“The measures taken by BaFin and by the Deutsche Bundesbank in relation to the coronavirus pandemic are preventive,” said Chief Executive Director Raimund Röseler. He explained that they serve to provide affected companies with the flexibility they need in the current situation, allowing them to focus on maintaining their business operations and granting loans to the real economy.

Through the measures it has taken, BaFin is also supporting government programmes to mitigate the economic impacts of the coronavirus crisis, which have been launched via development banks. “With these measures, BaFin is reinforcing the fiscal support programmes – and is doing so on an ongoing basis and in response to the developing situation,” said Hufeld.

On its website, BaFin has published FAQs on various issues related to the coronavirus crisis; these are being expanded and updated on a regular basis. The FAQs clarify, for example, that an obliger is not necessarily to be regarded as defaulted if instalments on a loan are postponed as a consequence of the coronavirus outbreak.

As regards the obligation for credit institutions, when granting loans, to require borrowers to disclose their financial situation (section 18 of the German Banking Act (Kreditwesengesetz – KWG)), BaFin has clarified that the latest available annual accounts provide a sufficient basis for the creditworthiness as-sessment; as a rule this currently means the annual accounts for 2018, provided the accounts for 2019 are not yet available. For the assessment of debt-servicing capacity, institutions can use a past full-year liquidity assessment from the borrower. As regards conduct of business and disclosure obligations in the securities sector, until further notice, BaFin will not investigate breaches arising in relation to invest-ment services conducted by staff working from home. This is subject to the condition that any missing documentation or information is provided as appropriate and that customers are informed of this.

BaFin has issued a range of measures intended to increase the flexibility with which institutions can grant loans and, where applicable, absorb losses. Against this background and in light of the consider-able uncertainty regarding further developments, BaFin advises against share buy-backs and recom-mends that institutions give careful consideration before paying any distributions in the form of divi-dends, profits or bonuses. “We are advising financial institutions to treat their available capital re-sources with great care,” explained Hufeld.

BaFin also advises institutions to make use of the transitional arrangements for institutions that prepare their accounts in accordance with IFRS 9. “We recommend that banks strengthen their focus on medi-um-term planning,” clarified Röseler. In the event of delays to payment due to the coronavirus crisis, institutions should adopt a “through the cycle” perspective that also takes into consideration measures by the state to mitigate the economic impacts of the crisis. BaFin’s dialogue with standard-setters in the area of accounting will be continued at the national and international level.