After having taken initial steps to deal with the impact of the COVID-19 pandemic on the financial sector in Germany (see the related publication in our blog), the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) has taken further relief measures. In order to give supervised entities a better overview of these measures, BaFin has published a related website compiling information on the actions taken by BaFin, by the European Central Bank (ECB) and by the European Supervisory Authorities (ESAs).
List of frequently asked questions (FAQs)
On this website, BaFin has also consolidated its guidance and measures in the form of a list of frequently asked questions (FAQs). The regulator has announced that it will continuously update and complement this list at short notice.
So far, the FAQs already deal with a variety of matters related to both banking supervision and securities supervision. Regarding the regulation of banks during the crisis situation, the list covers questions as to regulatory capital requirements, organizational questions or questions regarding the administrative practice of the authority. Regarding securities supervision, the list deals with questions regarding ad hoc disclosure requirements.
In particular: Impact of deferral of loans on capital requirements
As one of the issues dealt with in the FAQs, BaFin clarifies the impact of a deferral of loans in connection with the crisis on the regulatory capital requirements of banks. An obligor is not considered as defaulted within the meaning of the Capital Requirement Regulation (CRR) if a loan is deferred, but the deferred amount is agreed to be subject to interest at the originally agreed terms.
Pursuant to BaFin, such deferral does not result in an obligor being past due on any material credit obligation to the institution pursuant to Art. 178 (1) lit. (b) CRR and is not part of a “distressed restructuring” within the meaning of Art. 178 (3) lit. (d) CRR.
On a national level, BaFin states that such deferral does not necessarily conflict with the provisions of BaFin’s circular 09/2017 (Mindestanforderungen an das Risikomanagement – MaRisk). The circular does not stipulate the criteria and conditions under which a deferral may be granted. Rather, a credit institution has to decide based on standard banking practice. BaFin intends to take into account that different banking standards apply during such a singular crisis.
In particular: On-site audits
As another example of the matters dealt with in the FAQs, BaFin has announced that auditors may refrain from on-site audits during the coronavirus pandemic. However, BaFin stresses the exceptional character of this relief and that the statutory auditing obligations, in principle, remain effective.
In general, companies must ensure that the documents required for an audit are made available to the auditors electronically. If a remote audit cannot be carried out, BaFin will not pursue breaches of any audit deadline.