Germany: Applying For A German Banking Or Financial Services Licence

Due to Brexit developments, for many non-European investors the option to acquire a German banking or financial licence, including the attached benefit of being able to use the European passport regime, is a part of their strategic thinking in terms of their future European business model.

In the following article, the application process for a German banking or financial services licence is set out.

Certain banking and financial services in Germany require a banking licence pursuant to section 32 of the German Banking Act (Gesetz über das Kreditwesen, KWG). (An English translation of the KWG is available at

The KWG provides three categories of institution – credit institutions, financial services institutions and financial enterprises – to which different licence requirements apply.

Credit institutions are enterprises which conduct banking activities on a commercial basis or on a scale which requires a commercially organised business undertaking.

Banking Activities

Banking activities are defined conclusively in the KWG as any of the types of activity listed in section 1, para. 1 KWG. These include the acceptance of funds (deposit-taking activities), the granting of loans (lending activities), and the purchase and sale of financial instruments (prime brokerage services).

The commercial conduct of a banking business activity requires a licence. Conduct qualifies as commercial if the activity is to be undertaken for a certain length of time and with a view to a profit. Business volume, however, does not influence the licence requirement, so even 'small' banks need a licence.

Section 2 KWG lists certain entities which do not fall within the scope of the credit institution definition and so do not require a banking licence in order to conduct a banking business activity. For example, enterprises that conduct such activity solely with respect to their parent, subsidiaries or affiliated enterprises.

Certain types of banking business, such as specialised credit institutions, that do not intend to conduct any deposit-taking or lending activity may apply for a limited banking licence, as opposed to an unlimited, full licence.

Financial services institutions are enterprises that provide financial services on a commercial basis or on a scale which requires a commercially organised business undertaking; however, they are not credit institutions. Financial services are defined conclusively in section 1, para. 1a KWG and comprise, among others, investment brokerage, the purchase and sale of financial instruments for others (contract brokerage) and portfolio management.

The commercial conduct of financial services requires a written licence, which may be limited to certain financial services.

Enterprises conducting banking business activities or providing financial services are referred to in this memorandum as 'institutions'.

Financial enterprises are enterprises that are not institutions but which conduct banking-related activities, such as factoring, leasing and investment advice. As financial enterprises neither conduct banking activities nor provide financial services, they do not require a licence pursuant to section 32 KWG.

Supervisory Body

The supervisory body responsible for granting banking licences is the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) or, in the case of licences for deposit-taking and lending activities (ie 'credit institutions', as defined in the Capital Requirements Regulation (CRR)), the European Central Bank (ECB). The application for a banking licence must be filed in writing with the BaFin or ECB, as applicable, and be accompanied by documentation demonstrating that the requirements for a licence are fulfilled.

Conditions to Granting a Licence

Below is a brief summary of the conditions for granting a banking licence pursuant to sections 32 and 33 KWG. There are special rules for opening branch offices of foreign institutions and for payment institutions, but these are beyond the scope of this update.

Pursuant to KWG, financial services institutions and credit institutions can be operated in any legal form available under German law except, in the case of credit institutions, in the form of a sole proprietorship (Einzelkaufmann).

Large commercial banks are usually run in the form of (publicly traded) corporations (Aktiengesellschaft, AG) and smaller banks in the form of limited liability companies (Gesellschaft mit beschränkter Haftung, GmbH). Partnerships (offene Handelsgesellschaft, oHG), limited partnerships (Kommanditgesellschaft, KG) and limited partnerships with a GmbH as sole general partner (GmbH & Co. KG) are also admissible. The forms AG, GmbH and GmbH & Co. KG have the advantage that the shareholders or limited partners, as the case may be, are generally not personally liable for the entity's debt.

Depending on the legal form of the entity, the licence holder is either a legal entity or a natural person.

In the case of a partnership (oHG) or limited partnership (KG), it is generally acknowledged that the licence is held by the personally liable partners, who each require a licence. Any new partner that enters the partnership in a personally liable capacity must also obtain a licence. Partners who are not personally liable, such as limited partners and silent partners, do not require a licence.

In the case of corporations (AG and GmbH) the licence is held by the legal entity. A change in the shareholders, therefore, does not affect the licence. In the case of a limited partnership with a GmbH as the sole general partner (GmbH & Co. KG), the licence is held by the GmbH, being the sole liable partner.

Owing to its personal character, the licence cannot be transferred by way of singular or universal succession. This implies that a new licence is required in the event of a change in the legal form, for example, in the case of a merger or transformation from a partnership into a corporation. A new licence is also required for any other transfer of banking or financial services activities to a legal entity or natural person that does not already have a licence.

Initial Capital

The initial minimum capital requirement depends on the nature of the planned business activity and is detailed laid down in section 33 KWG.

Nature of Business Initial Capital Requirement
Credit institutions (as defined in the CRR) €5 million
Financial services providers, and securities trading banks, which trade for their own account €730,000
Financial services providers which do not trade for their own account €125,000
Investment advisors, investment brokers, contract brokers, portfolio managers, operators of multilateral trading systems and enterprises which perform placement activities in relation to financial instruments (provided that they are not authorised to obtain ownership or possession of customers' funds or securities and do not trade for their own account) €50,000
Investment advisors, investment brokers and contract brokers registered as insurance brokers pursuant to Directive 2002/92/EC on insurance mediation and fulfilling the requirements of article 4, para. 3 of that Directive (provided that they are not authorised to obtain ownership or possession of customers' funds or securities and do not trade in financial instruments for their own account in the course of providing financial services) €25,000

Independent of the initial capital requirement, credit institutions conducting deposit-taking or investment fund activities, and financial services institutions providing financial services as listed in section 1, para. 1a, nos. 1-4 KWG (investment brokerage, contract brokerage, portfolio management or own-account trading) are obliged to secure all deposits.

With a view to fulfilling this obligation, such institutions must join one of the organisations set up by the various German banking groups in order to provide security for investors in case of a member institution's insolvency (Einlagensicherungsfonds), pursuant to section 32, paras. 3 and 3a KWG and section 2 of the Deposit Guarantee and Investor Compensation Act (Einlagensicherungs- und Anlegerentschädigungsgesetz). For private commercial banks, the respective organisation is Entschädigungseinrichtung deutscher Banken GmbH.

Generally speaking, each institution needs to appoint at least two senior managers (Geschäftsleiter). The members of the institution's future management must be deemed trustworthy and demonstrate their professional qualifications.

Trustworthiness must be demonstrated not only by the management, but also by holders of a qualified participating interest, as well as, in the case of an incorporated entity, a legal representative and, in the case of a partnership, a general partner. For practical purposes, trustworthiness is assumed unless any negative facts are established. The BaFin reviews submitted references, relies on its prior experience with the relevant person in that person's former capacity as a manager of another institution and checks against criminal records.

Professional qualifications in this context means the theoretical and practical knowledge of the relevant business activity, as well as managerial experience. The extent of the professional qualifications required, therefore, depends on the business activity for which the licence is to be granted. A person is deemed to have the professional qualifications necessary to manage an institution if he/she has three years' managerial experience at an institution of a comparable size and type of business. Such experience is considered managerial if the person worked in management or at a level immediately below management. As a general rule, senior managers are expected to have sufficient experience, in particular with respect to lending business activities. Lastly, professional qualifications are in each case assessed on an individual basis and with regard to the particularities of the respective institution.

Furthermore, the management must submit a viable business plan for the relevant institution, outlining the planned activity, organisational structure and internal monitoring procedures. The business plan and organisational structure must demonstrate that the institution is in a position to fulfil the requirements of section 25a KWG, including, among other things:

  • A suitable arrangement for managing, monitoring and controlling risk.
  • An established business organisation, an appropriate internal control system and adequate security precautions with respect to electronic data processing.
  • Records of executed business transactions, enabling full and continued supervision by the competent supervisory body.
  • Safeguards, as appropriate for the respective business activities and customers, against money laundering and other fraudulent activities that are to the detriment of the respective institution.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.