consideration in its ongoing supervision and during later inspections, particularly where institutions grant additional loans to the same borrower within the scope of support programmes initiated by the public authorities that are intended to mitigate the effects of the crisis.

Nonetheless, institutions must also appropriately consider the associated risks when granting bridging loans (or postponements). Institutions are themselves responsible for judging, in line with their business policy, whether they are in a position to enter into these risks. As part of this, the business policy must be updated at regular intervals in response to the current crisis situation, which will have an impact on many borrowers; the business policy must also be focussed on the longevity of business relationships, for example. Furthermore, even if a bank takes account of the particular impacts of an external crisis on its borrowers and/or takes into consideration guarantees and discharges of liability, it will, even with flexible loan terms and conditions and a flexible approach to instruments customary in the industry, have to determine whether exposures exhibit material non-performing features. In line with BTO 1.2.5 item 2 of the MaRisk, the bank would then have to decide whether it can keep an exposure in intensified loan management. This is still permissible for exposures that exhibit material non-performing features provided the exposure’s counterparty and credit risk can at least be limited and the subsequent procedure (customary monitoring of the loan without recovery report) is coordinated with the staff specialised in recovery and resolution, and provided the legal risks are appropriately reviewed.

In a first step, institutions should review and document which, if any, audits by the internal audit function can still be carried out properly. If the contact persons for the internal audit function are unavailable or if they are required to focus on other issues relating to the coronavirus crisis, BaFin is of the view that it is acceptable to delay the audits in question. However, a suspension of current audit planning must not result in auditing activities being omitted in large part in these areas; rather, audits may merely be deferred to a later date. In accordance with BT 2.3, item 1 of the MaRisk, the internal audit function has a certain degree of flexibility in its risk-oriented audit planning. This relates to the “normal operations” of the internal audit function and is important in cases where special audits are required or if the institution needs to waive the three-year audit cycle. However, this flexibility afforded to institutions also shows that their original planning is not rigid and can be changed or deferred (for example when it is necessary to ensure that a special audit required at short notice can be performed in accordance with BT 2.3., item 4 of the MaRisk).