In the field of money laundering prevention, for example, Hufeld argued that BaFin must continue to clarify which activities do and do not fall within the authority’s area of responsibility. “This is not the Wild West, but a state governed by the rule of law. We cannot simply pin a Sheriff's badge to our lapel and ride off to arrest anyone we are suspicious of – such as those potentially involved in money laundering,” explained Hufeld. Only the prosecuting authorities can make use of police means and methods of investigation, he said. “If they conduct an investigation, that does not mean that we have been sleeping on the job. Quite the reverse, in fact: around 90 percent of suspicious transaction reports come from the financial sector – and these are made on the basis of prevention systems that have been created specifically to produce such reports and that fall under the scope of our supervision,” said Hufeld.

At the same time, Hufeld warned that supervisors should not rest on their laurels in light of the successes of post-crisis regulation. Thanks to extensive reforms, the financial sector is more stable and more resilient than before the outbreak of the crisis. “Even the unprecedented regulatory effort following the outbreak of the crisis was unable to completely eliminate old risks or pre-empt all future challenges. Constant vigilance is therefore paramount. Reverting to the laissez-faire attitude of pre-crisis regulation would be fatal,” said Hufeld.

BaFin’s Chief Executive Director of Resolution, Dr Thorsten Pötzsch, also views cooperation as the best way forward when it comes to money laundering prevention. “One group in particular has benefited from the lack of consistent regulation in Europe up to now: law-breakers,“ said Dr Pötzsch. He emphatically praised the action plan issued by the Council of the EU as well as the European Commission’s roadmap. These provide for the creation of real supervisory convergence in Europe, among other things. Dr Pötzsch also welcomes the strengthening of the European Banking Authority (EBA), which will in future be able to demand investigations be carried out at the national level and, where necessary, take supervisory action itself. At the same time, he issued the following warning: “The EBA must not become a supervisor of supervisors.”

A good 18 months after the entry into force of the Markets in Financial Instruments Directive MiFID II, the conclusion drawn by Elisabeth Roegele, Chief Executive Director of Securities Supervision/Asset Management, was somewhat mixed: “Our market surveys have shown that, in the vast majority of companies, processes have been integrated with considerably less disturbance than was to be anticipated given the scope of the directive,” said Roegele.

Roegele reported that the process of taping, or recording telephone conversations relating to securities advice, has been implemented by banks largely without errors, for example, but that adjustment is required as regards ex-ante cost information and the statement on suitability. “There are still considerable differences in the ex-ante cost information provided, which makes it impossible for consumers to properly compare prices,“ explained Roegele. Issues of European law were cited as the reason for this. Compromises need to be developed at the European level. Roegele intends to apply some pressure as regards the statement on suitability. Despite having received the relevant information from BaFin at an early stage, many companies have not yet implemented all of the requirements – something which BaFin will no longer accept, according to Roegele.

Raimund Röseler, Chief Executive Director of Banking Supervision, warned of the erosion of credit standards. Against the backdrop of increased liquidity in the market combined with limited demand for credit, many banks could be tempted to offer loans at very favourable conditions. An analysis of selected statistics has shown that credit defaults have more than halved since 2014. In the same period, however, the volume of new provisions recognised has also halved. “The potential erosion of credit standards combined with a reduction in risk provisioning could pose a risk to financial stability,” said Röseler. For this reason, BaFin launched a survey in April of around 100 institutions together with the Bundesbank, the results of which are not yet available.

Dr Frank Grund, Chief Executive Director of Insurance and Pension Funds Supervision, focussed on the ongoing review of Solvency II. The European supervisory regime for insurers has proven its worth and improved risk management, according to Grund. Nevertheless, Grund highlighted a few points that could be refined, relating in particular to proportionality, according to which regulation and supervision must be aligned with the nature, scope and complexity of companies’ risks. According to Grund, it is not yet clear whether the review will lead to new thresholds for the application of Solvency II. Dr Grund also spoke in favour of adjusting the standard formula for calculating solvency capital requirements so that negative interest rates are also taken into account. He also argued that the Solvency II review must also adequately reflect the requirements of long-term business.

According to Béatrice Freiwald, Chief Executive Director of Internal Administration and Legal Affairs, BaFin is currently in the midst of a digital transformation. Large portions of supervisory processes have already been digitalised. “This process will continue and will gather pace,” she announced. The position of Chief Digital Officer (CDO), which was advertised at the beginning of 2019, is intended to contribute to BaFin’s success in this area. “Together with colleagues from the Digital Office, the CDO will act as our digitalisation navigator,” explained Freiwald. Furthermore, BaFin’s human resources development will in future place increased emphasis on skills in mathematics, informatics, science and technology.

BaFin also presented its annual report 2018 on 7 May, which is now available on its website in German language. The English version will follow.