Banking Act
Banking supervision in the Federal Republic of Germany
1. Legal basis and aims
The legal basis for banking supervision in Germany is the Banking Act. This Act is aimed at safeguarding the viability of the banking industry, which is particularly sensitive to fluctuations in confidence, by protecting creditors. The Act seeks to fulfil this aim while paying due regard to free market principles, i.e. the entire responsibility for business decisions rests with the credit institutions' managers. The activity of credit institutions is restricted only by quantitative general provisions and their obligation to disclose their books to the supervisory authorities; the supervisory authorities do not intervene directly in the credit institutions' individual operations.
II. Organisation
Banking supervision is carried out by the Federal Banking Supervisory Office, working in cooperation with the Deutsche Bundesbank. The Act assigns the central role in banking supervision to the Federal Banking Supervisory Office (section 6 of the Banking Act). The Federal Banking Supervisory Office reports to the Federal Ministry of Finance direct.
Recognising that the functions of the authority responsible for banking supervision and those of the central bank are interconnected, the legislature has provided for the Bundesbank to be involved in banking supervision. Moreover, the participation of the Bundesbank is necessary since the Federal Banking Supervisory Office has no substructure of its own. It is only the Bundesbank system, with its main offices and branch offices, that permits efficient and cost-effective supervision, at the local level, of the over 4,000 credit institutions in the Federal Republic of Germany.
There is a clear division of functions between the Federal Banking Supervisory Office and the Bundesbank in the area of banking supervision:
- Sovereign functions, e.g. the issuing of administrative acts, are the responsibility of the Federal Banking Supervisory Office.
- Before issuing general regulations, the Federal Banking Supervisory Office must confer with the Bundesbank. The degree to which the Bundesbank is entitled to participate is graduated according to the extent to which regulations affect its functions. Thus, when issuing Principles Concerning Capital and Liquidity, the Federal Banking Supervisory Office is required to reach agreement with the Bundesbank, whereas in other cases the Bundesbank merely has to be consulted.
- The Bundesbank is fully involved in the regular surveillance of credit institutions and analyses their annual and other reports. Observations which the Bundesbank makes in the course of its own activities are also used in the monitoring operations.
III. Development of banking supervision after the Second World War
After the end of the War, banking supervision was initially carried out at Lander Government level. There was no uniform regulatory framework throughout the Federal Republic until the passing of the Banking Act of July 10, 1961, which at the same time created the legal basis for the establishment of the Federal Banking Supervisory Office.
The extension of the credit institutions' business activities, in particular outside Germany, fairly soon raised the question of how the instruments of banking supervision could be brought into line with these developments.
The amendment of the Banking Act in 1976 confined itself to closing the gaps in banking supervision which had become particularly obvious as a result of the failure of Bankhaus l.D. Herstatt in 1974. In preparation for an extensive revision of the Banking Act, the Federal Minister of Finance set up a Commission of Inquiry into "Basic Banking Questions" in November 1974. The Commission also had to examine whether the structure of the German banking system should be changed. In its report, which was submitted in May 1979, it came to the conclusion that the German banking system had proved to be effective. However, the Banking Act would have to be adjusted to the changes in the credit institutions' risk situation. It was necessary to ensure that credit institutions had adequate capital, both individually and on a consolidated basis. These findings of the inquiry were in line with the demands which the banking supervisory authorities had been making in the light of their practical experience.
The Act Amending the Banking Act, which came into force on January 1, 1985, introduced a consolidation procedure for banking supervision purposes in addition to the existing supervision of individual credit institutions. Until that time, credit institutions could build up credit pyramids through their subsidiaries without any increase in the parent institution's capital base and thus bypass the restrictions on business that are based on credit institutions' capital.
The consolidation comprises
- the assessment of the adequacy of the liable capital,
- the application of the regulations governing large loans, and
- regular surveillance on the basis of consolidated monthly returns.
Through the Fourth Act Amending the Banking Act, which came into force on January 1, 1993, essentially two Directives of the European Economic Community (EEC) - viz. the Second EEC Banking Directive and the Own Funds Directive - were translated into German law. These Directives constitute a further substantial step towards harmonising banking supervision legislation in the EU and are the precondition for free transactions in financial services in the single European market. The regulations for the licensing and ongoing surveillance of credit institutions were harmonised throughout the EU; the branches in other EU member states of credit institutions domiciled in an EU country were, in principle, subjected to the sole supervision of the home-country authority responsible for that domicile, and a uniform extended definition of capital was agreed upon.
On the basis of the new definition of capital, Principle I was redrafted as from January 1, 1993, in implementation of the EC Solvency Ratio Directive. At the same time Principle la, which limits the risks involved in off-balance-sheet transactions, was brought into line with the new capital concept.
IV. Basic features of the Banking Act
1. Scope
All enterprises which conduct banking business within the meaning of section 1 of the Banking Act on a scale which requires a commercially organised business undertaking are subject to the Banking Act. It does not matter whether the capital is German-owned or foreign-owned.
A branch of a credit institution domiciled in another EU member state does not require a licence or any endowment capital and is, in principle, supervised by the appropriate authority at the domicile of the institution. By contrast, the branches of credit institutions domiciled in non-Community countries require both a licence and endowment capital and are, in principle, supervised by the Federal Banking Supervisory Office, like domestic credit institutions. Moreover, some specialised credit institutions such as mortgage banks, ship mortgage banks, building and loan associations and investment companies are subject to special laws in addition to the Banking Act. Savings banks must comply not only with the Banking Act but also with savings bank laws passed under Land legislation.
2. Licensing
Anyone who wishes to operate a credit institution requires a licence from the Federal Banking Supervisory Office (section 32 of the Banking Act). The licence may be limited to certain types of banking business. Conducting banking business without a licence is a punishable offence (section 54 of the Banking Act). No specific legal form for credit institutions is stipulated in the Banking Act, although credit institutions have not been allowed to operate in the form of a sole proprietorship since 1976. The licence may be refused only for the reasons listed in section 33 of the Banking Act, e.g. if the managers lack the requisite personal or professional qualifications, if the shareholders are not trustworthy or if the credit institution does not have at least two managers (principle of dual control). Credit institutions which accept deposits or other repayable funds from the general public and intend to conduct banking business must have a minimum capital equivalent to five million ECUs. The minimum capital of all other institutions is fixed in accordance with the administrative practice of the Federal Banking Supervisory Office.
3. Capital and liquidity
The definition of capital was significantly extended by the Fourth Act Amending the Banking Act. Since then a distinction has been made between superior-quality capital, i.e. core capital (e.g. paid-up capital, published reserves, contributions to the capital by silent partners), and inferior-quality capital, i.e. additional capital (e.g. unrealised reserves, capital represented by participation rights, subordinated liabilities, the addition of members' uncalled commitments in the case of cooperative societies).
Principle I stipulates that at least 8 % of a credit institution's risk assets should be backed by liable capital. Section 10 of the Banking Act defines what is to be regarded as liable capital. Risk assets comprise financial swaps, futures contracts and option rights as well as loans, securities and participating interests. For calculating the Principle I ratio, loans are weighted in accordance with various risk groups. Loans to domestic public authorities and the public authorities of certain states are deemed to be risk-free and are not included. Financial swaps, futures contracts and option rights are converted into loan equivalents in accordance with their periods to maturity and are included in the Principle at the weight for loans, but not at more than 50 %.
The parent institutions of groups of credit institutions must ensure that Principle I is complied with on a consolidated basis, too. The consolidation must include all domestic and foreign subsidiaries as well as leasing and factoring companies in which the parent institution has an interest of at least 40 %, or over which it can exercise a controlling influence. The legislature assumed that the parent institution must normally accept liability for losses incurred by its subsidiaries in accordance with its shareholding. For this reason a "pro rata consolidation" was prescribed, i.e. the risk assets and liable capital are to be consolidated in accordance with the share which the parent institution holds in the subsidiaries' capital.
Principle la limits a credit institution's open positions that are subject to price risks to 42 % of its liable capital. This overall limit is distributed among three subitems. In order to limit the exchange rate exposure, at the close of business each day the difference between a credit institution's foreign-currency-denominated assets and liabilities, irrespective of their maturities, must not exceed 21 % of its liable capital. The open interest rate risk is determined on the basis of the risk-enhancing items arising from interest rate futures and interest rate options, and must not exceed 14 % of the reference variable. Finally, an upper limit of 7 % of the liable capital applies to the items exposed to other price risks.
Liquidity is assessed according to Principles ll and lll. Principle ll stipulates that the sum of certain long-term assets should not exceed the sum of certain financial resources which are deemed to be long-term. These are liabilities with maturities of four years and over and specific percentages of shorter-term liabilities which, as experience has shown, are available to the credit institutions for their long-term use ("deposit base").
Pursuant to Principle lll, the sum of various short and medium-term assets should not exceed the sum of certain short and medium-term financial resources (plus the financial surplus or less the financial deficit under Principle ll). The Banking Act does not provide for the application of the liquidity principles on a consolidated basis.
4. Surveillance of lending business
Loans to a single borrower which, taken together, exceed 15 % of the credit institution's liable capital in the former definition (large loans; see section 13 of the Banking Act), and loans to borrowers closely associated personally or otherwise with the lending credit institution (loans to managers, etc. (Organkredite); see sections 15 to 17 of the Banking Act) are deemed to be particularly risk-prone and are therefore subject to special regulations governing their reporting and decisions to grant them. Moreover, no single large loan may exceed 50 % of the liable capital, and all large loans taken together may not exceed eight times the liable capital in the former definition (see section 13 (3) and (4) of the Banking Act). These limits also apply to groups of credit institutions (see section 13a of the Banking Act). To make it easier to obtain the requisite detailed information from subsidiaries, the consolidation requirement applies only when the parent institution holds a participating interest amounting to not less than 50 % in the subsidiary.
The credit register concerning loans of three million Deutsche Mark or more in accordance with section 14 of the Banking Act is an important source of information both for the banking supervisory authorities and for lenders. This clause stipulates that credit institutions and insurance enterprises must report their loans of three million Deutsche Mark or more to the Bundesbank, which adds together the loans to individual borrowers and subsequently notifies the lenders of the total indebtedness of their borrowers and the number of lenders involved. Mortgage loans and loans of three million Deutsche Mark or more granted by foreign subsidiaries of German credit institutions have been included in the reporting procedure since July 1, 1986.
As regards the concepts of "loan" and "borrower", and the exceptions to the regulations governing lending, see sections 19 (1) and (2) and 20 of the Banking Act.
5. Monthly returns
To enable the banking supervisory authorities to conduct a regular analysis of the credit institutions' business, the latter have to submit monthly returns to the Bundesbank. The Bundesbank passes on these returns, together with its comments, to the Federal Banking Supervisory Office. If the Bundesbank collects monthly balance sheet statistics for the purposes of its monetary analysis, these are deemed at the same time to be monthly returns in order to avoid duplication of work for the credit institutions. The parent institution of a group of credit institutions must submit both its own monthly return and a pro rata consolidated monthly return for the group.
6. Audits of credit institutions
The reporting system for banking supervision purposes relies heavily on the credit institutions' data being correct. For this reason the reports of annual accounts auditors must meet particularly high standards. The Federal Banking Supervisory Office and the Bundesbank have no such auditors of their own. Instead, credit institutions are audited by independent certified auditors whom they select themselves and who, in their audits, have to comply with detailed auditing guidelines laid down by the Federal Banking Supervisory Office. Section 29 of the Banking Act spells out the duties of the auditors. Credit institutions in the savings bank and cooperative bank sectors are normally audited by the auditing bodies of their respective associations.
Moreover, the Federal Banking Supervisory Office is empowered to carry out audits even if there is no special reason for them (section 44 (1) of the Banking Act). External certified auditors are entrusted with these audits, too, though not with audits of foreign exchange transactions, which are carried out by the Bundesbank.
The reports on audits carried out by deposit guarantee funds provide further information. These reports must likewise be submitted to the supervisory authorities immediately (section 26 (2) of the Banking Act).
The Federal Banking Supervisory Office appoints special auditors for audits of safe custody accounts (section 30 of the Banking Act).
7. Powers to intervene
The supervisory authorities must have the possibility of intervening if prudential requirements have been breached. The measures permitted in the case of inadequate capital or inadequate liquidity are set out in section 45 of the Banking Act. If the fulfilment of a credit institution's obligations to its creditors is actually endangered, the Federal Banking Supervisory Office may take measures pursuant to section 46 ff. of the Banking Act. Revocation of the licence is possible as a final resort.
8. International cooperation between supervisory authorities
Previously, provisions had already been included in the Banking Act which permitted cross-border cooperation between banking supervisory authorities and which removed barriers to the provision of information. The further harmonisation of banking supervisory regulations in the EU, which has led to the mutual recognition of banking supervision throughout the Community, entails even closer cooperation between the banking supervisory authorities within the EU. If German credit institutions undertake operations in another EU member state, the Federal Banking Supervisory Office and the Bundesbank, to the extent that the latter takes action under the Banking Act, are required to cooperate with the banking supervisory authorities of that state (section 8 (3) sentence 1 of the Banking Act). Cooperation is particularly close and the exchange of information particularly detailed with respect to German credit institutions which operate branches in another EU member state and with respect to credit institutions in another EU member state which have established branches in Germany. For example, the Federal Banking Supervisory Office has to inform the banking supervisory authorities in other EU member states if the licence to conduct banking business of a German credit institution which maintains branches in other EU member states is revoked (section 8 (3) sentence 3 of the Banking Act). It also has to inform the authorities of the home member states of infringements by domestic branches of credit institutions domiciled in another EU member state of provisions compliance with which is monitored by the Federal Banking Supervisory Office (section 8 (4) of the Banking Act). The details of such cooperation are regulated by bilateral agreements between the banking supervisory authorities.
German legal regulations which restrict the transmission of data shall not be applied if such transmission is necessary to be able to perform banking supervisory consolidation procedures abroad inclusive of subsidiaries in the Federal Republic of Germany (section 44a of the Banking Act). A precondition thereof is that a share of at least 25 % is held in the German subsidiary. The Federal Banking Supervisory Office may prohibit the transmission of data if reciprocity is not assured. At the request of the foreign banking supervisory authority, the Office has to check the correctness of the data transmitted abroad or to permit their correctness to be checked .
It does not constitute a violation of the secrecy requirement if information is passed on exclusively to foreign banking supervisory authorities and to authorities which supervise financial institutions, insurance enterprises or financial markets, if these authorities are subject to the secrecy requirement (section 9 (1) of the Banking Act). The revision of this provision by the Fourth Act Amending the Banking Act facilitates international cooperation in the supervision of financial conglomerates. To ensure a mutual exchange of information, the disclosure of information received from foreign banking supervisory authorities to the German fiscal authorities is banned (section 9 (2) sentence 3 of the Banking Act).
V. Deposit guarantee schemes
Virtually all credit institutions which conduct deposit business belong to one of the deposit guarantee funds set up on a voluntary basis by the banking associations. The fund established for the commercial banks aims primarily at protecting depositors, while the schemes operated by the savings bank and credit cooperative sectors are designed to avert member institutions' insolvency.
The Deposit Guarantee Fund set up for commercial banks at the Federal Association of German Banks safeguards, in cases of insolvency, non-securitised liabilities to non-bank creditors, per creditor up to the level of 30% of the liable capital at the time of the last published annual accounts of the credit institution concerned. Larger liabilities are protected up to this guarantee limit. Protection encompasses both deposits in Germany and those at branches abroad, irrespective of the currency in which they are denominated and of whether the creditors are residents or non-residents.
Although, in the case of public savings banks, the responsibility for indemnifying depositors ultimately rests with the local authorities (e.g. town, district) which set up the savings bank, owing to the existence of what is known as "guarantors' liability", the regional savings bank and giro associations have nevertheless established guarantee funds. In addition, there is a reserve fund of the Land banks/regional giro institutions, which, notwithstanding the guarantors' liability, acts as an extra safeguard for the deposits of non-bank customers. The two schemes, i.e. the regional savings bank guarantee funds and the reserve fund of the Land banks/regional giro institutions, are interlinked.
Credit cooperatives' by-laws provide for a limited obligation on the part of members to pay up further capital when called. The guarantee scheme operated by the credit cooperatives has, however, ensured up to now that not a single insolvency has arisen in the credit cooperative sector.
In order to prevent liquidity crises in the wake of credit institution failures, the Deutsche Bundesbank and the German banking industry joined forces to set up the Liquidity Consortium Bank in 1974; this bank grants, as and when necessary, liquidity assistance to credit institutions of unquestioned soundness.
Banking Act (Gesetz uber das Kreditwesen) Announcement of the amended text of the Banking Act of June 30, 1993 (Federal Law Gazette 1, page 1082), as amended by Article 4 of the Act on Tracing Profits Arising from Serious Criminal Acts (Geldwaschegesetz) of October 25, 1993 (Federal Law Gazette 1, page 1770) and section 7 (1) c of the Act Implementing the Decision of the German Bundes- tag of June 20, 1991 on the Completion of the Unification of Germany (Ber- lin/Bonn Act) (Gesetz zur Umsetzung des Beschlusses des Deutschen Bundestages vom 20. Juni 1991 zur Vollendung der Einheit Deutschlands (Berlin/Bonn-Gesetz)) of April 26, 1994 (Federal Law Gazette 1, page 918). By virtue of Article 8 of the Act Amending the Banking Act (Gesetz zur Anderung des Gesetzes uber das Kreditwesen und anderer Vorschriften uber Kreditinstitute) of December 21, 1992 (Federal l aw Gazette 1, page 2211), the text of the Banking Act in the wording in force as from July 1, 1993 is hereby announced. The amend- ed text takes due account of: 1. the wording of the Announcement of July 11, 1985 (Federal Law Gazette 1, page 1472), 2. Article 7 of the Act of December 19, 1985 (Federal Law Gazette 1, page 2355), which came into force on January 1, 1986, 3. Article 6 of the Act of May 15, 1986 (Federal Law Gazette 1, page 721), which came into force on August 1, 1986, 4. section 31 of the Act of December 17, 1986 (Federal Law Gazette 1, page 2488), which came into force on January 1, 1987, 5. Article 23 number 3 of the Act of July 25, 1988 (Federal Law Gazette 1, page 1093), which came into force on July 26, 1988 and Article 23, numbers 1, 2 and 4 of that Act, which came into force on January 1, 1990, 18 6. Article 14 of the Act of December 22, 1989 (Federal Law Gazette 1, page 2408), which came into force on December 23, 1989, 7. Article 4 of the Act of June 25, 1990 (Federal Law Gazette 1990 Il, page 518), which came into force on June 26, 1990, 8. Article 5 of the Act of November 30, 1990 (Federal Law Gazette 1, page 2570), which came into force on January 1, 1991, 9. Article 1 number 43 of the Act specified at the beginning, which came into force on December 30, 1992, Article 1 numbers 1 to 3 and 4 (b), numbers 5 to 9,11 to 14, 16, 18to 42 and 44 of that Act, which came into force on January 1, 1993, Article 1 numbers 10, 15 and 17 of that Act, which came into force on July 1, 1993, and Article 1 number 4 (a) of that Act, which will come into force on January 1, 1996. Bonn, June 30, 1993 The Federal Minister of Finance Theo Waigel 1 9 Banking Act of the Federal Republic of Germany Table of contents Part I Division 1. Credit institutions and financial institutions General S. 1 Definitions 21 provisions S. 2 Exceptions 21 S. 2a Legal form 2 S. 2b Holders of major participating interests 2 S. 3 Prohibited business 3 S. 4 Decision by the Federal Banking Supervisory Office 3, Division 2. Federal Banking Supervisory Office S. 5 Organisation 3 S. 6 Functions 3 S. 7 Cooperation with the Deutsche Bundesbank 3 S. 8 Cooperation with other bodies 33 S. 9 Secrecy 34 Part ll Division 1. Capital and liquidity Provisionsfor S. 10 Capital 3 credit institutions S. 10a Capital of groups of credit institutions 4 S. 11 Liquidity 4 S. 12 Limitation of investments 4 S. 12a Establishment of corporateties 4 Division 2. Lending business S. 13 Large loans 5 S. 13a Large loans granted by groups of credit institutions 5 S. 14 Loans of three million Deutsche Mark or more5 S. 15 Loans to managers, etc. 5 S. 16 Reporting requirements for loans to managers, etc. 5 S. 17 Liability 5 20 S.18 Information required of borrowers 57 S.19 Theconceptsof "loan" and "borrower" 58 S. 20 Exceptions 59 Division 3. (Repealed) S. 21 (Repealed) S. 22 (Repealed) Division 4. Advertising, and information requirements of credit institutions S. 23 Advertising 61 S. 23a Information on non-membership of a guarantee scheme 61 Division 5. Special duties of credit institutions and managers S. 24 Reports 61 S. 24a Establishment of a branch in another member state of the European Economic Community 63 S. 25 Monthly returns and other information 64 Division 5a. Submission of accounting records S. 26 Submission of annual accounts, annual report and auditor's reports 65 Division 6. Audits and appointment of auditors S. 27 Audits of the notes 66 S. 28 Appointment of the auditor in special cases 66 S. 29 Special duties of the auditor 67 S. 30 Audits of safe custody accounts 68 Division 7. Exemptions S.31 68 Part lll Division 1. Licence to conduct business Provisions on theS. 32 Granting the licence 70 supervision of S. 33 Refusing the licence 71 credit institutions 21 f , S. 33a Deferring or qualifying the licence in the case of enterprises domiciled outside the European Economic Community 72 S. 33b Consultation of the appropriate authorities of another member state of the European Economic Community 73 S. 34 Substitution and continuation in the event of death 73 S. 35 Expiry and revocation of the licence 73 S. 36 Dismissal of managers 74 S. 37 Action to stop unlawful business 75 S. 38 Consequences of the revocation and expiry of the licence; measures in the event of liquidation 75 Division 2. Protection of the terms "bank" and "savings bank" S. 39 Theterms "bank" and "banker" 76 S. 40 The term "savings bank" 76 S. 41 Exceptions 77 S. 42 Decision by the Federal Banking Supervisory Office 77 S. 43 Registration provisions 77 Division 3. Information and audits S. 44 Information from and audits of credit institutions 78 S. 44a Cross-border information and audits 79 S. 44b Audits of the holders of major participating interests 80 Division 4. Measures in special cases S. 45 Measures in case of inadequate capital or inadequate liquidity 80 S. 46 Measures in case of danger 81 S. 46a Measures in case of a danger of insolvency; appointment of persons authorised to represent the credit institution 81 S. 46b Petition for compulsory liquidation 84 S. 46c Calculation of periods 84 22 r S. 47Moratorium; suspension of banking and stock market business 84 S. 48Resumption of banking and stock market business 85 Division 5. Enforceability, sanctions, costs and charges S. 49 Immediate enforceability 85 S. 50 Sanctions 86 S. 51Costsand charges 86 ! Part IV S. 52 Special supervision 87 Special provisions S. 53 Branches of enterprises domiciled in another state 87 S. 53a Representative offices of enterprises domiciled in another state 89 S. 53b Enterprises domiciled in another member state of the European Economic Community 89 S. 53c Enterprises domiciled outside the European Economic Community 91 S. 53d Reports to the Commission of the European Communities 92 Part V S. 54 Prohibited business, acts performed without Provisions on a licence 94 penalties and fines S. 55 Violation of the requirement to report insolvency or overindebtedness 94 S. 56 Breaches of administrative regulations 94 S. 57 (Repealed) S. 58 (Repealed) S. 59 Fines imposed on credit institutions 96 S. 60 Appropriate administrativeauthority 96 Part Vl S. 61 Licence for existing credit institutions 97 Transitional and S. 62 Transitional provisions 97 final provisions S. 63 (Legislation repealed and amended) 98 23 L~ S 63a Special provisions relative to the territory specified in Article 3 of the Unification Treaty 98 S. 64 Deutsche Bundespost POSTBANK 99 S. 64a Limits on investments by existing credit institutions 99 S. 64b Capital of existing credit institutions 100 , . ';~; ~: ,~ - 24 Part I General provisions Division 1. Credit institutions and financial institutions 1. Definitions (1) Credit institutions are enterprises conducting banking business, if the scale of such business calls for a commercially organised business undertaking. Banking business comprises 1. the acceptance of funds from others as deposits, irrespective of whether or not interest is paid (deposit business); 2. the granting of money loans and acceptance credits (lending business); 3. the purchase of bills of exchange and cheques (discount business); 4. the purchase and sale of securities for the account of others (securities busi- ness); 5. the safe custody and administration of securities for the account of others (safe custody business); 6. the business specified in section 1 of the Act on Investment Companies (Gesetz uber Kapitalan/agegese//schaften) (investment fund business); 7. the incurrence of the obligation to acquire claims in respect of loans prior to their maturity; 8. the assumption of guarantees and other warranties on behalf of others (guar- antee business); 9. the execution of cashless payment and clearing operations (giro business). The Federal Minister of Finance, after having consulted the Deutsche Bundesbank, may designate other business as banking business by regulation where this is war- ranted in the accepted view, taking due account of the supervisory purpose pur- sued by this Act. (2) For the purposes of this Act, managers (Geschaftsleiter) are those natural per- sons who are appointed by law, articles of association or partnership agreement to manage the business of and represent a credit institution organised in the form of a corporation or partnership. In exceptional cases the Federal Banking SupervisorJ Office (section 5) may also revocably designate as manager another person en- trusted with the management of a credit institution's business and authorised to represent it if that person is trustworthy and has the necessary professional quali fications; section 33 (2) applies. If the credit institution is operated by a sole pro- prietor, a person whom the proprietor has entrusted with the management of the credit institution's business and authorised to represent it may be revocably desig- nated as manager in exceptional cases on the conditions specified in sentence 2. If a person is designated as manager on the basis of an application by the credit insti- tution, the designation shall be revoked upon application by the credit institution or the manager. (3) Financial institutions are enterprises which are not credit institutions within the meaning of subsection (1) and whose main ~ftivities comprise 1. acquiring participating interests, 2. acquiring money claims against payment, 3. concluding leasing contracts, 4. issuing or administering credit cards or travellers' cheques, 5. trading in or exchanging foreign payment media for their own account or on behalf of customers (business in foreign banknotes ar f coins~ 6. trading in securities for their own account, 7. trading in futures contracts, options, exchange rate or interest rate instruments for their own account or on behalf of customers, 8. participating in securities issues and providing the associated services, 9. advising enterprises on their capital structure, their industrial strategy and asso- ciated issues, advising them and offering them services in the event of corpor- ate mergers and take-overs, 10. arranging loans between credit institutions (money-broking business), or 11. administering assets invested in securities or in the instruments specified in number 7 above on behalf of others, or advising others on the investment of such assets. The Federal Minister of Finance, after having consulted the Deutsche Bundesbank, may designate by regulation other enterprises as financial institutions, whereby the schedule in the Annex to Council Directive 89/646/EEC of December 15, 1989 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of credit institutions (and amending Directive 77/780/EEC) - Official Journal of the European Communities No. L 386, page 1 - (Second Banking Directive) is extended. (4) The home member state is a member state of the European Economic Com- munity in which the head office of a credit institution is registered. (5) The host member state is a member state of the European Economic Com- munity in which a credit institution maintains a branch or provides services outside the home member state. (6) Parent enterprises are enterprises which are considered to be parent enterprises for the purposes of section 290 of the German Commercial Code (Handelsgesetz- buch), irrespective of their legal form and domicile. (7) Subsidiaries are enterprises which are considered to be subsidiaries for the pur- poses of section 290 of the German Commercial Code, irrespective of their legal form and domicile. (8) Control is deemed to exist if an enterprise is considered to be a parent enter- prise relative to another enterprise, or if an analogous relationship exists between a natural person or a corporation and an enterprise. (9) A major participating interest is deemed to exist if at least ten per cent of the capital of, or the voting rights in, an enterprise is held directly or indirectly through one or more subsidiaries, or if a substantial influence can be exercised on the man- agement of the enterprise in which the participating interest is held. For calculat- ing the share of the voting rights, Article 7 sentence 1 of Council Directive 88/627/EEC of December 12, 1988 on the information to be published when a major holding in a listed company is acquired or disposed of - Official Journal of Li the European Communities No. L 348, page 62 - applies. Participating interests which are held indirectly are to be attributed in full to the enterprise holding the indirect participating interest. 2. Exceptions (1) Subject to the provisions of subsections (2) and (3), the following are deemed not to be credit institutions for the purposes of this Act: 1. the Deutsche Bundesbank; 2. the German Federal Post Office; 3. the Reconstruction Loan Corporation (Kreditanstalt fur Wiederaufbau); 4. the social security funds and the Federal Labour Office (Bundesanstalt fur Arbeit); 5. private and public insurance enterprises; 6. and 7. (repealed); 8. enterprises engaged in pawnbroking, insofar as they carry on this business by granting loans against pledges; 9. enterprises recognised under the Act Concerning Risk Capital Investment Com panies (Gesetz uber Unternehmensbeteiligungsgesellschaften) of December 17, 1986 (Federal Law Gazette 1, page 2488) as risk capital investment companies. (2) The Reconstruction Loan Corporation is subject to section 14 and to action taken by virtue of section 47 (1) 2 and section 48; the social security funds, the Federal Labour Office, insurance enterprises and risk capital investment companies are subject to section 14. (3) Enterprises of the types specified in subsection (1) 5 to 9 are subject to the pro- visions of this Act insofar as they conduct banking business which is not part of their characteristic business. ~ Number 2 will be repealed on January 1, 1996. (4) The Federal Banking Supervisory Office may rule in particular cases that an en- terprise within the meaning of section 1 (1) is not subject to the provisions of sec- tions 10 to 20, 24 to 38, 45 to 46c and 51 (1) of this Act or of section 112 (2) of the Composition Code (Vergleichsordnung), taken as a whole, as long as it does not require supervision, given the nature of the business it conducts. Such a ruling shall be published in the Federal Gazette (Bundesanzeiger). 2a. Legal form Credit institutions requiring a licence in accordance with section 32 (1) may not be operated in the form of a sole proprietorship. 2b. Holders of major participating interests (1) Anyone who intends to acquire a major participating interest in a credit institu- tion shall report the amount of the intended participating interest immediately to the Federal Banking Supervisory Office and the Deutsche Bundesbank. In his report he shall state the facts germane to assessing his trustworthiness, which facts shall be specified in more detail by regulation in accordance with section 24 (4); at the request of the Federal Banking Supervisory Office, the records specified in section 32 (1) sentence 2 number 6 (d) and (e) shall be submitted. If the pur- chaser is a corporation or a partnership, the report must contain the facts ger- mane to assessing the trustworthiness of its legal representatives or general part- ners; as long as the major participating interest is held, every newly appointed legal representative or new general partner shall be reported immediately, to- gether with the facts germane to assessing his trustworthiness. The holder of a major participating interest shall, moreover, notify the Federal Banking Supervisory Office and the Deutsche Bundesbank immediately if he intends to increase the amount of the major participating interest in such a way that the thresholds of twenty per cent, thirty-three per cent or fifty per cent of the voting rights or capital are reached or exceeded, or that the credit institution becomes a subsidiary. With- in three months of receipt of such notification, the Federal Banking Supervisory Office may prohibit the intended acquisition, or the increase, of the major particip- ating interest if facts are known which indicate that the party submitting the report or, if it is a corporation or partnership, its legal representatives or general partners are not trustworthy; this also applies if other facts are known which en- title the Federal Banking Supervisory Office to refuse the licence in accordance with section 33 (1) sentence 1 number 2a or sentence 2. If such acquisition is not prohibited, the Federal Banking Supervisory Office may fix a period after the expiry of which the party submitting the report shall inform the Federal Banking Supervis- ory Office immediately if it has not carried out the intention reported in accod- ance with sentence 1 or 4. (2) The Federal Banking Supervisory Office may prohibit the holder of a major par- ticipating interest from exercising his voting rights if 1. facts are known which indicate that the influence exercised by the holder or by legal representatives or general partners of the enterprise concerned may have a detrimental effect on the credit institution, 2. facts are known which indicate that, in the case of a major participating inter- est in the credit institution, the holder or the legal representatives or general partners of the enterprise concerned do not satisfy the requirements to be made in the interests of the sound and circumspect management of the credit institution; this is the case, in particular, if they are not trustworthy, 3. facts are known which indicate that the credit institution is associated with the holder of the major participating interest (section 15 of the Companies Act- Aktiengesetz) and that, owing to this association or the pattern of the associ- ation of the holder of the major participating interest with other enterprises, effective control over the credit institution is not possible, or 4. the participating interest has been acquired or increased notwithstanding an enforceable prohibition pursuant to subsection (1) sentence 5. In the cases specified in sentence 1, the exercise of voting rights may be trans- ferred to a trustee. In exercising the voting rights, the trustee shall take due account of the interests of the sound and circumspect management of the credit institution. The trustee is appointed by the court having jurisdiction at the domicile of the credit institution upon application by the credit institution, the holder of a participating interest in it or the Federal Banking Supervisory Office. If the precon- ditions specified in sentence 1 are no longer met, the Federal Banking Supervisory Office shall apply for the revocation of the appointment of the trustee. The trustee is entitled to the reimbursement of reasonable expenses and to remuneration for his activities. The court determines such expenses and remuneration upon applica- tion by the trustee; no further appeal is permissible. The Federal Government advances such expenses and remuneration; the holder of the major participating interest concerned and the credit institution are jointly and severally liable to the Federal Government in respect of its outlays. _ (3) Before taking measures in accordance with subsection (1) sentence 5 and sub- section (2) sentence 1, the Federal Banking Supervisory Office shall consult the appropriate authorities of the other member state of the European Economic Com- munity if the purchaser of the major participating interest is a credit institution licensed in the other member state, a parent enterprise of a credit institution licensed in the other member state or a person controlling a credit institution licensed in the other member state, and if the credit institution in which the pur- chaser intends to hold a participating interest would become a subsidiary of, or be controlled by, the purchaser as a result of the acquisition. (4) Anyone who intends to relinquish a major participating interest in a credit insti- tution or to reduce the amount of his major participating interest below the thresholds of twenty per cent, thirty-three per cent or fifty per cent of the voting rights or the capital, or to change the participating interest in such a way that the credit institution is no longer a subsidiary, shall report this to the Federal Banking Supervisory Office and the Deutsche Bundesbank immediately; the residual level of the participating interest shall be indicated in the report. (5) The Federal Banking Supervisory Office shall suspend or limit the decision on the acquisition of a direct or indirect participating interest in a credit institution, through which the credit institution becomes a subsidiary of an enterprise domi- ciled outside the European Economic Community, if the Commission or Council of the European Communities has passed a corresponding decision in accordance with Article 22 (2) of the Second Banking Directive. The suspension or limitation may not last longer than three months from the date of the decision. If the Council of the European Communities decides to prolong the period pursuant to sentence 2, the Federal Banking Supervisory Office shall take due account of this prolonga- tion. 3. Prohibited business The following are prohibited: 1. the conducting of deposit business if the majority of the depositors are persons employed by the enterprise (employee savings banks - Werksparkassen), unless other banking business is conducted which exceeds the scale of such deposit business; 2. the acceptance of sums of money if the majority of the lenders have a legal right to loans being granted to them or objects being supplied to them on 31 credit out of these sums of money (savings enterprises for specific purposes- Zwecksparunternehmen); this does not apply to building and loan association 3. the conducting of lending business or deposit business if, by agreement or in line with normal business practice, it is impossible or very difficult to withdraw the amount of the loan or the deposits in cash. 4. Decision by the Federal Banking Supervisory Office In doubtful cases, the Federal Banking Supervisory Office decides whether an en- terprise is subject to the provisions of this Act. Its decisions are binding upon the administrative authorities. Division 2. Federal Banking Supervisory Office 5. Organisation (1) The Federal Banking Supervisory Office (Bundesaufsichtsamt fur das Kreditwe- sen) is established as an independent superior Federal authority (Bundesober-behorde). It is domiciled in Berlin. (2) The President of the Federal Banking Supervisory Office is nominated by the Federal Cabinet and appointed by the President of the Federal Republic; the Fed- eral Cabinet shall consult the Deutsche Bundesbank regarding such nomination. 6. Functions (1) The Federal Banking Supervisory Office exercises supervision over credit instit tions in accordance with the provisions of this Act. (2) The Federal Banking Supervisory Office shall counteract undesirable develop- ments in banking which may endanger the safety of the assets entrusted to credt institutions, adversely affect the orderly conduct of banking business, or involve serious disadvantages for the national economy. (3) The Federal Banking Supervisory Office performs the functions assigned to it under this Act and under other Acts in the public interest only. 7. Cooperation with the Deutsche Bundesbank (1) The Federal Banking Supervisory Office and the Deutsche Bundesbank cooper- ate as provided in this Act. The Deutsche Bundesbank and the Federal Banking Supervisory Office shall communicate to each other any observations and findings which may be of significance for the performance of their respective functions. To this end, the Deutsche Bundesbank shall make available to the Federal Banking Supervisory Office the information it obtains from statistics collected in accordance with section 18 of the Bundesbank Act (Gesetz uber die Deutsche Bundesbank). Before ordering the collection of such statistics, the Deutsche Bundesbank shall consult the Federal Banking Supervisory Office; section 18 sentence 5 of the Bun- desbank Act applies as appropriate. (2) The President of the Federal Banking Supervisory Office or, if he is unable to attend, his deputy is entitled to take part in the deliberations of the Central Bank Council of the Deutsche Bundesbank whenever matters within his field of respons- ibility are being discussed. He has no right to vote, but may propose motions. 8. Cooperation with other bodies (1) The Federal Banking Supervisory Office may enlist the services of other persons and institutions to assist in the performance of its functions. (2) If tax evasion proceedings are instituted against proprietors or managers of credit institutions, section 30 of the Tax Code (Abgabenordnung) does not pre- clude communication of the proceedings and the underlying facts to the Federal Banking Supervisory Office; the same applies if the proceedings are directed against persons who ~nmm tt~f~ the offence while in the employment of credit institutions. (3) When supervising credit institutions conducting banking business in another member state of the European Economic Community and when supervising credit institutions on a consolidated basis, the Federal Banking Supervisory Office and - insofar as it is acting under this Act - the Deutsche Bundesbank cooperate with the appropriate authorities of the member state concerned. Communications from the appropriate authorities of another member state may be used for the following purposes only: 1. for checking a credit institution's licence to conduct business, ~ i 2. for supervising the operations of a credit institution or group of credit institu- tions, 3. for orders by the Federal Banking Supervisory Office and for the prosecution and punishment by the Federal Banking Supervisory Office of breaches of ad- ministrative regulations, 4. in the context of administrative proceedings on legal remedies against a de- cision by the Federal Banking Supervisory Office, or 5. in the context of proceedings before administrative courts, insolvency courts, public prosecutors' offices or courts having jurisdiction in criminal cases or administrative fine cases. If the licence of a credit institution to conduct banking business is revoked,the Federal Banking Supervisory Office informs the appropriate authorities of the other member states in which the credit institution has established branches. (4) If an enterprise within the meaning of section 53b (1) sentence 1 or (7), through its operations via a branch in the area of validity of this Act or through the services it renders, infringes provisions compliance with which is monitored by the Federal Banking Supervisory Office, that Office informs the authorities of the home member state of the measures it will take to terminate such infringement. The Office also informs the appropriate authorities of the host member state of the measures it will take to terminate infringements by a credit institution domi- ciled within the area of validity of this Act of legal regulations of the host member state of which the Federal Banking Supervisory Office has been informed by the appropriate authorities of the host member state. 9. Secrecy (1) Persons employed by the Federal Banking Supervisory Office and persons appointed under section 8 (1) or section 30 (2) sentence 3, supervisors appointed under section 46 (1) sentence 2 and persons employed by the Deutsche Bundes- bank, insofar as they are acting to implement this Act, may not disclose or use without authority facts which have come to their notice in the course of their activi- ities and which should be kept secret in the interests of the credit institution or a third party (especially business and trade secrets), not even after they have left such employment or their activities have ended. This also applies to other persons who learn of the facts referred to in sentence 1 as a result of official reports.In particular, it is not deemed to be such disclosure, or use without authority within the meaning of sentence 1, if facts are passed on 1. to public prosecutors' offices or courts having jurisdiction in criminal cases and administrative fine cases, 2. to agencies which, by virtue of an act of parliament or by official order, are entrusted with the supervision of credit institutions, financial institutions or insurance enterprises, or of the financial markets, and to persons commissioned by such agencies, 3. to agencies dealing with the liquidation, composition or insolvency of a credit institution, 4. to persons entrusted with the statutory auditing of the accounts of credit insti- tutions or financial institutions, or 5. to deposit guarantee schemes, insofar as these agencies require the information for the performance of their functions. Secrecy in accordance with sentence 1 applies as appropriate to persons employed by these agencies. If the agency is located in another state, the facts may be passed on only if that agency and the persons commissioned by it are sub- ject to secrecy requirements corresponding to those specified in sentence 1. (2) Sections 93, 97, 105 (1) and 111 (5), read in conjunction with section 105 (1), and section 116 (1) of the Tax Code do not apply to the persons referred to in sub- section (1) insofar as they are acting to implement this Act. This does not apply if the fiscal authorities require the information for instituting proceedings for tax eva- sion and the associated tax assessment proceedings, in the prosecution of which there is a pressing public interest, or if the person required to give information or the persons acting on his behalf have wilfully supplied incorrect information. Sen- tence 2 does not apply if the facts involved were communicated to the persons referred to in subsection (1) sentence 1 or 2 by the banking supervisory authority of another state or by persons commissioned by that authority. 35 Part 11 Provisions for credit institutions Division 1. Capital and liquidity 10. Capital (1) In order to meet their obligations to their creditors, and particularly in order to safeguard the assets entrusted to them, credit institutions must have adequate liable capital (ha*endes Eigenkapital). The Federal Banking Supervisory Office,act- ing in agreement with the Deutsche Bundesbank, draws up Principles by which it assesses in the normal case whether the requirements of sentence 1 have been satisfied; the central associations representing the credit institutions shall be con- sulted beforehand. The Principles shall be published in the Federal Gazette. (2) The following shall be regarded as liable capital: 1. in the case of sole proprietorships (Einzelkaufleute), general partnerships (offe- ne Handelsgesellschaften) and limited partnerships (Kommanditgesellschaften): the capital and the reserves, less withdrawals by the proprietor or the general partners and loans granted to them, and less any net debt in the proprietor's unencumbered personal assets; in the case of general and limited partnerships: only the paid-up capital shall be taken into account; 2. in the case of public limited companies (Aktiengesellscha*en), limited compan- ies with one or more general partners (Kommanditgesellscha*en auf Aktien) and private limited companies (Gesellscha*en mit beschrankter Ha*ung):the paid-up capital and the reserves, less the company's holdings of its own shares and cumulative preferential shares; in the case of limited companies with gen- eral partners: also assets contributed by the general partners but not paid into the capital, less withdrawals by the general partners and loans granted to them 3. in the case of registered cooperative societies (eingetragene Genossenschaf- ten) the amounts paid up on members' shares and the reserves, plus an addi- tional sum to be fixed by regulation by the Federal Minister of Finance, after having consulted the Deutsche Bundesbank, to take account of the uncalled commitments of members; amounts paid up on the shares of members who are retiring at the end of the financial year and rights of members to the out- payment of a share in the cooperative society's reserves, as shown separately in the balance sheet by registered cooperative societies in accordance wth sec- tion 73 (3) of the Act Concerning Industrial and Trading Cooperative Societies (Gesetz betreffend die Erwerbs- und Wirtschaftsgenossenscha*en), shall be deducted; the Federal Minister of Finance may delegate the authority to issue regulations to the Federal Banking Supervisory Office; 4. in the case of public savings banks and private savings banks recognised as public savings banks: the reserves; 5. in the case of public credit institutions not coming under the provisions of num- ber 4: the paid-up endowment capital (Dotationskapital) and the reserves; 6. in the case of credit institutions organised in any other form: the paid-up capital and the reserves. Loans to limited partners, to shareholders in a private or public limited company or a limited company with general partners, or to shareholders in a public credit insti- tution who own more than twenty-five per cent of the capital (nominal capital, total amount of capital shares) of the credit institution, or who hold more than twenty-five per cent of the voting rights, shall be deducted unless they have been granted on market terms or if, contrary to banking practice, they are inadequately secured. Section 16 (2) to (4) of the Companies Act applies as apprnnri~t~ to the calculation of the percentage pursuant to sentence 2. (3) The net profit shall be counted as part of the liable capital insofar as it has been decided to allocate such profit to the capital, the reserves or the amount paid up on cooperative society members' shares. For the purposes of subsection (2), reserves are deemed to comprise only amounts shown as reserves, other than liab- ilities which by virtue of the tax regulations are not subject to taxation until their release . (4) Assets contributed by silent partners shall be counted as ~ I t of the liable cap- ital only 1. if they share fully in any loss, 2. if, in the event of the credit institution's insolvency or liquidation, they cannot be recovered until all creditors have been satisfied, 3. if they have been made available to the credit institution for a period of at least five years, 4. as long as the claim to repayment does not, or, under the terms of the pa ship agreement, cannot, fall due within less than two years, and 5. if the credit institution, when establishing the silent partnership, referred e~ citly and in writing to the legal consequences specified in sentences 2 and 3 After the event, participation in any loss cannot be changed, the subordinatio claims cannot be limited, and neither the period to maturity nor the period cf tice can be shortened. Any premature repayment shall be returned to the c- institution, irrespective of any arrangements to the contrary. Loans to silent~ ners whose contributed assets make up more than twenty-five per cent of liable capital shall be deducted from the liable capital unless they have t granted on market terms or if, contrary to banking practice, they are inadequd secured. Section 16 (4) of the Companies Act applies as appropriate to the ca~ tion of the percentage pursuant to sentence 4. (4a) The following may be counted as part of the liable capital: 1. precautionary reserves in accordance with section 340f of the Comme~: Code; 2. special items providing for general banking risks in accordance with sec~ 340g of the Commercial Code; 3. cumulative preferential shares; 4. unrealised reserves (a) up to the amount of forty-five per cent of the difference between the bot value and the loan value of land, rights equivalent to land, and buildings (b) up to the amount of thirty-five per cent of the difference between the bct value and (aa) the market price of securities which are officially listed on a sto~ exchange or included in another organised market that is recogniset open to the general public and functioning properly (listed securities) (bb) the value to be ascertained pursuant to section 11 (2) sentences 2 to of the Valuation Act (Bewertungsgesetz) of unlisted securities evide cing shares in incorporated enterprises with a balance sheet total of.~ least twenty million Deutsche Mark and belonging to the associatc of credit cooperatives or savings banks; (cc) the published repurchase price of shares in securities or real estate investment funds (other than specialised funds), which shares were issued in accordance with the provisions of the Act on Investment Companies, or of shares in a securities special fund issued by an invest- ment company domiciled in another member state of the European Communities in accordance with the provisions of Council Directive 85/611/EEC of December 20, 1985 on the coordination of laws, regu- lations and administrative provisions relating to undertakings for col- lective investment in transferable securities (Official Journal of the European Communities No. L 375, page 3); in the case of these assets, any precautionary reserves formed are to be added to the book value; 5. reserves pursuant to section 6b of the Income Tax Act (Einkommensteuerge- setz) up to the amount of forty-five per cent, to the extent that these reserves were formed through the transfer of the proceeds of the sale of land, rights equivalent to land, and buildings. Unrealised reserves may be counted as part of the liable capital only if the sum total of the capital items specified in subsections (2) to (4), in sentence 1 number 2 of this subsection and in subsections (6) and (7) sentence 3, less the additional sum pursuant to subsection (2) sentence 1 number 3, and less the amounts listed in subsection (6a) sentence 1 numbers 1 and 2 (core capital), make up at least four point four per cent of the credit institution's risk assets, weighted in accordance with Principle I of the Federal Banking Supervisory Office; unrealised reserves may be counted as part of the liable capital only up to one point four per cent of such risk-weighted assets. Unrealised reserves may be included only if all assets pursuant to sentence 1 number 4 (a) or (b) are included in the calculation of the difference. The mode of calculation of the unrealised reserves is to be disclosed to the Federal Banking Supervisory Office and the Deutsche Bundesbank immediately after its completion, indicating the relevant valuations. (4b) Section 12 (1) and (2) of the Mortgage Bank Act (Hypothekenbankgesetz) applies as appropriate to the calculation of the loan values of land, rights equival- ent to land, and buildings. These values shall be determined by means of expert valuations at least every three years. The credit institution shall appoint an expert committee consisting of at least three members for calculating the loan values. Section 32 (2) and (3) of the Act on Investment Companies applies as appropriate. If the loan value is below the book value, this negative difference is to be decu- from the unrealised reserves. (4c) The market value of listed securities depends upon the price on the bac sheet date. If the average of that price and the prices ascertained on the pre~: three balance sheet dates is below that price, the average price applies. If no a is available on a balance sheet date, then the last price ascertained within t~ days before the balance sheet date applies. If securities are treated in accorda with the principles for fixed assets, the difference between the relevant ma value and the higher book value shall be deducted from the unrealised rese,- The procedure described in sentences 1, 2 and 4 is to be applied as appropr at~ the determination of the value of unlisted securities pursuant to section 11 2 the Valuation Act and of the repurchase price of shares in a special fund. (5) Capital paid up against the issue of participation rights (Genussrechte) sha counted as part of the liable capital only 1. if it shares fully in any loss, and if the credit institution is required to defe- n. est payments in the event of a loss, 2. if it has been agreed that, in the event of the credit institution's insolvency: liquidation, it cannot be repaid until all non-subordinated creditors have be~ satisfied, 3. if it has been made available to the credit institution for a period of at least t years and does not have to be repaid prematurely at the creditor's reques+ tr term of five years need not be observed if securities evidencing partici ~at^ rights are called in prematurely owing to tax changes which result in add t orc payments to the purchaser of the participation rights, and if the capita ~. been replaced before repayment by the inpayment of other liable capita ot ~. Ieast equivalent status, 4. as long as the claim to repayment does not, or, under the terms of the agre~ ment, cannot, fall due within less than two years, and 5. if the credit institution, when concluding the agreement, referred explicitly ana in writing to the legal consequences specified in sentences 2 and 3. After the event, participation in any loss cannot be changed, the subordination o claims cannot be limited, and neither the period to maturity nor the period of no 40 tice can be shortened. Any premature repayment shall be returned to the credit institution, irrespective of any arrangements to the contrary, unless the capital has been replaced by the inpayment of other liable capital of at least equivalent status. If any securities are issued in respect of the participation rights, only the terms of subscription and issue shall refer to the legal consequences specified in sentences 2 and 3. A credit institution may purchase securitised participation rights of its own only if it is thereby carrying out instructions to buy on a commission basis; for market-smoothing purposes, the credit institution may also purchase up to three per cent of the total nominal amount of an issue of participation rights of its own if the participation rights are securitised in listed securities; the intention of taking advantage of the market-smoothing option shall be communicated to the Federal Banking Supervisory Office and the Deutsche Bundesbank. Sections 71a, 71d and 71 e of the Companies Act apply as appropriate. (5a) Capital which has been paid up on account of the incurrence of subordinated liabilities shall be counted as part of the liable capital only if it has been agreed that 1. in the event of the credit institution's insolvency or liquidation, it will not be repaid until all non-subordinated creditors have been satisfied, 2. it has been made available to the credit institution for a period of at least five years and does not have to be repaid prematurely at the creditor's request; if no period has been fixed for the repayment of the capital, a period of notice of at least five years shall be envisaged; after the expiry of these five years, a shorter period of notice may be agreed in favour of the credit institution if, before repayment, the capital has been replaced by the inpayment of other liable cap- ital of at least equivalent status; the period of five years need not be observed if bonds are called in prematurely owing to a change in taxation which leads to additional payments to the purchaser of the bonds, 3. offsetting the repayment claim against claims of the credit institution is ruled out and no contractual collateral for the liabilities is provided by the credit insti- tution or third parties; a credit institution may provide subordinated collateral for subordinated liabilities incurred by a subsidiary of the credit institution that was established for the sole purpose of raising capital; section 11 number 3 of the Act to Regulate the Law Governing the General Terms and Conditions of the Offsetting Ban (Gesetz zur Rege/ung des Rechts der Allgemeinen Geschaftsbedingungen uber das Aufrechnungsverbot) does not apply to claims arising from the credit institution's subordinated liabilities. If the claim to repayment does, or, under the terms of the agreement, can, fall due within less than two years, only two-fifths of the liabilities are counted as part of the liable capital. After the event, the subordination of claims cannot be limited, and neither the period to maturity nor the period of notice can be shortened.Any premature repayment shall be returned to the credit institution, irrespective of arrangements to the contrary, unless the credit institution has been liquidated or unless the capital has been replaced by the inpayment of other liable capital of at least equivalent status. Upon conclusion of the agreement, the credit institution shall refer explicitly and in writing to the legal consequences specified in sentences 3 and 4; if securities are issued through subordinated liabilities, the aforemen- tioned legal consequences shall be referred to in the subscription and issue terms. Subsection (5) sentences 5 and 6 applies as appropriate. No designation may be used for subordinated liabilities, or for advertising for subordinated liabilities which contains the word "save" or which is otherwise liable to deceive as to the subordinated status in the event of insolvency or liquidation; this does not apply, however, if a credit institution uses its firm-name as protected under section 40. (6) Proven unencumbered personal assets of the proprietor or the general partners may, upon application, be counted as part of the liable capital to an extent to the determined by the Federal Banking Supervisory Office. (6a) The following shall be deducted from the liable capital: 1. Iosses; 2. intangible assets; 3. three per cent of the total nominal amount of the respective issue of own par- ticipation rights evidenced by listed securities and subordinated liabilities if the credit institution intends to take advantage of the market-smoothing option; 4. the following participating interests, claims arising from subordinated liabilities and participation rights, and preferential shares: (a) participating interests in credit institutions and financial institutions, other than investment companies, amounting to more than ten per cent of the capital of these enterprises; upon application by the credit institution,the Federal Banking Supervisory Office may permit exceptions if the cred t insti- tution temporarily holds shares in a credit institution or financial institution in order to give financial support to that enterprise; (b) claims arising from subordinated liabilities within the meaning of subsection (5a) on credit institutions and financial institutions, other than investment companies, in which the credit institution holds more than ten per cent of these enterprises' capital; (c) claims arising from participation rights within the meaning of subsection (5) on enterprises pursuant to letter (b); (d) preferential shares within the meaning of subsection (4a) sentence 1 number 3 of enterprises pursuant to letter (b); 5. the total amount of the following participating interests, claims arising from subordinated liabilities and participation rights, and preferential shares if it exceeds ten per cent of the credit institution's liable capital before deduction of the amounts pursuant to number 4 and pursuant to this number: (a) participating interests in credit institutions and financial institutions, other than investment companies, amounting to not more than ten per cent of these enterprises' capital; (b) claims arising from subordinated liabilities within the meaning of subsection (5a) on credit institutions and financial institutions, other than investment companies, in which the credit institution holds no participating interest or in which the participating interest amounts to not more than ten per cent of these enterprises' capital; (c) claims arising from participation rights within the meaning of subsection (5) on enterprises pursuant to letter (b); (d) preferential shares within the meaning of subsection (4a) sentence 1 number 3 of enterprises pursuant to letter (b). If the credit institution includes all participating interests of at least ten per cent in credit institutions or financial institutions, other than investment companies, in the consolidation in accordance with section 10a, no deductions need be made for these enterprises pursuant to sentence 1 number 4 or 5. Section 10a (5) sentence 2 applies as appropriate. (6b) The sum total of the capital items specified in subsection (4a) sentence 1 num- bers 1 and 3 to 5, subsections (5) and (5a) and the additional sum pursuant to sub- - r l (1) Credit institutions belonging to a group, taken as a whole, must have adequ liable capital. Section 10 on the capital of individual credit institutions applies appropriate . section (2) sentence 1 number 3 must not exceed the core capital. The sum of the additional sum pursuant to subsection (2) sentence 1 number 3 a subordinated liabilities pursuant to subsection (5a) must not exceed fifty p of the core capital; the provisions of the Regulation Governing the Additi Members' Uncalled Liability to the Capital and Reserves (Zuschlagsveror remain unaffected, in accordance with subsection (2) sentence 1 numbe exceptional circumstances, the Federal Banking Supervisory Office may credit institutions or groups of credit institutions to exceed the limits spec sentences 1 and 2 for a temporary period. (7) The criterion for the assessment of the liable capital is the last balance approved for the end of a financial year. The Federal Banking Supervisory may take due account of any changes in the liable capital shown before the a accounts are approved. Interim profits may be taken into account unless th tied up for prospective profit distributions or tax payments, and if they ha~ ascertained on the basis of interim accounts which satisfy the requirements a ing to annual accounts. The interim accounts shall be audited by the auditor annual accounts. The interim accounts and the associated auditor's reports be submitted immediately to the Federal Banking Supervisory Office and Deutsche Bundesbank. Any losses shown in the interim accounts shall be d~ ed from the liable capital. If a credit institution compiles interim accounts, it not discontinue this procedure until five years have elapsed; the procedure ca be resumed until five years have passed since the last interim accounts. (8) Credit institutions shall report immediately to the Federal Banking Super Office and the Deutsche Bundesbank those loans which are to be deducb accordance with subsection (2) sentence 2 or subsection (4) sentence 4. Ioans shall be reported immediately once again if the collateral provided o terms of the loan are changed by a legal transaction. Every five years, the Fe Banking Supervisory Office may require credit institutions to submit to itself a the Deutsche Bundesbank a summary report of the loans to be reported in a ance with sentence 1 10a. Capital of grouos of credit institutions (2) For the purposes of this provision, credit institutions belong to a group of credit institutions if one credit institution (parent institution) holds directly or indirectly at least forty per cent of the capital shares in another credit institution (subsidiary) (= significant participating interest), or can directly or indirectly exercise a control- ling influence over it. Capital shares held directly and indirectly and capital shares owned by a third party for the account of a credit institution belonging to the group shall be added together; capital shares held indirectly are disregarded when determining the significant participating interest if they have been obtained through the intermediation of an enterprise in which the parent institution directly holds less than forty per cent of the capital shares; this applies as appropriate to capital shares held indirectly which have been obtained through the intermediation of more than one enterprise. Voting rights are equivalent to capital shares. Section 16 (2) and (3) of the Companies Act applies as appropriate. The following enter- prises are likewise deemed to be subsidiaries: 1. enterprises the object of which is to purchase money claims, 2. enterprises the object of which is to conclude leasing agreements, and 3. enterprises which are domiciled in another state and which conduct banking business corresponding to that specified in section 1 or business corresponding to that specified in number 1 or 2, other than enterprises within the meaning of section 2 (1) 5 and 8, if a significant participating interest is held in them or if a controlling influence can be exercised over them. Enterprises exclusively conducting safe custody business or investment fund business are not deemed to be subsidiaries. (3) Whether or not credit institutions belonging to a group, taken as a whole, have adequate liable capital shall be determined on the basis of a pro rata consolidation of the liable capital and the other items relevant under the Principles pursuant to subsection (1) sentence 2, read in conjunction with section 10 (1) sentence 2; in the case of subsidiaries domiciled in another state, the items corresponding to those recognised under section 10 are deemed to be liable capital. For the pro rata consolidation the parent credit institution shall consolidate its relevant items with the relevant items of the subsidiaries, to the extent of the share of its capital inter- est in the subsidiary in each case. The book values, as shown by the parent institu- tion (but accounted for by the credit institutions belonging to the group), of the capital shares, of the assets contributed by silent partners in accordance with sec- tion 10 (4) sentence 1, of the capital represented by participation rights in accord- ance with section 10 (5) sentence 1, of the subordinated liabilities in accordance with section 10 (5a) sentence 1 and of the unrealised reserves shown by the ent institution in accordance with section 10 (4a) sentence 1 number 4 shall be deducted from the liable capital to be consolidated on a pro rata basis in accord- ance with sentence 2; in the case of indirect participating interests, the book values shall be deducted on a pro rata basis in accordance with sentence 2.If the book value of a participating interest is higher than that part of the subsidiary's capital and reserves which is to be consolidated in accordance with sentence 2, the difference resulting upon the first inclusion of the participating interest in the pro rata consolidation is not included in the deduction pursuant to sentence 3 for a period of not more than ten years, at an amount decreasing by at least one-tenth each year, but is treated like a participating interest in a credit institution not be- longing to the group. The other items relevant to the calculation of the Principles which are not included in the computation pursuant to sentence 3, and which result from legal relations between credit institutions belonging to the group,shall be omitted. The Federal Minister of Finance, acting in consultation with the Deut- sche Bundesbank, may issue supplementary provisions by regulation. (4) The parent institution is responsible for the group of credit institutions having adequate capital. To fulfil its obligations in accordance with sentence 1 it may, however, exercise an influence over subsidiaries only insofar as this does not contravene current company law. The parent institution shall submit to the Federal Banking Supervisory Office and the Deutsche Bundesbank every month the data required for monitoring capital adequacy. (5) The subsidiaries are required to submit to the parent institution the data needed for a pro rata consolidation. If a parent institution is unable to obtain the requisite data for individual credit institutions belonging to the group, the book values specified in subsection (3) sentence 3 accounted for by the credit institution belonging to the group shall be deducted from the liable capital of the parent insti- tution . (6) Subsections (1), (3) and (4) do not apply to parent institutions which are them- selves subsidiaries, except in the case of credit institutions which hold reciprocal participating interests, credit institutions which are subsidiaries pursuant to subsec- tion (2) sentence 5 number 3 or credit institutions in which the parent institutions hold less than seventy-five per cent of the capital shares. Subsections (1) and (3) to (5) do not apply to subsidiaries which would have to be included in the consolida- tion in accordance with subsection (3) with less than ten per cent of their capital shares. 11. Liquidity Credit institutions must invest their funds in such a way as to ensure that adequate liquidity is guaranteed at all times. The Federal Banking Supervisory Office, acting in agreement with the Deutsche Bundesbank, draws up Principles whereby it assesses in the normal case whether a credit institution's liquidity is adequate; the central associations representing the credit institutions shall be consulted before- hand. The Principles shall be published in the Federal Gazette. The Principles shall link up with the definition of savings deposits, and particularly of a pass- book, given in the Regulation on the Accounts of Credit Institutions (Verordnung uber die Rechnungslegung der Kreditinstitute), which to this extent is subject to the approval of the Bundestag. 12. Limitation of investments (1) A credit institution's investments in land, buildings, furniture and equipment, ships, shares in credit institutions and other enterprises, as well as in claims arising from assets contributed as a silent partner, from participation rights and from li- abilities within the meaning of section 10 (5a) to other credit institutions, excluding the items which have been deducted from the liable capital in accordance with sec- tion 10 (6a) sentence 1 number 4 or 5, calculated at book value, may not in the aggregate exceed the liable capital. (2) Subsection (1 ) does not apply to 1. shares in the capital of other enterprises if they do not exceed ten per cent of the capital (nominal capital, number of mining shares, total amount of capital shares) of the enterprise; 2. securities intended for trading for the credit institution's own account and for market-smoothing operations up to five per cent of an enterprise's capital, if they are listed on a resident or non-resident stock exchange or are included in regulated free trading and if they are recorded and administered separately from other such holdings; 3. shares in the capital of enterprises which the credit institution has purchased in its own name for the account of a third party, as long as the credit institution does not hold them for more than two years; 47 4. Iand, buildings, ships and shares in the capital of enterprises which the credit institution has purchased to avoid losses in lending business, as long as the credit institution does not hold them for more than five years; 5. furniture and equipment of credit cooperatives, insofar as they are required for carrying out transactions in goods. (3) Upon application, the Federal Banking Supervisory Office may permit a credit institution to deviate temporarily from subsection (1). (4) Subsection (1) does not apply to registered cooperative societies which were recognised as non-profit housing enterprises on December 31, 1989 and whose activities mainly comprise the letting of dwellings to their members if 1. the only banking business they conduct is deposit business, which they transact only with their members and their relatives within the meaning of section 15 of the Tax Code, 2. the deposits do not exceed seventy per cent of the fixed assets leased to mem- bers, and 3. they belong to a scheme for protecting savings deposits at enterprises which were recognised on December 31, 1989 as non-profit housing enterprises. (5) A credit institution which accepts deposits or other repayable funds from the general public and conducts banking business may not hold a major participating interest the nominal value of which exceeds fifteen per cent of the credit institu- tion's liable capital in the capital of an enterprise that neither constitutes a credit institution, financial institution or insurance enterprise nor conducts ancillary busi- ness for the credit institution. The total nominal amount of the major participating interests in the capital of these enterprises may not exceed sixty per cent of the credit institution's liable capital. Shares in the capital which are not intended to serve the credit institution's own business operations by the creation of a perman- ent link shall not be included in the computation of the amount of the major par- ticipating interest. The limits specified in sentences 1 and 2 are to be complied with on a consolidated basis, too, in accordance with the Principles pursuant to section 10a. A credit institution or group of credit institutions may exceed the limits specified in sentence 1 or sentence 2 if the credit institution or group of credit institutions covers that part of the participating interest that exceeds the limits by liable capital; those parts of the liable capital may not be considered for the pur- poses of the Principles on the adequacy of liable capital pursuant to section 10 (1) sentence 2 and section 10a (1) sentence 1. If both of the limits specified in sen- tences 1 and 2 are exceeded, the larger amount shall be covered by liable capital. 12a. Establishment of corporate ties (1 ) A credit institution, 1. when acquiring a significant participating interest within the meaning of sec- tion 10a (2), or when acquiring a substantial participating interest within the meaning of section 13a (2), in an enterprise as defined in section 10a (2) sen- tence 5 number 3, or 2. when establishing corporate ties by virtue of which a controlling influence can be exercised directly or indirectly over such an enterprise through majority par- ticipating interests or control agreements, shall ensure that it obtains the data required for discharging the various duties specified in sections 10a, 13a and 25 (2). Sentence 1 shall not apply to the data required for discharging the duties specified in sections 10a and 13a if account is taken of the risk arising from the establishment of the participating interest or the corporate ties by the deduction of the book values, to be effected pursuant to sec- tion 10a (5) sentence 2 in a way comparable to the pro rata consolidation in ac- cordance with section 10a (3) and section 13a (3), and if the Federal Banking Supervisory Office is enabled to monitor compliance with this condition. The credit institution shall report the establishment, modification or discontinuance of a parti- cipating interest or of corporate ties as specified in sentence 1 to the Federal Bank- ing Supervisory Office and the Deutsche Bundesbank immediately. (2) The Federal Banking Supervisory Office may prohibit the continuation of the participating interest or the corporate ties if the credit institution does not receive the data required for discharging the duties specified in section 10a, section 13a or section 25 (2). The exception pursuant to subsection (1) sentence 2 applies as appropriate to the powers of prohibition conferred by sentence 1. 49 Division 2. Lending business 13. Large loans (1) Loans to a single borrower which, taken together, exceed fifteen per cent of the credit institution's liable capital (large loans) shall be reported to the Deutsche Bundesbank immediately; this does not apply to large loans where the amount committed or taken up is not above fifty thousand Deutsche Mark, unless the large loan exceeds fifty per cent of the credit institution's liable capital. Large loans al- ready reported shall be reported again if they are increased by more than twenty per cent of the amount last reported or exceed fifty per cent of the liable capital. The Deutsche Bundesbank passes on the reports, along with its comments, to the Federal Banking Supervisory Office; the latter may waive its right to the for- warding of certain reports. The Federal Banking Supervisory Office may require credit institutions to submit to it and the Deutsche Bundesbank once a year a list of their large loans subject to reporting requirements. (2) Without prejudice to the validity of the transaction, credit institutions organised in the form of a corporation or partnership may grant large loans only on the bacis of a unanimous decision by all managers. The decision should be taken before the loan is granted. If in individual cases this is impossible because of the urgency of the transaction, the decision shall be taken immediately afterwards. The decision shall be placed on record. If a large loan has been granted without a prior unanim- ous decision by all managers, the Federal Banking Supervisory Office and the Deutsche Bundesbank shall be notified within one month whether the decision has been taken subsequently, and, if so, with what result. If a loan already granted becomes a large loan owing to a reduction in the liable capital, the continued granting of this large loan is permissible, without prejudice to the validity of the transaction, only on the basis of a unanimous decision to be taken immediately by all managers; sentences 4 and 5 apply as appropriate. (3) Without prejudice to the validity of the transaction, 1. (Repealed) 2. all large loans in the aggregate may not exceed eight times the credit institu- tion's liable capital. For the purposes of sentence 1 number 2, loans committed but not yet taken up shall be disregarded. (4) Without prejudice to the validity of the transaction, no single large loan may exceed fifty per cent of the credit institution's liable capital. (5) Loans which central credit institutions transmit to final borrowers via the regional institutions (Zentralkassen/Girozentralen) associated with them, or via the registered cooperative societies or savings banks associated with these regional institutions, shall be counted at the central credit institutions for the purposes of subsections (3) and (~, only to the extent that credit is granted to the individual final borrower if the claims in respect of the loans are assigned to the central credit institution as collateral. (6) When calculating large loans, guarantees and other warranties - except guar- antees in respect of loans as defined in section 19 (1) sentence 1 numbers 1 to 3 and 7 - and credit extended by purchasing bills of exchange rediscountable at the Bundesbank shall be counted at only half their value. (7) Subsections (1) and (2) also apply to general credit lines committed subject to the proviso that the reports required under subsection (1) are to be filed on dates specified by the Federal Banking Supervisory Office. (8) Liable capital within the meaning of the preceding subsections comprises the capital items specified in section 10 (2) to (4), (5), (6), and (7) sentences 1 and 2; losses shall be deducted. Capital paid up against the granting of participation rights shall be counted as part of the liable capital only if it does not exceed twenty- five per cent of the liable capital in accordance with section 10 (2) and (3), exclud- ing an additional sum in accordance with section 10 (2) sentence 1 number 3. 13a. Large loans granted by groups of credit institutions (1) Section 13 (1) and (3) to (8) on large loans granted by individual credit institu- tions applies as appropriate to loans granted by credit institutions belonging to a group, taken as a whole. (2) For the purposes of this provision, credit institutions belong to a group of credit institutions if one credit institution (parent institution) holds directly or indirectly at least fifty per cent of the capital shares in another credit institution (subsidiary) (= substantial participating interest), or can directly or indirectly exercise a control- ling influence over it. Capital shares held directly and indirectly and capital shares owned by a third party for the account of a credit institution belonging to the group shall be added together; capital shares held indirectly are disregarded when determining the substantial participating interest if they have been obtained through the intermediation of an enterprise in which the parent institution directly holds less than fifty per cent of the capital shares; this applies as appropriate to capital shares held indirectly which have been obtained through the intermediation of more than one enterprise. Section 10a (2) sentences 3 to 6 on credit institutions belonging to a group applies as appropriate. (3) Whether or not credit institutions belonging to a group, taken as a whole, have granted a large loan and are observing the limits specified in section 13 (3) and (4) shall be determined on the basis of a pro rata consolidation of the liable capital and the loans granted to a single borrower if, for one of the credit institutions belonging to the group, the loan granted by that credit institution is a large loan within the meaning of section 13 (1) sentence 1. Section 10a (3) sentences 2 to 6 on the pro rata consolidation applies as appropriate. (4) The parent institution shall satisfy the reporting requirements and the require- ments to submit lists in accordance with subsection (1), read in conjunction with section 13 (1), in respect of the large loans granted by the credit institutions be- longing to the group, taken as a whole. The parent institution is responsible for the credit institutions belonging to the group, taken as a whole, observing the limits specified in section 13 (3) and (4). To meet its obligations in accordance with sen- tence 2 it may, however, exercise an influence over subsidiaries only insofar as this does not contravene current company law. (5) Section 10a (5) and (6) on the information requirement, the deduction proced- ure and exceptions from the pro rata consolidation applies as appropriate. 14. Loans of three million Deutsche Mark or more (1) Credit institutions shall report to the Deutsche Bundesbank by the fifteenth day of January, April, July and October those borrowers whose indebtedness to them amounted to three million Deutsche Mark or more at any time during the three cal- endar months preceding the reporting date. At the same time they shall report, for their subsidiaries within the meaning of section 13a (2) that are domiciled in another state and conduct banking business in accordance with section 1, the subsidiaries' borrowers within the meaning of sentence 1, to be applied as appro- priate. In the case of syndicated loans of three million Deutsche Mark or more, sen- tence 1 applies even if the share of the individual credit institution does not amount to three million Deutsche Mark. The report shall indicate the amount of the borrower's indebtedness at the end of the month preceding the report. Sec- tion 13 (1) sentence 3 applies as appropriate. (2) If it is found that loans of the type specified in subsection (1) have been grant- ed to a single borrower by several credit institutions or enterprises within the meaning of subsection (1) sentence 2, the Deutsche Bundesbank shall notify the credit institutions concerned. The notificatlon may indicate only the total indebted- ness of the borrower and the number of credit institutions involved. In the notifica- tion, the indebtedness to the credit institutions involved shall be broken down into liabilities arising from 1. Ioans repayable not earlier than four years after they have been granted, or sub- ject to regular repayment extending over a period of not less than four years; 2. Ioans repayable within less than four years after they have been granted; 3. acceptance and discount credit in respect of which the borrower has a right of recourse against other liable parties; 4. guarantees and other warranties and the liability in respect of the provision of collateral for third-party debts and in respect of obligations to meet money claims transferred against payment or to buy them back at the purchaser's request; 5. Ioans which are covered by numbers 1 to 4 and are guaranteed or secured in some other way by the Federal Government, a Federal special fund, a Land Government, a local authority or a local authority association; 6. Ioans which are covered by numbers 1 to 4 and satisfy the conditions of section 20(2), 1,20r5. (3) If pursuant to section 19 (2) several debtors are deemed to be a single bor- rower, the indebtedness of the individual debtors shall also be indicated in the reports in accordance with subsection (1). In the notification pursuant to subsec- tion (2) the total indebtedness of the debtors deemed to be a single borrower shall be stated. The indebtedness of individual debtors shall be notified only to those credit institutions which or whose subsidiaries within the meaning of subsection (1) sentence 2 have granted loans to these debtors. (4) After the conclusion of international agreements or after the entry into force of a Directive of the European Economic Community on credit reports within the meaning of this provision, the Deutsche Bundesbank is authorised to pass on the reports specified in subsection (1) in the consolidation provided for in subsection (2) sentences 2 and 3 to the bodies named in the international agreement or in the Directive of the European Economic Community for communication to the enter- prises concerned that are domiciled in another state, and also to notify the credit institutions involved in accordance with subsection (2) about the indebtedness of borrowers to enterprises domiciled in another state. 15. Loans to managers, etc. ( 1 ) Loans to 1. managers of the credit institution, 2. partners (Gesellschafter) of the credit institution who are not managers if the credit institution is organised in the form of a partnership or private limited company, and general partners of the credit institution who are not managers if the credit institution is organised in the form of a limited company with one or more general partners, 3. members of a body of the credit institution appointed to supervise the manage- ment of the credit institution if the supervisory powers of the body are regulat- ed by law (supervisory body), 4. holders of a special statutory authority (Prokuristen) and agents of the bank with authority to represent it in all aspects of its business (zum gesamten Geschaftsbetneb ermachtigte Handlungsbevollmachtigte), 5. spouses and under-age children of the persons specified in numbers 1 to 4, 6. silent partners of the credit institution, 7. enterprises organised in the form of a corporation or partnership if a manager, a holder of a special statutory authority or an agent with authority to represent the credit institution in all aspects of its business is a legal representative or a member of the supervisory body of the corporation or a partner in the part- nership, enterprises organised in the form of a corporation or partnership if a legal rep- resentative of the corporation, a partner in the partnership, a holder of a spe- cial statutory authority or an agent of the enterprise with authority to rep- resent it in all aspects of its business is a member of the supervisory body of the credit institution, 9. enterprises in which the credit institution or a manager holds a participating interest amounting to more than ten per cent of the enterprise's capital or in which the credit institution or a manager is a general partner; a participating interest is deemed to be any holding of shares or mining shares in the enter- prise amounting to not less than one-quarter of the capital (nominal capital, number of mining shares, total amount of capital shares), irrespective of the duration of the holding, enterprises which hold a participating interest in the credit institution amount- ing to more than ten per cent of its capital; number 9 clause 2 applies as appropriate, enterprises organised in the form of a corporation or partnership if a legal rep- resentative of the corporation or a partner in the partnership holds a particip- ating interest in the credit institution amounting to more than ten per cent of its capital; number 9 clause 2 applies as appropriate, may be granted only on the basis of a unanimous decision by all managers of the credit institution and only with the explicit approval of the supervisory body. The authorisation of withdrawals in excess of the remuneration due to a manager or a member of the supervisory body, and in particular the authorisation of advances on such remuneration, is deemed to be equivalent to the granting of a loan. (2) Subsection (1) applies as appropriate to the granting of loans to general part- ners, managers, members of the executive board or supervisory body, to holders of a special statutory authority and to agents of an enterprise dependent on the credit institution or controlling the credit institution with authority to represent the enterprise in all aspects of its business, as well as to their spouses and under-age children. In these cases the explicit approval of the supervisory body of the control- ling enterprise must have been given. (3) Subsections (1 ) and (2) do not apply to 1. Ioans to holders of a special statutory authority or to agents with authority to represent the credit institution in all aspects of its business, or to their spouses and under-age children, if the loan does not exceed one annual salary of the holder of the special statutory authority or of the agent with authority to repres- ent the credit institution in all aspects of its business, 2. Ioans to the persons or enterprises specified in subsection (1) sentence 1 num- bers 6 to 11, if the loan amounts to less than one per cent of the liable capital of the credit institution or to less than one hundred thousand Deutsche Mark, 3. Ioans which are increased by not more than ten per cent of the amount decid- ed on in accordance with subsection (1 ) sentence 1. (4) The decision by the managers and the decision on approval shall be taken be- fore the loan is granted. The decisions must contain provisions concerning the in- terest payable on and the repayment of the loan. They shall be placed on record. If a loan to be granted pursuant to subsection (1) sentence 1 numbers 6 to 11 is urgent, it is sufficient if all the managers and the supervisory body approve the granting of the loan immediately afterwards; if the decision by the managers has not been taken within two months, or if the decision by the supervisory body has not been taken within four months, this shall be reported to the Federal Banking Supervisory Office immediately. For certain lending operations and types of lend- ing operations, the decision by the managers and the decision on the approval of loans to the persons specified in subsection (1) sentence 1 numbers 1 to 5 and subsection (2) may be taken in advance, but not more than one year in advance. (5) If a loan is granted contrary to the provisions of subsections (1), (2) or (4) to a person specified in subsection (1) sentence 1 numbers 1 to 5 or subsection (2), it shall be repaid immediately, notwithstanding any arrangements to the contrary, unless all the managers and the supervisory body subsequently approve the grant- ing of the loan. 16. Reporting requirements for loans to managers, etc. A loan pursuant to section 15 (1) or (2) shall be reported immediately to the Fed- eral Banking Supervisory Office and the Deutsche Bundesbank if, (3) Subsections (1 ) and (2) do not apply to 1. Ioans to holders of a special statutory authority or to agents with authority to represent the credit institution in all aspects of its business, or to their spouses and under-age children, if the loan does not exceed one annual salary of the holder of the special statutory authority or of the agent with authority to repres- ent the credit institution in all aspects of its business, 2. Ioans to the persons or enterprises specified in subsection (1) sentence 1 num- bers 6 to 11, if the loan amounts to less than one per cent of the liable capital of the credit institution or to less than one hundred thousand Deutsche Mark, 3. Ioans which are increased by not more than ten per cent of the amount decid- ed on in accordance with subsection (1) sentence 1. (4) The decision by the managers and the decision on approval shall be taken be- fore the loan is granted. The decisions must contain provisions concerning the in- terest payable on and the repayment of the loan. They shall be placed on record. If a loan to be granted pursuant to subsection (1) sentence 1 numbers 6 to 11 is urgent, it is sufficient if all the managers and the supervisory body approve the granting of the loan immediately afterwards; if the decision by the managers has not been taken within two months, or if the decision by the supervisory body has not been taken within four months, this shall be reported to the Federal Banking Supervisory Office immediately. For certain lending operations and types of lend- ing operations, the decision by the managers and the decision on the approval of loans to the persons specified in subsection (1) sentence 1 numbers 1 to 5 and subsection (2) may be taken in advance, but not more than one year in advance. (5) If a loan is granted contrary to the provisions of subsections (1), (2) or (4) to a person specified in subsection (1) sentence 1 numbers 1 to 5 or subsection (2), it shall be repaid immediately, notwithstanding any arrangements to the contrary, unless all the managers and the supervisory body subsequently approve the grant- ing of the loan. 16. Reporting requirements for loans to managers, etc. A loan pursuant to section 15 (1) or (2) shall be reported immediately to the Fed- eral Banking Supervisory Office and the Deutsche Bundesbank if, 1. in the case of natural persons, it exceeds two hundred and fifty thousand Deutsche Mark; 2. in the case of enterprises, it exceeds five per cent of the credit institution's li- able capital and exceeds two hundred and fifty thousand Deutsche Mark Sentence 1 applies as appropriate to withdrawals by proprietors or general part- ners; in the case of general partners, loans and withdrawals shall be added to- gether. The Federal Banking Supervisory Office may request credit institutions every five years to submit to it and to the Deutsche Bundesbank a summary report of their loans to managers, etc., that need to be reported. 17. Liability (1) If a loan is granted contrary to the provisions of section 15, the managers who thereby violate their duty and the members of the supervisory body who, contrary to their duty, take no action to prevent the granting of the intended loan despite having knowledge thereof, are jointly and severally liable to the credit institution for any loss arising; the managers and the members of the supervisory body have to prove that they did not act culpably. (2) The credit institution's right to compensation may also be asserted by its cred- itors insofar as they cannot obtain satisfaction from the credit institution. The liability to compensate the creditors is not annulled by a waiver or by settlement with the credit institution nor, in the case of credit institutions organised in the form of a corporation, by the fact that the loan was granted on the basis of a de- cision by the supreme body of the credit institution (shareholders' meeting, gen- eral meeting, partners' meeting). (3) Claims under subsection (1) are barred under the Statute of Limitations after five years. 18. Information required of borrowers A credit institution which grants to a single borrower loans amounting in the aggregate to more than one hundred thousand Deutsche Mark shall require that borrower to disclose his financial circumstances to it, in particular by submitting his annual accounts. The credit institution may abstain from doing so if, in view of the collateral provided or of the co-obligors, there is manifestly no reason to require such disclosure. Sentence 1 does not apply to a loan based on the purchase of a 57 claim in respect of non-banking commercial transactions if claims on the debtor in question are bought regularly, if the seller of the claim is not answerable for its ful- filment and if the claim falls due within three months of the date of purchase. 19. The concepts of "loan" and "borrower" (1 ) The following shall be regarded as loans for the purposes of sections 13 to 18: 1. money loans of all kinds, money claims purchased, acceptance credits and claims in respect of registered bonds, other than registered mortgage bonds and communal bonds; 2. the discounting of bills of exchange and cheques; 3. money claims arising from a credit institution's other commercial transactions, other than credit cooperatives' claims in respect of merchandise transactions, unless these claims are prolonged beyond the customary period; 4. a credit institution's guarantees and other warranties and a credit institution's liability arising from the provision of collateral for third-party liabilities; 5. the obligation to meet money claims sold or to buy them back at the pur- chaser's request; 6. a credit institution's participating interests in a borrower's enterprise; a particip- ating interest is deemed to be any holding by the credit institution of shares or mining shares in the enterprise amounting to not less than one-quarter of the capital (nominal capital, number of mining shares, total amount of capital shares), irrespective of the duration of the holding; 7. assets with respect to which a credit institution, as the lessor, has concluded leasing agreements, less rentals paid by the lessee or a purchase of lease re- ceivables; such an item may be deducted only up to the book value of the respective asset leased. Any collateral provided to, and balances maintained with, the credit institution by the borrower are left out of account. (2) For the purposes of sections 10 and 13 to 18, the following are deemed to be a single borrower: 1. all enterprises belonging to the same group or connected by agreements which provide that one enterprise has to transfer its entire profit to another enterprise, as well as majority-owned enterprises and the enterprises or persons holding a majority interest in them, other than the central, regional and local authorities and special funds referred to in section 20 (1 ) 1; 2. partnerships and their general partners; 3. persons and enterprises for whose account a loan is raised, as well as the party that raises the loan in its own name. If a credit institution as a trustee holds a majority share in the capital of a limited partnership that invests its assets exclusively in German land, and if the credit insti- tution grants this partnership money loans to finance temporarily the acquisition or development of this land, the partnership is deemed to this extent, in respect of compliance with the limit laid down in section 13 (4), not to be an enterprise with- in the meaning of sentence 1 number 1. In applying section 13, sentence 1 does not apply to loans within a group of credit institutions as defined in section 13a (2) to enterprises included in the consolidation in accordance with section 13a (3). (3) In the case of purchases of money claims in accordance with subsection (1) sentence 1 number 1, the seller of the claim shall be regarded as a borrower within the meaning of sections 13 to 18 if he is answerable for the fulfilment of the claim sold or has to buy it back at the purchaser's request; failing this, the debtor of the liability shall be regarded as a borrower. 20. Exceptions (1 ) Sections 13 to 18 do not apply to 1. Ioans granted to the Federal Government, a Federal special fund. a I ~nd Gov- ernment, a local authority or a local authority association; 2. unsecured claims on other credit institutions in respect of balances maintained with them for investment purposes only and falling due within not more than three months; claims of registered cooperative societies on their regional insti- tutions (Zentralkassen), of savings banks on their regional institutions (Girozen- tralen), and of these regional institutions on their respective central institutions, may fall due later; 3. bills of exchange which have been purchased from other credit institutions, which have been accepted, endorsed, or drawn as promissory notes by a credit institution, which run for not more than three months, and which are normally traded in the money market; 4. loans written off. (2) Section 13 (3) to (5) on large loans, section 15 (1) sentence 1 numbers 6 to 11, section 16 sentence 1 number 2 on loans to managers, etc. and section 18 on information required of borrowers do not apply to 1. Ioans satisfying the requirements of sections 11 and 12 (1) and (2) of the Mort- gage Bank Act; 2. Ioans with maturities not exceeding fifteen years secured by ship mortgages satisfying the requirements of section 10 (1), (2) sentence 1 and (4) sentence 2, section 11 (1 ) and (4) and section 12 (1 ) and (2) of the Ship Mortgage Bank Act (Schiffsbankgesetz); 3. loans granted to a public corporation domiciled in the area of validity of this Act and not specified in subsection (1 ) 1, or to the European Economic Community, the European Coal and Steel Community, the European Atomic Energy Com- munity or the European Investment Bank; 4. loans guaranteed by any person specified in subsection (1 ) 1; 5. loans which are secured by a mortgage, a land charge or a ship mortgage, which exceed the marginal loan values specified in number 1 or 2 and which are guaranteed in the amounts exceeding these values by a person specified in subsection (1) 1. (3) Section 13 (1), (2) and (7) on large loan reports and large loan decisions does not apply to the loans specified in subsection (2) 3 and 4. Section 14 on loans of three million Deutsche Mark or more does not apply to the loans specified in sub- section (2) 3. Division 3. (Repealed) 21. and 22. (Repealed) Division 4. Advertising, and information requirements of credit institutions 23. Advertising (1) To counteract misleading advertising by credit institutions, the Federal Banking Supervisory Office may prohibit certain kinds of advertising. (2) Before general measures are taken under subsection (1), the central associ- ations representing the credit institutions shall be consulted. 23a. Information on non-membership of a guarantee scheme If a credit institution which accepts deposits is not a member of a domestic institu- tion guaranteeing deposits (guarantee scheme), it shall inform its customers who are not credit institutions of this fact, in a clearly printed manner, in its General Terms and Conditions, in its price list and, before an account is opened, in the ap- plication for the opening of an account. The relevant note in the application for the opening of an account shall not contain any other statements, and must be signed separately by the customer. If a credit institution withdraws from a guaran- tee scheme, it shall notify its customers who are not credit institutions of this fact immediately in writing. Division 5. Special duties of credit institutions and managers 24. Reports (1) Credit institutions shall report immediately to the Federal Banking Supervisory Office and the Deutsche Bundesbank 1. the appointment of a manager and the authorisation of a person to represent the credit institution in all aspects of its business, stating the facts which are important for assessing his trustworthiness and professional qualifications, 2. the retirement of a manager and the revocation of the authorisation to repres- ent the credit institution in all aspects of its business, 3. the acquisition and disposal of a direct participating interest in another enter- prise, and changes in the amount of the participating interest; a participating interest is deemed to be the holding of at least ten per cent of the capital or voting rights of the enterprise; changes in such participating interests are to be reported as soon as they exceed ten per cent of the capital or voting rights; once a year a summary report on these direct participating interests and a summary report on the indirect participating interests are to be submitted, 4. changes in the legal form, unless a licence is required under section 32 (1), and changes in the firm-name, partnership agreement or articles of association, 5. a loss amounting to twenty-five per cent of the liable capital; capital changes required to be entered in public registers; the termination of participation rights and subordinated liabilities; and, in the case of credit institutions organ- ised in the form of partnerships and in the case of dormant credit institutions, the dissolution of the partnership and repayment of the assets contributed by the partners, 6. the relocation of the office or domicile, 7. the establishment, relocation and closing of a branch; section 24a remains unaffected, 8. the termination of business, 9. the commencement and termination of business other than banking business, 10. the intention of conducting banking business, performing activities pursuant to section 1 (3) sentence 1 numbers 2 to 11, providing commercial information or renting out safe deposit boxes as services within the meaning of Art- icle 60 of the Treaty Establishing the European Economic Community in another member state of the European Economic Community, 11. the acquisition or disposal of a major participating interest in the reporting credit institution, the reaching, over- or undershooting of the thresholds for participating interests of twenty per cent, thirty-three per cent and fifty per cent of the voting rights or the capital, and the fact that the credit institution is becoming or is no longer the subsidiary of another enterprise, if the change in these participatory relationships comes to the attention of the credit institu- tion, 12. once a year, the name and address of the holder of a major participating inter- est in the reporting credit institution and in the foreign subsidiaries pur- suant to section 10a (2), and the amount of such participating interests, if these facts come to the attention of the credit institution. (2) A credit institution intending to merge with another credit institution shall report this fact to the Federal Banking Supervisory Office and the Deutsche Bun- desbank in good time. (3) A manager of a credit institution shall report immediately to the Federal Bank- ing Supervisory Office and the Deutsche Bundesbank 1. the commencement and termination of activities as a manager or member of the supervisory board or administrative board of another credit institution or another enterprise, and 2. the acquisition and disposal of a participating interest in an enterprise and changes in the amount of such a participating interest; section 19 (1) sentence 1 number 6 clause 2 applies as appropriate. (4) The Federal Minister of Finance, acting in consultation with the Deutsche Bun- desbank, may issue by regulation more detailed provisions on the nature, scope and timing of the reports, and on the submission of the documentation, provided for in this Act insofar as this is necessary for the performance of the functions of the Federal Banking Supervisory Office, and especially to enable it to obtain con- sistent records for assessing the banking business conducted by credit institutions. He may delegate this authority by regulation to the Federal Banking Supervisory Office, subject to the proviso that regulations of the Federal Banking Supervisory Office are issued only in agreement with the Deutsche Bundesbank. 24a. Establishment of a branch in another member state of the European Economic Community (1) A credit institution intending to establish a branch in another member state of the European Economic Community shall report this fact to the Federal Banking Supervisory Office and the Deutsche Bundesbank immediately. The report shall contain the following particulars: 1. the name of the member state in which the branch is to be established, 2. a business plan indicating the nature of the planned business and the organisa- tional structure of the branch, 3. the address at which the records of the credit institution can be requested in the host member state, and to which documents can be delivered, and 4. the name of the manager of the branch. (2) If there is no reason to doubt the suitability of the organisational structure and financial standing of the credit institution, the Federal Banking Supervisory Office transmits the particulars pursuant to subsection (1) sentence 2 to the appropriate authorities of the host member state within two months of the receipt of the com- plete documentation, and advises the reporting credit institution accordingly. The Federal Banking Supervisory Office also informs the appropriate authorities of the host member state of the amount of the own funds and the adequacy of the cap- ital and, if applicable, of the guarantee scheme of the association of credit institu- tions to which the credit institution belongs. If the Federal Banking Supervisory Office does not pass on the particulars pursuant to subsection (1) sentence 2 to the appropriate authorities of the host member state, it informs the credit institu- tion of its reasons for not doing so within two months of the receipt of all particu- lars pursuant to subsection ( 1 ) sentence 2. (3) If the situation reported in accordance with subsection (1) sentence 2 number 2, 3 or 4 or the situation of the guarantee scheme of its association changes, the credit institution shall report this change to the Federal Banking Supervisory Office, the Deutsche Bundesbank and the appropriate authorities of the host member state in writing at least one month in advance. (4) The Federal Minister of Finance is authorised to rule by regulation that subsec- tions (1 ) to (3) apply as appropriate to the establishment of a branch in a state out- side the European Economic Community insofar as this is necessary in the field of the right of establishment under agreements of the European Economic Commun- ity with states which do not belong to it. 25. Monthly returns and other information (1) Credit institutions shall submit monthly returns to the Deutsche Bundesbank immediately after the end of each month. If monthly balance sheet statistics are collected in accordance with section 18 of the Bundesbank Act, the returns to be submitted for that purpose are deemed to be monthly returns within the meaning of sentence 1. (2) Parent institutions within the meaning of section 13a (2) shall also submit pro rata consolidated monthly returns to the Deutsche Bundesbank immediately after the end of each month. Section 10a (3) on the pro rata consolidation procedure, section 10a (5) sentence 1 on the requirement to provide data, and section 10a (6) on exceptions from pro rata consolidation apply as appropriate. (3) The Deutsche Bundesbank passes on the monthly returns together with its comments to the Federal Banking Supervisory Office; the latter may waive its right to the forwarding of certain monthly returns. (4) The Federal Minister of Finance, acting in consultation with the Deutsche Bun- desbank, may issue by regulation more detailed provisions on the nature and scope of the monthly returns, insofar as monthly balance sheet statistics are not collected in accordance with section 18 of the Deutsche Bundesbank Act, and on other information insofar as this is necessary for the performance of the functions of the Federal Banking Supervisory Office, and especially in order to enable it to obtain consistent records for assessing the banking business conducted by credit institutions. The other information may also relate to enterprises which are domi- ciled in another state and are subsidiaries of the credit institution pursuant to sec- tion 13a (2). The Federal Minister of Finance may, by regulation, delegate the authority to issue regulations to the Federal Banking Supervisory Office. Division 5a. Submission of accounting records 26. Submission of annual accounts, annual report and auditor's reports (1 ) Credit institutions shall draw up their annual accounts for the previous financial year in the first three months of their financial year, and shall submit their annual accounts as drawn up, and subsequently also as approved, and their annual report, if any, to the Federal Banking Supervisory Office and the Deutsche Bundes- bank immediately; their annual accounts shall be elucidated in notes thereon. The annual accounts shall bear the certificate of audit (Bestatigungsvermerk) or a note accounting for the refusal of such a certificate. The auditor shall submit his report on the audit of the annual accounts (auditor's report) to the Federal Banking Supervisory Office and the Deutsche Bundesbank immediately after completion of the audit; in the case of credit institutions which belong to a cooperative society audit association or are audited by the audit office of a savings bank and giro asso- ciation (Sparkassen- und Giroverband), the auditor's report shall be submitted only on request. (2) If an additional audit has taken place in connection with the deposit guarantee scheme of a credit institution association, the auditor shall submit his report on this audit to the Federal Banking Supervisory Office and the Deutsche Bundesbank immediately. (3) Credit institutions which draw up group accounts or a group annual report shall submit these documents to the Federal Banking Supervisory Office and the Deutsche Bundesbank immediately. Subsection (1) sentence 3 on the submission of auditor's reports applies as appropriate if auditor's reports are drawn up by group auditors. Division 6. Audits and appointment of auditors 27. Audits of the notes The notes in accordance with section 26 (1) sentence 1 are to be included in the audits of annual accounts pursuant to section 340k of the Commercial Code and, in the case of cooperative societies, pursuant to section 53 (2) of the Act Concern- ing Industrial and Trading Cooperative Societies. 28. Appointment of the auditor in special cases (1) Credit institutions shall notify the Federal Banking Supervisory Office and the Deutsche Bundesbank of the auditor they have appointed immediately after mak- ing the appointment. Within one month of receipt of such notification, the Federal Banking Supervisory Office may request the appointment of a different auditor if this is necessary to achieve the object of the audit; objections and appeals have no postponing effect. (2) The court of registration having jurisdiction at the domicile of the credit institu- tion shall appoint an auditor at the request of the Federal Bankir (1 Sllnervjsory Office if 1. the notification in accordance with subsection (1) sentence 1 is not affected immediately after the end of the financial year; 2. the credit institution does not comply immediately with the request for the appointment of a different auditor in accordance with subsection (1 ) sen- tence 2; 3. the auditor chosen has declined to accept the auditing mandate, is no longer active, or is unable to conclude the audit in time, and the credit institution has not appointed a different auditor immediately. The appointment by the court is final. Section 318 (5) of the Commercial Code applies as appropriate. The court of registration may, at the request of the Federal Banking Supervisory Office, terminate the appointment of an auditor appointed in accordance with sentence 1. (3) Subsections (1) and (2) do not apply to credit institutions which belong to a cooperative society audit association or are audited by the audit office of a savings bank and giro association. 29. Special duties of the auditor (1) When auditing the annual accounts and interim accounts in accordance with section 10 (7) sentence 4, the auditor shall also examine the financial circum- stances of the credit institution; when auditing the annual accounts, he shall ascer- tain whether the credit institution has complied with the reporting requirements laid down in section 10 (4a) sentence 4, (5) sentence 5, (5a) sentence 6, (8) sen- tences 1 and 2, section 12a (1) sentence 3, section 13 (1) sentences 1 and 2, (2) sentences 5 and 6, section 13a (4) sentence 1, section 14 (1), section 15 (4) sen- tence 4 clause 2, section 16 sentences 1 and 2, sections 24, 24a (1), the require- ment to submit lists and summary reports in accordance with section 10 (8) sen- tence 3, section 13 (1) sentence 4, section 13a (4) sentence 1, section 16 sentence 3, section 24 (1) 3 and 12 and the obligations under sections 12 and 18, as well as the obligations under section 14 of the Act on Tracing Profits Arising from Serious Criminal Acts (Gesetz uber das Aufspuren von Gewinnen aus schweren Strafta- ten), if unrealised reserves pursuant to section 10 (4a) sentence 1 number 4 are included in the credit institution's liable capital, the auditor, when auditing the annual accounts, shall also examine whether section 10 (4a) sentences 2 and 3, (4b) and (4c) was complied with when ascertaining these reserves. The result shall be included in the auditor's report. (2) If, in the course of his audit, the auditor learns of facts which might warrant the qualification or refusal of the certificate of audit, endanger the existence of the credit institution or gravely impair its development, or which indicate that the man- agers have seriously infringed the law, the articles of association or the partnership agreement, he shall report this immediately to the Federal Banking Supervisory Office and the Deutsche Bundeshank ~t the request of the Federal Banking Super- report to them and communicate any other facts which have come to his notice in the course of the audit and which suggest that the business of the credit institu- tion has not been conducted properly. (3) The Federal Minister of Finance, after having consulted the Deutsche Bundes- bank, may issue by regulation more detailed provisions on the contents of auditor's reports insofar as this is necessary for the performance of the functions of the Federal Banking Supervisory Office, and especially in order to enable it to obtain consistent records for assessing the banking business conducted by credit institutions. He may delegate this authority by regulation to the Federal Banking Supervisory Office. 30. Audits of safe custody accounts (1) Where credit institutions conduct securities business or safe custody business, such business shall normally be auditecl once a year (safe custody account audit). The audit shall also cover compliance with section 128 of the Companies Act con- cerning communications by credit institutions, and compliance with section 135 of the Companies Act concerning the exercise of voting rights by credit institutions. (2) The Federal Minister of Finance may issue by regulation more detailed provi- sions on the nature, scope and timing of the safe custody account audit insofar as this is necessary for the performance of the functions of the Federal Banking Supervisory Office, and especially in order to counteract irregularities in securities and safe custody business and to enable the Office to obtain consistent records for assessing the securities and safe custody business conducted by credit institutions. He may delegate this authority by regulation to the Federal Banking Supervisory Office. The auditors of safe custody accounts are appointed by the Federal Banking Supervisory Office. In particular cases, the latter may delegate the right to appoint such auditors to the Deutsche Bundesbank. Division 7. Exemptions (1) The Federal Minister of Finance, after having consulted the Deutsche Bundes- bank, may by regulation exempt 68 1. all credit institutions or certain types or categories of credit institutions from the duty to report specific loans and facts in accordance with section 10 (8) sen- tence 2, section 13 (1), section 14 (1), sections 16 and 24 (1) 1 to 5, 7 and 9, certain types or categories of credit institutions from the duty to submit month- ly returns in accordance with section 25, and the managers of a credit institu- tion from the duty to report participating interests in accordance with section 24 (3) 2, if this information is of no significance for supervisory purposes; 2. certain types or categories of credit institutions from compliance with the provi- sions of sections 12, 13 (3) and (4) and section 26, if this is warranted by the particular nature of their business. The Federal Minister of Finance may delegate this authority to the Federal Banking Supervisory Office. (2) The Federal Banking Supervisory Office may exempt individual institutions from the requirements of sections 12, 13 (1) to (4), section 14 (1), section 15 (1) sen- tence 1 numbers 6 to 11 and (2), sections 16, 24 (1) 1, 2, 4 and 5 and sections 25, 26 and 30 if this appears desirable for particular reasons, especially because of the nature or scale of the business conducted. The Federal Banking Supervisory Office may exempt individual parent institutions within the meaning of section 10a (2) and section 13a (2) from the requirements of section 10a (3) and (4), section 12a (1) sentence 1 and section 13a (3) and (4) in respect of individual subsidiaries with- in the meaning of section 10a (2) and section 13a (2) if and as long as the balance sheet total of the individual subsidiary amounts to less than twenty million Deut- sche Mark and less than two per cent of the balance sheet total of the parent insti- tution, if the inclusion of this subsidiary is of no significance for supervision on a consolidated basis, and if it is made possible for the Federal Banking Supervisory Office to monitor whether these preconditions are met. Part 111 Provisions on the supervision of credit institutions Division 1. Licence to conduct business 32. Granting the licence (1) Anyone wishing to conduct banking business on the scale specified in section 1 (1) in the area of validity of this Act requires a written licence from the Federal Banking Supervisory Office. The application for the licence must contain the following particulars: 1. suitable evidence of the resources needed for business operations; 2. the nomination of at least two managers; 3. the information which is necessary for assessing the trustworthiness of the applicants and of the persons specified in section 1 (2) sentence 1; 4. the information which is necessary for assessing the professional qualifications, as required for managing the credit institution, of the proprietors and of the persons specified in section 1 (2) sentence 1; 5. a business plan showing the nature of the planned business, the organisational structure and the planned internal monitoring procedures of the credit institu- tion, and, 6. if major participating interests are held in the credit institution: (a) an indication of the holders of the major participating interests; (b) the amount of these participating interests; (c) the data required for assessing the trustworthiness of these holders or their legal representatives or the general partners; (d) if these holders are required to draw up annual accounts: their annual ac- counts for the last three financial years, and the auditor's reports compiled by independent external auditors, if such reports are to be prepared; and (e) if these holders belong to a group: the outline of the structure of the group and, if such accounts are to be drawn up, the consolidated group accounts for the last three financial years, and the auditor's reports compiled by inde- pendent external auditors, if such reports are to be prepared. The reports and documents to be submitted in accordance with sentence 2 shall be specified in detail by regulation in accordance with section 24 (4). (2) The Federal Banking Supervisory Office may make the granting of the licence subject to conditions which must be consistent with the purpose pursued by this Act. It may limit the licence to certain types of banking business. (3) Before granting a licence to conduct deposit business, the Federal Banking Supervisory Office shall consult the association appropriate for the credit institu- tion. 33. Refusing the licence (1) The licence shall be refused 1. if the resources needed for business operations, in particular adequate liable capital, are not available in the area of validity of this Act; if an enterprise intends to accept deposits or other repayable funds from the general public and to conduct lending operations, the equivalent of at least five million ECUs in paid-up capital, the amount paid up on cooperative society shares or reserves, less the total nominal amount of cumulative preferential shares, must be available; 2. if facts are known which indicate that an applicant or one of the persons speci- fied in section 1 (2) sentence 1 is not trustworthy; 2a. if facts are known which indicate that, in the case of a major participating interest in the credit institution, the holder or his legal representative or the general partners of the enterprise concerned fail to satisfy the requirements to be made in the interests of the sound and circumspect management of the credit institution; this is the case, in particular, if they are not trustworthy; 3. if facts are known which indicate that the proprietor or one of the persons specified in section 1 (2) sentence 1 does not have the professional qualifica- tions necessary for managing the credit institution and if no other person has been designated as manager in accordance with section 1 (2) sentence 2 or 3; 4. if the credit institution does not have at least two managers who work for it not merely in an honorary capacity; 5. if, contrary to the provisions of section 32 (1) sentence 2, the application is not accompanied by adequate particulars or documents. The Federal Banking Supervisory Office may refuse the licence if the credit institu- tion is associated with the holder of the major participating interest (section 15 of the Companies Act) and if effective supervision of the credit institution is not poss- ible because of these corporate ties or of the pattern of the corporate ties of the holder of the major participating interest with other enterprises. The licence may not be refused for reasons other than those specified in sentences 1 and 2. (2) A prerequisite of the professional qualifications for managing a credit institu- tion needed by the persons specified in subsection (1) sentence 1 number 3 is that they have adequate theoretical and practical knowledge of banking, as well as managerial experience. A person shall normally be assumed to have the profes- sional qualifications necessary for managing a credit institution if three years' managerial experience in a credit institution of comparable size and type is proved. 33a. Deferring or qualifying the licence in the case of enterprises domiciled outside the European Economic Community The Federal Banking Supervisory Office shall defer or qualify the decision on an application for a licence by enterprises domiciled outside the European Economic Community or by subsidiaries of such enterprises if a decision to this effect has been taken by the Commission or the Council of the European Communities under Article 22 (2) of the Second Banking Directive. The deferral or qualification may not exceed three months from the date of the decision. Sentences 1 and 2 also apply to applications for a licence submitted after the date of the decision. If the Council of the European Communities decides to extend the period specified in sentence 2, the Federal Banking Supervisory Office shall take due account of such extension. 72 33b. Consultation of the appropriate authorities of another member state of the European Economic Community If an enterprise domiciled in another member state of the European Economic Community applies for a licence to accept deposits or other repayable funds from the general public and to conduct lending business, the Federal Banking Supervis- ory Office, before granting the licence, shall consult the appropriate authorities of the home member state if 1. a subsidiary of an enterprise licensed in another member state in accordance with section 53b (1) sentence 1 or (7) is to be established, 2. a subsidiary of the parent enterprise of an enterprise licensed in another mem- ber state in accordance with section 53b (1) sentence 1 or (7) is to be estab- lished, or 3. the enterprise is controlled by the same natural persons or corporations as an enterprise licensed in another member state in accordance with section 53b (1) sentence 1 or (7). 34. Substitution and continuation in the event of death (1) Section 45 of the Industrial Code (Gewerbeordnung) does not apply to credit institutions. (2) After the death of the holder of the licence, the credit institution's business may be continued on behalf of the heirs without a licence by two substitutes for a period not exceeding one year. If the substitutes are not trustworthy or do not have the necessary professional qualifications, the Federal Banking Supervisory Office may prohibit the continuation of business. The substitutes shall be appointed immediately after the licence-holder's death; they are deemed to be managers. The Federal Banking Supervisory Office may prolong the ~Priod Sn~ci- fied in sentence 1 if there are special reasons for doing so. 35. Expiry and revocation of the licence (1) The licence expires if no use is made of it within one year from the date of granting . (2) The Federal Banking Supervisory Office may revoke the licence pursuant to the provisions of the Act on Administrative Procedures (Verwaltungsverfahrensgesetz) and also 1. if the business to which the licence relates has not been conducted for one year; 2. if the credit institution is operated in the form of a sole proprietorship; 3. if it learns of facts which would warrant the refusal of the licence under (a) section 33 (1) sentence 1 number 2 or 3, or (b) section 33 (1) sentence 1 number 1 or 4 or sentence 2; 4. if the discharge of a credit institution's obligations to its creditors, and particu- larly the safety of the assets entrusted to it, is endangered, and the danger can- not be averted by taking other measures under this Act; the safety of the assets entrusted to a credit institution is endangered, inter alia, by (a) a loss amounting to one-half of its liable capital calculated in accordance with section 10 (7), or (b) a loss amounting to more than ten per cent of its liable capital calculated in accordance with section 10 (7) in each of at least three successive financial years. (3) Subsection (2) 3 (b), read in conjunction with section 33 (1) sentence 1 num- ber 4, does not apply to credit institutions operated by a sole proprietor. (4) Section 48 (4) sentence 1 and section 49 (2) sentence 2 of the Act on Admin- istrative Procedures concerning the period of one year do not apply. 36. Dismissal of managers (1) In the cases specified in section 35 (2) 3 (a) and 4, the Federal Banking Super- visory Office, instead of revoking the licence, may demand the dismissal of the managers to whom the facts relate or who are answerable for the danger to the discharge of the credit institution's obligations to its creditors, and in the case of credit institutions organised in the form of a corporation it may also prohibit these managers from carrying out their activities. (2) The Federal Banking Supervisory Office may demand the dismissal of a man- ager, in addition, if he has wilfully or thoughtlessly violated the provisions of this Act, the regulations issued to implement it or orders issued by the Federal Banking Supervisory Office, and if he persists in such behaviour in spite of having been duly warned by the Federal Banking Supervisory Office. 37. Action to stop unlawful business If banking business is being conducted without the licence required under section 32 or if business prohibited under section 3 is being carried on, the Federal Bank- ing Supervisory Office may take direct action to prevent the continuation of the business. The Federal Banking Supervisory Office may publicise the measures it takes in accordance with sentence 1. 38. Consequences of the revocation and expiry of the licence; measures in the event of liquidation (1) If the Federal Banking Supervisory Office revokes the licence or if the licence expires, the Office may rule in the case of corporations and partnerships that the credit institution shall be liquidated. Its decision has the effect of a winding-up order. The decision shall be communicated to the court of registration and entered by the latter in the Commercial Register (Handelsreglster) or Register of Cooper- ative Societies (Genossenschaftsregister). (2) The Federal Banking Supervisory Office may issue general instructions regard- ing the liquidation of a credit institution. The court of registration shall appoint li- quidators at the request of the Federal Banking Supervisory Office if the persons otherwise appointed to liquidate the credit institution afford no guarantee of proper liquidation. An immediate appeal against the order of the court of registration is permissible. (3) The Federal Banking Supervisory Office may publicise the revocation or expiry of the licence. (4) Subsections (1) and (2) do not apply to public corporations. Division 2. Protection of the terms "bank" and "savings bank" 39. The terms "bank" and "banker" (1) Except as otherwise provided by current legislation, the term "bank" or "banker", or a term in which the word "bank" or "banker" appears, may be used in the firm-name or as an addition thereto or to describe the object of the business or for advertising purposes only by 1. credit institutions holding a licence in accordance with section 32 or branches of enterprises in accordance with section 53b (1) sentence 1 or (7); 2. other enterprises which, when this Act came into force, were legitimately using the term under the former regulations. (2) The term "people's bank" (Volksbank), or a term in which the words "people's bank" appear, may be newly used only by credit institutions organised in the form of a registered cooperative society and belonging to an audit association. (3) The Federal Banking Supervisory Office may rule when granting the licence that the terms specified in subsection (1) may not be used if in the accepted view the nature or scale of the credit institution's business does not warrant their use. 40. The term "savings bank" (1) The term "savings bank" (Sparkasse), or a term in which the words "savings bank" appear, may be used in the firm-name or as an addition thereto or to de- scribe the object of the business or for advertising purposes only by 1. public savings banks holding a licence in accordance with section 32; 2. other enterprises which, when this Act came into force, were legitimately using the term under the former regulations. (2) Credit institutions within the meaning of section 1 of the Act on Building and Loan Associations (Gesetz uber Bausparkassen) may use the term "building and loan association" (Bausparkasse), and registered cooperative societies belonging to an audit association may use the term "savings and loan bank" (Spar- und Darle- henskasse). 76 41. Exceptions Sections 39 and 40 do not apply to enterprises which use the words "bank", "banker" or "savings bank" in a context which precludes the impression that they conduct banking business. Credit institutions domiciled abroad may use the terms specified in section 39 (2) and in section 40 in the firm-name or as an addition thereto or to describe the object of the business or for advertising purposes in con- nection with their domestic operations, if they are entitled to use these terms in their country of domicile and if they include a clarifying addition in their firm-name which refers to their country of domicile. 42. Decision by the Federal Banking Supervisory Office In doubtful cases, the Federal Banking Supervisory Office decides whether an en- terprise may legitimately use the terms specified in sections 39 and 40. It shall communicate its decisions to the court of registration. 43. Registration provisions (1) If the conducting of banking business is subject to a licence in accordance with section 32, entries in public registers may be made only if the court of registration has been furnished proof that such a licence is held. (2) If an enterprise uses a firm-name or an addition thereto which is impermissible under sections 39 to 41, the court of registration shall officially cancel such firm- name or addition; section 142 (1) sentence 2, (2) and (3) and section 143 of the Act on Matters Relating to Voluntary Jurisdiction (Gesetz uber die Angelegenhei- ten der freiwilligen Gerichtsbarkeit) apply as appropriate. The enterprise shall be induced to discontinue the use of the firm-name or addition by the imposition of administrative fines; section 140 of the Act on Matters Relating to Voluntary Juris- diction applies as appropriate. (3) In proceedings before the court of registration concerning the entry or chan- ging of the legal status or firm-name of credit institutions, the Federal Banking Supervisory Office is entitled to enter petitions, and also to lodge the appeals per- missible under the Act on Matters Relating to Voluntary Jurisdiction. Division 3. Information and audits 44. Information from and audits of credit institutions (1) The Federal Banking Supervisory Office is empowered 1. to request information about all business matters and the presentation of books and records from credit institutions and members of their governing bod- ies and to carry out audits even if there is no special reason for them; persons in the employment of the Federal Banking Supervisory Office may enter a credit institution's premises for this purpose; the basic right embodied in Article 13 of the Constitution (Grundgesetz) is qualified to this extent; 2. in the case of credit institutions organised in the form of a corporation, to send representatives to shareholders' meetings, general meetings or partners' meet- ings, as well as to meetings of the supervisory bodies; the representatives may address these meetings; 3. to request credit institutions organised in the form of a corporation to convene the meetings specified in number 2, to convene meetings of the administrative and supervisory bodies and to announce in advance subjects on which de- cisions are to be taken; in this case the powers specified in number 2 are vested in the Federal Banking Supervisory Office in respect of meetings of the admin- istrative bodies as well. (2) The Federal Banking Supervisory Office may also request information about business matters and the presentation of books and records from an enterprise about which facts are known which warrant the assumption that it is a credit insti- tution or is conducting business prohibited under section 3. (3) The powers specified in subsection (1) 1 are also vested in the persons and institutions referred to in section 8 (1) within the scope of their mandate. The power to request information about all business matters and the presentation of books and records from credit institutions and members of their governing bodies is likewise vested in the Deutsche Bundesbank, insofar as it is acting under this Act. (4) The person liable to supply such information may refuse to answer questions the replies to which would expose him or one of the relatives specified in section 383 (1) 1 to 3 of the Code of Civil Procedure (Zivilprozessordnung) to the risk of criminal prosecution or of proceedings under the Act on Breaches of Administrat- ive Regulations (Gesetz uber Ordnungswidrigkeiten). 44a. Cross-border information and audits (1) Legal regulations that restrict the transmission of data do not apply to the transmission of data between a credit institution or an enterprise whose object is the acquisition of money claims, the acquisition of participating interests or capital investment and an enterprise domiciled in another state which directly or indirectly holds at least twenty-five per cent of the capital shares in the credit institution or enterprise, if such transmission of data is necessary to comply with the provisions of banking supervision on a consolidated basis with respect to the enterprise domi- ciled in another state. The Federal Banking Supervisory Office may prohibit a credit institution from transmitting data if reciprocity is not assured. (2) At the request of an authority responsible for exercising banking supervision over an enterprise domiciled in another member state of the European Economic Community, the Federal Banking Supervisory Office shall check the correctness of the data transmitted by a credit institution within the meaning of subsection (1) sentence 1 for the purpose of banking supervision on a consolidated basis, or shall permit the authority making the request, an auditor or an expert to check such data. Section 5 (2) of the Act Concerning Administrative Procedures, regarding the limits to administrative assistance, applies as appropriate. Credit institutions within the meaning of subsection (1) sentence 1 have to tolerate the audit. The granting of audit rights by banking supervisory authorities on the basis of international agreements remains unaffected. (3) The Federal Banking Supervisory Office is entitled to carry out the audits per- missible under this Act among subsidiaries within the meaning of section 10a (2) sentence 5 number 3, and especially to check the correctness of the data transmit- ted for the pro rata consolidation in accordance with section 10a (3), section 13a (3) and section 25 (2) insofar as this is necessary for the performance of the func- tions of the Federal Banking Supervisory Office and permissible under the legisla- tion of the other state. (4) The Federal Banking Supervisory Office shall communicate the services re- ported by a credit institution in accordance with section 24 (1) 10 to the appropri- ate authorities of the host member state within one month of the receipt of the report. 44b. Audits of the holders of major participating interests If facts are known which warrant doubts as to whether the holder of a major parti- cipating interest satisfies the demands to be made in the interests of sound and circumspect management of the credit institution, or as to whether the pattern of corporate ties permits effective supervision of the credit institution, the holder of the major participating interest shall, at the request of the Federal Banking Super- visory Office, submit to it and to the Deutsche Bundesbank the records specified in section 32 (1) sentence 2 number 6 (d) and (e). The Federal Banking Supervisory Office may order an audit of the records specified in section 32 (1) sentence 2 number 6 (d) and (e) by an external auditor to be nominated by that Office. Division 4. Measures in special cases 45. Measures in case of inadequate capital or inadequate liquidity (1) If at any credit institution 1. the liable capital does not satisfy the requirements of section 10 (1) sentence 1, or 2. the investment of its funds does not satisfy the requirements of section 11 sen- tence 1 or section 12, the Federal Banking Supervisory Office may prohibit or limit withdrawals by pro- prietors or partners, the distribution of profits and the granting of loans (section 19 (1)). In the case specified in sentence 1 number 2, the Federal Banking Supervis- ory Office may also prohibit the credit institution from investing available funds in the assets to be included in accordance with section 12. Sentence 1 shall apply as appropriate to parent institutions within the meaning of section 10a (2) if the liable capital of the credit institutions belonging to the group does not satisfy the requirements of section 10a (1). (2) The Federal Banking Supervisory Office may issue the orders specified in sub- section (1) only if the credit institution has failed to remedy the shortcoming within a period set by the Office. Decisions on the distribution of profits are invalid insofar as they conflict with any order issued in accordance with subsection (1). 46. Measures in case of danger (1) If the discharge of a credit institution's obligations to its creditors, and espe- cially the safety of the assets entrusted to it, is endangered, the Federal Banking Supervisory Office may take temporary measures to avert the danger. In particular, it may issue instructions on the management of the credit institution's business, prohibit or limit the acceptance of deposits and the granting of loans (section 19 (1)), prohibit proprietors and managers from carrying out their activities, or limit such activities, and appoint supervisors. Decisions on the distribution of profits are invalid insofar as they conflict with any order issued in accordance with sentences 1 and 2. In the case of credit institutions organised in a form other than that of a sole proprietorship, managers who have been prohibited from carrying out their activities are barred from the management and representation of the credit institu- tion for the duration of the prohibition. Regarding the claims arising from the employment contract or from other provisions on the activities of the manager, the general regulations apply. Rights permitting a manager to participate as a partner or in other ways in decisions on measures affecting the management of the credit institution may not be exercised for the duration of the prohibition. (2) Where, in cases in which the necessary legal representatives are lacking or in which the proprietor of a credit institution organised in the form of a sole propri- etorship is no longer active or is unable to act, the court, acting in accordance with other legislation, may upon application by an interested party appoint a person authorised to represent the credit institution, the Federal Banking Supervisory Of- fice is among those entitled to make such an application on the conditions speci- fied in subsection (1) sentence 1. 46a. Measures in case of a danger of insolvency; appointment of persons authorised to represent the credit institution (1) On the conditions specified in section 46 (1) sentence 1, the Federal Banking Supervisory Office may, to avert insolvency, temporarily issue a ban on sales and payments by the credit institution, 2. order the credit institution to be closed for business with customers, 3. prohibit the acceptance of payments not intended for the discharge of debts to the credit institution, unless the deposit guarantee scheme of an association of credit institutions undertakes to satisfy in full all those entitled to satisfaction. The deposit guarantee scheme may make its declaration of liability subject to the condition that incoming payments not intended for the discharge of debts to the credit institution are held and administered, in favour of the deposit guarantee scheme, separately from the credit institution's assets in existence at the time of the issue of the ban on sales and payments in accordance with number 1. After the issue of the ban on sales and payments in accordance with sentence 1 number 1, the credit institution may complete the transactions in progress at the time of the issue of the ban, and enter into new transactions insofar as this is ne- cessary for completing the former transactions, provided and to the extent that the deposit guarantee scheme of an association of credit institutions supplies the funds required for the purpose or undertakes to compensate the credit institution for any diminution in its assets resulting from these transactions as a whole, inso- far as such compensation is needed for the full satisfaction of all creditors. More- over, the Federal Banking Supervisory Office may authorise exceptions to the ban on sales and payments in accordance with sentence 1 number 1, provided and to the extent that this is necessary for the administration of the credit institution. Exe- cutions, attachments and temporary injunctions against the assets of the credit institution are not permissible for the duration of measures in accordance with sen- tence 1. (2) If, in the case of credit institutions organised in a form other than that of a sole proprietorship, measures in accordance with subsection (1) sentence 1 have been ordered, and if managers have been prohibited from carrying out their activities, the court having jurisdiction at the domicile of the credit institution shall, at the request of the Federal Banking Supervisory Office, appoint, as necessary, persons authorised to manage the credit institution's business and to represent it if, owing to the prohibition, the credit institution no longer has the requisite number of per- sons authorised to manage its business and represent it. In the case of credit insti- tutions entered in a public register, the appointment or dismissal by the court of persons authorised to represent the credit institution, the scope of their authority and the termination of their tenure of office are recorded officially. The persons authorised to represent the credit institution shall deposit specimen signatures with the court. For the duration of the conditions specified in sentence 1, the per- sons or governing bodies entitled to do so under other legislation may not exercise their right to appoint persons authorised to manage the credit institution's busi- ness and to represent it. (3) The representational authority of a person appointed by the court is deter- mined by the authority of the manager in whose stead this person has been appointed. This person's authority to manage the credit institution's business is lim- ited to the execution of the measures necessary to avert insolvency and protect creditors, unless it is extended by the appropriate governing bodies of the credit i nstitution . (4) The person authorised to manage the credit institution's business and to repres- ent it whom the court has appointed is entitled to the reimbursement of reason- able cash expenses and to remuneration for his activities. The court having jurisdic- tion at the domicile of the credit institution determines such expenses and remu- neration upon application by the person authorised to manage the credit institution's business and to represent it whom the court has appointed. No fur- ther appeal is permissible. The final decision results in execution in accordance with the Code of Civil Procedure. (5) For the duration of measures in accordance with subsection (1) sentence 1, a person authorised to manage the credit institution's business and to represent it whom the court has appointed may be dismissed only by the court at the request of the Federal Banking Supervisory Office or of the credit institution's governing body responsible for the debarment of partners from the management and repres- entation of the credit institution or for the dismissal of persons authorised to man- age the credit institution's business or to represent it, and only if there is good reason for doing so. (6) The tenure of office of a person authorised to manage the credit institution's business and to represent it whom the court has appointed expires in any event if the measures in accordance with subsection (1) sentence 1 and the order prohibit- ing the manager in whose stead the person was appointed from carrying out his activities are revoked. If only the measures in accordance with subsection (1) sen- tence 1 are revoked, the tenure of office of a person authorised to manage the credit institution's business and to represent it whom the court has appointed expires as soon as the persons or governing bodies entitled to do so under other legislation have appointed a person authorised to manage the credit institution's business and to represent it, and as soon as a licence has been granted to this per- son, if necessary, in accordance with section 32. (7) Subsections (2) to (6) do not apply to public corporations. 46b. Petition for compulsory liquidation If a credit institution becomes insolvent or overindebted, the managers and, in the case of a credit institution operated in the form of a sole proprietorship, the pro- prietor shall report this fact immediately to the Federal Banking Supervisory Office. Insofar as these persons are required under other legislation to file a petition for compulsory liquidation in the event of insolvency or overindebtedness, the re- porting requirement in accordance with sentence 1 takes the place of the require- ment to file such a petition. Compulsory liquidation proceedings over the assets of a credit institution are instituted in the event of insolvency or overindebtedness. The petition for the institution of such proceedings over the assets of the credit institution may be filed by the Federal Banking Supervisory Office only. The bank- ruptcy court shall grant the petition filed by the Federal Banking Supervisory Office; sections 46 and 84 of the Composition Code and section 107 (1) of the Bankruptcy Code (Konkursordnung) remain unaffected. An appeal against the court's decision to institute compulsory liquidation proceedings is impermissible. 46c. Calculation of periods The periods to be calculated, in accordance with section 31 number 2, sections 32, 32a sentence 2, sections 33 and 55 number 3 and section 183 (2) of the Bank- ruptcy Code, section 237 of the Commercial Code and section 32b sentence 1 of the Act Concerning Private Limited Companies (Gesetz betreffend die Gesellschaf- ten mit beschrankter Haftung), from the date of the institution of compulsory liquidation proceedings, and the periods to be calculated, in accordance with sec tion 75 (2) and section 107 (2) of the Composition Code, from the date of the institution of composition proceedings, shall be calculated from the date on which a measure in accordance with section 46a (1) is ordered. 47. Moratorium; suspension of banking and stock market business (1) If there is reason to fear that credit institutions may encounter financial diffi- culties which warrant expectations of grave danger to the national economy, and particularly to the orderly functioning of general payments, the Federal Govern- ment may by regulation 1. grant a credit institution an extension of time to discharge its obligations, and order that executions, attachments and temporary injunctions against the credit institution as well as the institution of composition or compulsory iiquidation proceedings over the credit institution's assets, are impermissible for the dura- tion of the extension; 2 order that credit institutions be temporarily closed for business with customers and that they may neither make nor accept payments and credit transfers con- nected with such business; it may limit this order to certain types or categories of credit institutions and to certain types of banking business; 3 order that stock exchanges be temporarily closed. (2) Before taking measures in accordance with subsection (1) the Federal Govern- ment shall consult the Deutsche Bundesbank. (3) If the Federal Government takes measures in accordance with subsection (1), it shall specify by regulation the legal consequences of these measures for periods and dates in the fields of civil law, trade law, company law, bill of exchange law, cheque law and procedural law. 48. Resumption of banking and stock market business (1) For the period after a temporary closure of credit institutions and stock ex- changes in accordance with section 47 (1) 2 and 3, the Federal Government may, after having consulted the Deutsche Bundesbank, issue by regulation provisions on the resumption of payments, credit transfers and stock market business. In particu- lar, it may rule that the withdrawal of credit balances is subject to temporary restrictions. Such restrictions may not be imposed in respect of sums of money accepted after a temporary closure of credit institutions. (2) The regulations issued in accordance with subsection (1) and section 47 (1) cease to have effect three months after promulgation, unless they have been re- voked earlier. Division 5. Enforceability, sanctions, costs and charges 49. Immediate enforceability Objections to and appeals against measures by the Federal Banking Supervisory Office have no postponing effect in the cases specified in section 2b (1) sentence 5 and (2) sentence 1, section 12a (2), section 35 (2) 2, 3 (b) and 4, sections 36, 45, 46, 46a (1 ) and section 46b and in the case of an audit in accordance with section 44 ( 1 ) 1 and section 44a (2) sentence 1. 50. Sanctions (1) The Federal Banking Supervisory Office may impose sanctions in accordance with the provisions- of the Administration Enfor,cement Act (Verwaltungs-Voll- streckungsgesetz) to enforce compliance with the orders it issues by virtue of its statutory powers. It may also impose sanctions on credit ~nstitutions which are public corporations. (2) The amount of any such sanctionary fine may not exceed fifty thousand Deut- sche Mark. 51. Costs and charges (1 ) Ninety per cent of the costs incurred by the Federal Banking Supervisory Office shall be refunded to the Federal Government by the credit institutions, unless the said costs are covered by charges or special refunds in accordance with subsection (3). The costs are apportioned among the credit institutions in accordance with the scale of their business and are collected by the Federal Banking Supervisory Office as provided in the Administration Enforcement Act. Detailed provisions on the apportionment and collection are issued by regulation by the Federal Minister of Finance. (2) For decisions under sections 32, 34 (2) and sections 35 to 37, the Federal Bank- ing Supervisory Office may levy charges of between one hundred and ten thou- sand Deutsche Mark. The sum charged should depend in each case on the amount of work required for the decision and the scale of business of the enterprise con- cerned . (3) The costs incurred by the Federal Government as a result of a safe custody account audit (section 30), an announcement under section 38 (3), an audit car- ried out under section 44 (1 ) 1 or section 44b sentence 2 or the appointment of a supervisor shall be refunded separately by the enterprise concerned, and at the request of the Federal Banking Supervisory Office they shall be paid in advance. The costs incurred by the Federal Government as a result of checks pursuant to section 44a (3) of the correctness of the data transmitted for the pro rata consol- idation in accordance with section 10a (3), section 13a (3) and section 25 (2) shall be refunded separately by the parent institution required to make the pro rata con- solidation, and at the request of the Federal Banking Supervisory Office they shall be paid in advance. Part IV Special provisions 52. Special supervision Insofar as credit institutions are subject to any other government supervision, this remains in effect alongside supervision by the Federal Banking Supervisory Office. 53. Branches of enterprises domiciled in another state (1) If an enterprise domiciled in another state maintains in the area of validity of this Act a branch which conducts banking business on the scale specified in section 1 (1), that branch is deemed to be a credit institution. If the enterprise maintains several branches within the meaning of sentence 1, they are deemed to be a single credit institution. (2) This Act applies to the credit institutions specified in subsection (1) subject to the following provisos: 1. The enterprise shall appoint at least two natural persons residing in the area of validity of this Act who are authorised to manage the enterprise's business and to represent it with regard to the credit institution's field of business. These per sons are deemed to be managers. Their names shall be reported for entry in the Commercial Register. 2. The credit institution is required to keep separate books and render separate accounts to the Federal Banking Supervisory Office and the Deutsche Bundes- bank on the business it conducts and on the assets of the enterprise used in its business. To this extent, the provisions of the Commercial Code on account books apply as appropriate. On the liabilities side of the annual statement of assets and liabilities the amount of working capital supplied to the credit institu tion by the enterprise and the amount of operating profit retained by the credit institution to enlarge its capital and reserves shall be shown separately. The excess of liabilities over assets or of assets over liabilities shall be shown separ- ately and in a single sum at the end of the statement of assets and liabilities. 3. The statement of assets and liabilities to be drawn up as at the end of each financial year in accordance with number 2, together with a statement of re- ceipts and expenses and notes thereon, is deemed to be the annual accounts (section 26). Section 340k of the Commercial Code applies accordingly to the auditing of the annual accounts, subject to the proviso that the auditor is chosen and appointed by the managers. The annual accounts of the enterprise for the same financial year shall be submitted alo,ng with the annual accounts of the credit institution. 4. The liable capital of the credit institution is deemed to be the sum of the amounts shown in the monthly return in accordance with section 25 as work- ing capital supplied to the credit institution by the enterprise and operating profit retained by the credit institution to enlarge its capital and reserves, less the amount of a credit balance on inter-branch settlement account, if any. Fur- thermore, capital paid up by third parties not belonging to the group against the issue of participation rights in accordance with section 10 (5) or on account of the incurrence of subordinated liabilities in accordance with section 10 (5a) shall be counted as part of the credit institution's liable capital if the agree- ments made in accordance with section 10 (5) sentence 1 numbers 1 to 3 and (5a) sentence 1 numbers 1 to 3 relate in each case to the entire enterprise. The sum total of the capital items in accordance with sentence 2 may not exceed the amount of liable capital in accordance with sentence 1; the capital paid up on account of the incurrence of subordinated liabilities in accordance with sec- tion 10 (5a) may not exceed fifty per cent of the amount of liable capital in accordance with sentence 1. The liable capital is calculated on the basis of the most recent monthly return. 5. The commencement of business by any branch of the enterprise requires a licence. The licence may be refused if reciprocity on the basis of international agreements is not assured. The licence shall be revoked if and insofar as the enterprise's licence to conduct banking business has been revoked by the au- thority responsible for banking supervision over the enterprise in the other state. 6. For the purposes of section 36 (1) the credit institution is deemed to be a cor- poration . (3) For legal proceedings relating to the business of a branch withln the meaning of subsection (1), the venue as established by the location of the branch in accord- ance with section 21 of the Code of Civil Procedure may not be barred by contract. (4) Subsections (2) and (3) do not apply if barred by international agreements approved by Parliament in the form of a Federal Act. 53a. Representative offices of enterprises domiciled in another state The establishment, relocation and closing of a representative office in the area of validity of this Act by an enterprise which is domiciled in another state and which conducts banking business shall be reported immediately to the Federal Banking Supervisory Office and the Deutsche Bundesbank by the manager of the rep- resentative office. 53b. Enterprises domiciled in another member state of the European Economic Community (1) An enterprise domiciled in another member state of the European Economic Community that accepts deposits or other repayable funds from the general public and conducts lending business may, notwithstanding section 32, conduct the busi- ness specified in section 1 (1) sentence 2 numbers 1 to 5 and 7 to 9 without a licence from the Federal Banking Supervisory Office through a branch or by render- ing services in the area of validity of this Act, conduct the business specified in sec- tion 1 (3) sentence 1 numbers 2 to 11, offer commercial information and rent out safe deposit boxes, provided that the enterprise has been licensed and is super- vised by the appropriate authorities of the home member state, that the business is covered by the licence and that the enterprise is subject to the requirements of the Second Banking Directive and Council Directive 89/647/EEC of December 18, 1989 on a solvency ratio for credit institutions - Official Journal of the European Communities No. L 386 page 14. In this case section 53 does not apply. Section 14 of the Industrial Code remains unaffected. (2) The Federal Banking Supervisory Office shall notify the enterprise intending to establish a branch within the area of validity of this Act, within two months of the receipt of the records on the intended establishment of the branch despatched by the appropriate authorities of the home member state, of the reports to the Federal Banking Supervisory Office and the Deutsche Bundesbank prescribed for its operations, and shall specify the conditions applying pursuant to subsection (3) to the performance of the operations planned by the branch, on the grounds of general interest. After receipt of the notification from the Federal Banking Super- visory Office, but not later than after the expiry of the period specified in sen- tence 1, the branch can be established and commence operations. (3) Sections 3, 11, 14, 18 to 20, 23, 23a, 24 (1) 6 to 9, sections 25, 30, 37, 39 to 42, 43 (2) and (3), section 44 (1) 1, (2) to (4), section 44a (1) and (2) and sections 46 to 50 shall be applied as appropriate to branches within the meaning of subsec- tion (1) sentence 1, subject to the proviso that one or more branches of the same enterprise are deemed to be a single credit institution. Sections 3, 23a and 37 apply as appropriate to the rendering of services in accordance with subsection (1) sentence 1. (4) If the Federal Banking Supervisory Office finds that the liquidity of a branch within the meaning of subsection (1) sentence 1 is inadequate, it requests the branch to remedy the shortcoming within a period to be specified by the Office. If the branch does not comply with this request, the Federal Banking Supervisory Office notifies the appropriate authorities of the home member state. If the home member state does not take any action or if its action does not lead to the remedy- ing of the shortcoming, the Federal Banking Supervisory Office may take the necessary measures in accordance with sections 45 to 46b and 50, after having notified the appropriate authorities of the home member state. (5) In urgent cases the Federal Banking Supervisory Office may take the necessary measures in accordance with sections 45 to 46b and 50 before initiating the pro- cedure specified in subsection (4). The Commission of the European Communities and the appropriate authorities of the home member state shall be notified there- of immediately. The Federal Banking Supervisory Office shall amend or revoke the measures if the Commission, after having consulted the appropriate authorities of the home member state and the Federal Banking Supervisory Office, so decides. (6) The appropriate authorities of the home member state, after having notified the Federal Banking Supervisory Office in advance, may audit the information required for supervising the branch at the branch concerned, either themselves or through their agents. (7) An enterprise domiciled in another member state of the European Economic Community which performs one of the activities specified in section 1 (1) sentence 2 numbers 1 to 5 and 7 to 9 or which is a financial institution within the meaning of section 1 (3) may, notwithstanding section 32, conduct the business specified in section 1 (1) sentence 2 numbers 1 to 5 and 7 to 9 without a licence from the Fed- eral Banking Supervisory Office through a branch or by rendering services in the area of validity of this Act, conduct the business specified in section 1 (3) sentence 1 numbers 2 to 11, offer commercial information and rent out safe deposit boxes, provided that the enterprise is a subsidiary of a credit institution or a joint subsidi- ary of several credit institutions, that its articles of association permit these activ- ities and that the following preconditions are met: 1. the parent enterprise(s) is (are) licensed as a credit institution in that member state of the European Economic Community in which the subsidiary is domi- ciled; 2. the activities performed by the enterprise are likewise conducted in the home member state; 3. the parent enterprise(s) holds (hold) at least ninety per cent of the voting rights in the subsidiary; 4. the parent enterprise(s) has (have) submitted convincing evidence of the circumspect management of the subsidiary to the appropriate authorities of the home member state and, with the approval of the appropriate authorities of the home member state, jointly and severally guaranteed the liabilities incurred by the subsidiary, if necessary; 5. the subsidiary is included in the supervision of the parent enterprise on a con- solidated basis. Sentence 1 applies as appropriate to subsidiaries of the enterprises specified in sen- tence 1 which satisfy the aforementioned conditions. Subsections (2) to (6) apply as appropriate. 53c. Enterprises domiciled outside the European Economic Community The Federal Minister of Finance is authorised 1. to prescribe by regulation that the provisions of this Act on foreign enterprises domiciled in a member state of the European Economic Community shall also be applied to enterprises domiciled outside the European Economic Community insofar as this is necessary in the context of the freedom of establishment or of service transactions by virtue of agreements of the European Economic Com munity with states not belonging to it; 2. to order by regulation that the provisions of section 53b be applied in full or in part, with full or partial exemption from the provisions of section 53, to enter- prises domiciled outside the European Economic Community if reciprocity is assured and if (a) the enterprises are supervised in their country of domicile in the areas cov- ered by the exemption in accordance with internationally accepted prin- ciples, (b) branches of credit institutions domiciled in Germany are granted resident treatment in that state, and (c) the appropriate authorities of the country of domicile are willing to cooper- ate satisfactorily with the Federal Banking Supervisory Office, and if this is ensured by means of an international agreement. 53d. Reports to the Commission of the European Communities (1) The Federal Banking Supervisory Office reports to the Commission of the Euro- pean Communities 1. the granting of a licence to conduct banking business within the meaning of section 1 (1) sentence 2 numbers 1 and 2; 2. the granting of a licence in accordance with section 32 (1) to an enterprise which is a subsidiary of a parent enterprise domiciled outside the European Eco- nomic Community; the structure of the group shall be indicated in the report; 3. the acquisition of a participating interest in a credit institution through which the credit institution becomes a subsidiary of a parent enterprise domiciled out- side the European Economic Community; 4. the number and nature of the cases in which the establishment of a branch in another member state of the European Economic Community has foundered because the Federal Banking Supervisory Office has failed to pass on the in- formation specified in section 24a (1) sentence 2 to the appropriate authorities of the host member state; . the number and nature of the cases in which measures have been taken in accordance with section 53b (4) sentence 3 and (5) sentence 1; 92 6. the general difficulties which credit institutions face in establishing branches, setting up subsidiaries or conducting banking business and performing the activities specified in section 1 (3) sentence 1 numbers 2 to 11 in a state which is not a member of the European Economic Community; 7. at the request of the Commission, the application for a licence of an enterprise which is a subsidiary of a parent enterprise domiciled outside the European Eco- nomic Community; 8. at the request of the Commission, the intention (reported in accordance with section 2b) of acquiring a participating interest in a credit institution, through which acquisition the credit institution becomes a subsidiary of an enterprise domiciled outside the European Economic Community. (2) The reporting requirements specified in subsection (1) 7 and 8 apply only if the Commission of the European Communities finds that, in the state which is not a member state of the European Economic Community, no effective market access which is comparable to that which the European Economic Community grants to enterprises of that state is granted to credit institutions domiciled in the European Economic Community, or if the Commission finds that credit institutions domiciled in the European Economic Community are not granted resident treatment in that state. The reporting requirements specified in subsection (1) 7 and 8, read in con- junction with sentence 1, no longer apply if an agreement on effective market access by, and resident treatment of, credit institutions domiciled in the European Economic Community has been concluded with that state, or if applications for a licence by enterprises domiciled in that state no longer need to be deferred in accordance with section 33a. Part V Provisions on penalties and fines 54. Prohibited business, acts performed without a licence (1) Anyone who 1. conducts business which is prohibited under section 3, read also in conjunction with section 53b (3) sentence 1 or 2, or 2. conducts banking business without the licence required under section 32, is punished by a term of imprisonment not exceeding three years or by a fine. (2) If the acts have been performed through negligence, the punishment is a term of imprisonment not exceeding one year or a fine. 55. Violation of the requirement to report insolvency or overindebtedness (1) Anyone who, as a manager of a credit institution or as the proprietor of a credit institution operated in the form of a sole proprietorship, fails to report insolvency or overindebtedness, in violation of section 46b sentence 1, read also in conjunction with section 53b (3) sentence 1, to the Federal Banking Supervisory Office, is punished by a term of imprisonment not exceeding three years or a fine. (2) If the acts have been performed through negligence, the punishment is a term of imprisonment not exceeding one year or a fine. 56. Breaches of administrative regulations (1) It constitutes a breach of administrative regulations (Ordnungswidrigkeit) if anyone in violation of section 44 (1) 1, (2) or (3), read also in conjunction with section 53b (3) sentence 1, wilfully or negligently fails to provide information or to pro- vide it in time or in full, or provides incorrect information, or fails to present the books or records, or to present them in time or in full, or refuses to permit the exercise of the powers specified in section 44 (1) 1, 2 or 3 clause 2 or (3) sen- tence 1, read also in conjunction with section 53b (3) sentence 1, 2. wilfully or negligently violates a provision of a regulation pursuant to section 24 (4) sentence 1, read also in conjunction with sentence 2, section 25 (4) sen- tence 1, read also in conjunction with sentence 3, section 30 (2) sentence 1, read also in conjunction with sentence 2, section 31 (1) sentence 1, read also in conjunction with sentence 2, section 47 (1) 2 or 3 or section 48 (1) insofar as the regulation refers to this provision on fines in respect of certain elements of an offence, 3. wilfully or negligently violates an enforceable order issued in accordance with section 2b (1) sentence 5, section 12a (2), section 23 (1), read also in conjunc- tion with section 53b (3) sentence 1, section 32 (2) sentence 1, section 44 (1) 3 clause 1, section 45 (1), section 46 (1) sentence 1 or 2, read also in conjunction with section 53b (3) sentence 1, section 46a (1) sentence 1, read also in con- junction with section 53b (3) sentence 1, or section 53b (4) sentence 3, read in conjunction with section 45 (1), section 46 (1) sentence 1 or 2 or section 46a (1) sentence 1, 4. wilfully or thoughtlessly fails to comply with the reporting requirements speci- fied in section 2b (1) sentences 1 to 4 or 6 or (4), section 10 (8) sentence 1 or 2, section 12a (1) sentence 3, section 13 (1) sentence 1 or 2, (2) sentence 5 or 6, section 13a (4) sentence 1, section 14 (1), read also in conjunction with sec- tion 53b (3) sentence 1, section 15 (4) sentence 4 clause 2, section 16 sentence 1 or 2, section 24 (1) or (3), (1) 6 to 9, read also in conjunction with section 53b (3) sentence 1, section 24a (1) or (3), read also in conjunction with a regu- lation issued pursuant to section 24a (4), section 28 (1) sentence 1 or section 53a, or to comply with them in time or in full, or provides incorrect information in such a report; in respect of the reporting requirements specified in sections 13 and 13a, this applies only insofar as the large loan does not exceed fifty per cent of the liable capital, 5. wilfully or thoughtlessly fails to comply with the duty to submit interim reports and auditor's reports in accordance with section 10 (7) sentence 5, monthly returns in accordance with section 25 (1) sentence 1, read also in conjunction with sentence 2, or (2) sentence 1, read also in conjunction with section 53b (3) sentence 1, annual accounts, the auditor's report, the accounts of the group, the annual report of the group or the auditor's report of the group auditors in accordance with section 26 (1) or (3), or to comply with them in time or in full, or provides incorrect information in a monthly return, 6. wilfully or negligently violates a provision of section 10 (5) sentence 5, read also in conjunction with section 10 (5a) sentence 6, about the ban on purchasing securitised participation rights or subordinated liabilities of one's own, of sec- tion 12 (1) about the limitation of investments, of section 12 (5) about a major participating interest, of section 12a (1) sentence 1 about the establishment of corporate ties, of section 13 (3) or (4) or section 13a (4) sentence 2 about com- pliance with the limits for large loans or of section 18 sentence 1, read also in conjunction with section 53b (3) sPntence 1, about information required of bor- rowers, 7. wilfully or negligently, in violation of section 23a sentence 1 or 2, read also in conjunction with section 53b (3) sentence 1 or 2, fails to draw attention to non- membership or fails to do so in the prescribed way or, in violation of section 23a sentence 3, read also in conjunction with section 53b (3) sentence 1 or 2, fails to notify the withdrawal or fails to do so in time, or 8. continues his activities as a proprietor or manager of a credit institution despite having been prohibited from doing so by the Federal Banking Supervisory Of- fice in accordance with section 36 (1) or section 46 (1) sentence 2. (2) Such a breach of administrative regulations may be punished by a fine not exceeding one hundred thousand Deutsche Mark. 57. and 58. (Repealed) 59. Fines imposed on credit institutions Section 30 of the Act on Breaches of Administrative Regulations applies to credit institutions organised in the form of a corporation or partnership, or to enterprises within the meaning of section 53b (1) sentence 1, (7) sentence 1 operating through a branch or by rendering services in the area of validity of this Act, even if a manager who is not appointed by law, articles of association or partnership agreement to represent the credit institution or enterprise has committed a crim- inal offence or a breach of administrative regulations. 60. Appropriate administrative authority The administrative authority (Verwaltungsbehorde) for the purposes of section 36 (1) 1 of the Act on Breaches of Administrative Regulations is the Federal Banking Supervisory Office. Part Vl Transitional and final provisions 61. Licence for existing credit institutions Insofar as a credit institution was permitted to conduct banking business on the scale specified in section 1 (1) at the time this Act came into force, the licence required under section 32 is deemed to have been granted. The period specified in section 35 (1) begins with the entry into force of this Act. 62. Transitional provisions (1) The legislation already existing in the banking field and the orders issued in accordance with the existing legislation remain in force, except as otherwise pro- vided by this Act. Legislation prescribing requirements stricter than those embod- ied in this Act for the business activities of certain types of credit institutions remains unaffected. (2) Functions and powers assigned under Federal legislation to the banking super- visory authority devolve upon the Federal Banking Supervisory Office. (3) The responsibilities of the Lander Governments for recognition as a relocated financial institution in accordance with the Thirty-fifth Regulation Implementing the Conversion Act (Funfunddreissigste Durchfuhrungsverordnung zum Umstel lungsgesetz), for confirmation of the conversion account and the old banks' account, and for functions and powers under the Securities Validation Acts (Wert- papierbereinigungsgesetze) and the Act on the Validation of German External Bonds (Bereinigungsgesetz fur deutsche Auslandsbonds) remain unaffected. (4) The provisions of sections 10 to 38, 45, 46 and 51 (1) do not apply to credit institutions conducting business within the meaning of section 1 (1) sentence 2 number 7 in respect of obligations arising from loan claims originating before this Act came into force if it was intended from the outset that they would be assigned and repurchased by the credit institution. This does not apply if the credit institu- tion materially alters, to the disadvantage of creditors, the arrangements to ensure the discharge of its obligations existing when this Act came into force. (5) Enterprises which were recognised on December 31, 1989 as non-profit housing enterprises, and which only conduct business which they were allowed to conduct under the provisions of the Non-profit Housing Act (Wohnungsgemeinnutzigkeits- gesetz) applying on December 31, 1989, are until December 31, 1994 not subject to the licensing requirement pursuant to section 32 (1) for banking business which is part of their characteristic business, or 2. to the provisions of sections 10, 10a, 12 to 20, 25, 30 and 33 (2) sentence 2, provided that they have been granted a licence to conduct h~nkinn business pursuant to section 32 (1) . For the enterprises which were recognised on December 31, 1989 as organs of government housing policy, sentence 1 number 1 applies as appropriate, unless they predominantly conduct banking business. If the auditor or audit associ- ation learns of facts which suggest that the enterprise has extended its previous range of business, as a registered cooperative society no longer focuses its busi- ness operations primarily on the letting of dwellings to its members, or does not conduct banking business which is part of its characteristic business or does not predominantly conduct banking business, he/it shall report this immediately to the Federal Banking Supervisory Office and the Deutsche Bundesbank. (6) The provisions of section 23a shall apply to private building and loan associ ations from July 1, 1993. 63. (Legislation repealed and amended) 63a. Special provisions relative to the territory specified in Article 3 of the Unification Treaty (Einigungsvertrag) (1) (Repealed) (2) (Repealed) (3) If a credit institution domiciled in the German Democratic Republic including Berlin (east) was allowed on July 1, 1990 to conduct banking business on the scale specified in section 1 (1), the licence pursuant to section 32 is deemed to have been granted. Section 61 sentence 2 applies as appropriate. (4) The Federal Banking Supervisory Office may exempt certain categories of credit institutions or individual credit institutions domiciled in the territory specified in Article 3 of the Unification Treaty from obligations under this Act if this appears to 98 be appropriate for special reasons, in particular because the law of the territory specified in Article 3 of the Unification Treaty has not yet been harmonised with the law of the Federal Republic of Germany. (5) The Federal Administrative Court shall decide in the first and last instance on any actions against decisions by the Federal Banking Supervisory Office under this or other Acts or arising by virtue of any failure to act on the part of the Federal Banking Supervisory Office if the plaintiff is domiciled or resident in the territory specified in Article 3 of the Unification Treaty. (6) Section 9 (1) sentence 3 number 3, section 46a (1) sentence 1 and (3) sentence 2, section 46b sentences 1 to 5, sections 46c and 47 (1) 1 apply subject to the pro- viso that, for credit institutions domiciled in the territory specified in Article 3 of the Unification Treaty, proceedings under the Collective Enforcement Code (Gesamtvollstreckungsordnung) take the place of liquidation proceedings, and that collective enforcement proceedings can only be instituted upon application by the Federal Banking Supervisory Office. 64. Deutsche Bundespost POSTBANK Until the close of December 31, 1995 the Deutsche Bundespost POSTBANK, in respect of the business it conducts, is subject only to the measures taken in accord- ance with sections 23, 47 (1) 2 and section 48. From January 1, 1996 the licence required under section 32 is deemed to have been granted. Section 23a does not apply as long as the Deutsche Bundespost POSTBANK is a special fund of the Fed- eral Government. 64a. Limits on investments by existing credit institutions (1) If, owing to the amendment of section 12 (1), a credit institution fails to comply on January 1, 1993 with the limits on investments specified in that provision, the credit institution must comply with that provision within a period of three years from that date. (2) The Federal Banking Supervisory Office may for good reasons and upon application prolong the period specified in subsection (1) if the ratio of invest- ments pursuant to section 12 to the liable capital has decreased within that period. (3) If a credit institution or group of credit institutions fails to comply on January 1, 1993 with the limits on participating interests specified in section 12 (5) sentence 1 or 2, the credit institution or group of credit institutions must comply with the requirements of that provision within ten years from that date. 64b. Capital of existing credit institutions (1) Credit institutions which accept deposits or other repayable funds from the general public and conduct lending business, and which were licensed in accord- ance with section 32 on January 1, 1993, may, notwithstanding section 33 (1) sen- tence 1 number 1 clause 2, have at their disposal a sum total of paid-up capital, amounts paid up on cooperative society shares or reserves, less the amount of cumulative preferential shares, which is lower than the equivalent of five million ECUs. In this case the liable capital must not fall below the amount available on December 31, 1990. In the case of credit institutions licensed after December 31, 1990, the liable capital must not fall below the amount available at the time the licence was granted. (2) If the preconditions of subsection (1) are met, section 35 (2) 3 (b), read in con- junction with section 33 (1) sentence 1 number 1 clause 2, on the revocation of the licence shall not apply. (3) If control over a credit institution which has taken advantage of the preferential treatment under subsection (1) changes, section 33 (1) sentence 1 number 1 clause 2 on the amount of the capital shall apply to that credit institution. (4) In the case of a merger between two or more credit institutions which have taken advantage of the preferential treatment under subsection (1), the liable cap- ital of the credit institution resulting from the merger may, subject to the approval of the Federal Banking Supervisory Office, be below the equivalent of five million ECUs if there is no danger to the discharge of the credit institution's obligations to its creditors. However, in this case the liable capital of the merged credit institution must at least come up to the total amount of the liable capital of the merging credit institutions available at the time of the merger. (5) The Federal Banking Supervisory Office may grant the credit institution a period within which it must comply with the capital requirements specified in subsection (1) sentence 2 or 3 or (4) sentence 2, or discontinue its activities. If a credit institu- tion lastingly fails to satisfy these capital requirements, section 35 (2) 3 on the revocation of the licence applies as appropriate. 65. (Entry into force) 1 00 Transitional provisions Reports Regulation Principles Transitional provisions Extract from the Second Act Amending the Banking Act of March 24, 1976* (Federal Law Ga~ette 1, page 725) ARTICLE 2 Transitional provisions Section 2 In the case of loans granted before the entry into force of this Act, section 18 of the Banking Act as amended by this Act applies from the earliest date on which the loan can be terminated by the credit institution or falls due. Section 4 (1) Section 2a and 35 (2) 3 of the Banking Act do not apply to a proprietor of a credit institution organised in the form of a sole proprietorship who is the propri- etor of such a credit institution on the entry into force of this Act. * Date of entry into force: May 1, 1976. 102 Transitional provisions Extract from the Third Act Amending the Banking Act of December 20, 1984 (Federal Law Gazette 1, page 1693) Transitional provisions* Section 2 Assets contributed by silent partners prior to January 1, 1985 and counted as part of the liable capital on December 31, 1984 shall, as long as they are available to the credit institution, 1. continue to be counted as part of the liable capital even if they do not satisfy the requirements of section 10 (4) sentence 1 number 3 or 5 of the Banking Act; 2. be counted as part of the liable capital until December 31, 1986 if they do not satisfy the requirements of section 10 (4) sentence 1 number 1, 2 or 4 of the Banking Act. Section 3 (1) If on July 1, 1985 credit institutions belonging to a group do not, as a whole, have adequate liable capital in accordance with section 10a of the Banking Act, the parent institution is responsible for ensuring that one-half of the additional capital need is met by January 1, 1988 and that capital adequacy is achieved by January 1, 1991. ~ Dates of entry into force: sections 2, 5 and 6 - January 1, 1985: se~tions 3 and 7 - July 1 1985 (2) For good reasons, the Federal Banking Supervisory Office may, upon applica- tion, extend the periods specified in subsection (1) if the capital base of the credit institutions belonging to the group has improved during these periods. Section 5 (1) If, owing to the amendment of section 12 of the Banking Act, a credit institu- tion does not comply on January 1, 1985 with the limit for investments prescribed by section 12 (1) of that Act, the credit institution must satisfy the requirements of that provision by January 1,1990. (2) For good reasons, the Federal Banking Supervisory Office may, upon applica- tion, extend the period specified in subsection (1) if the ratio of investments as defined in section 12 of the Banking Act to the liable capital has decreased during the period specified in subsection (1). Section 6 (1) If, owing to the amendment of the Banking Act, a credit institution does not comply on January 1, 1985 with the limits for large loans prescribed by section 13 (3) and (4) of that Act, the following applies: If the credit institution exceeds the limit 1. of eight times the liable capital for all large loans, the credit institution shall reduce the excess amount by not less than twenty per cent of the amount each year, 2. of fifty per cent of the liable capital for the individual large loan, the excess amount shall not be taken into account for a period of five years, provided that the overshooting is due to contracts entered into before January 1,1985. (2) For good reasons, the Federal Banking Supervisory Office may, upon applica- tion, extend the period specified in subsection (1) sentence 2 number 2. Section 7 If credit institutions belonging to a group do not, as a whole, comply on January 1, 1985 with the limits for large loans prescribed by section 13a, read in conjunction with section 13 (3) or (4), of the Banking Act, section 6 applies as appropriate. 104 Reports Regulation (Anzeigenverordnung) Regulation Concerning Reports and the Submission of Records under the Banking Act of July 6, 1993 (Federal Law Gazette 1, page 1141) - The reporting forms (Annexes 1 to 17 of the Regulation) are not reproduced - By virtue of section 24 (4) of the Banking Act in the text of the Announcement of July 11, 1985 (Federal Law Gazette 1, page 1472), as last amended by Article 1 of the Act of December 21, 1992 (Federal Law Gazette 1, page 2211), read in conjunc- tion with section 1 of the Regulation of June 28, 1985 Transferring the Authority to Issue Regulations to the Federal Banking Supervisory Office (Federal Law Gaz- ette 1, page 1255), the following Regulation is hereby issued by the Federal Bank- ing Supervisory Office, acting in agreement with the Deutsche Bundesbank: 1. Reports pursuant to section 2b (1) and (4) of the Banking Act (holders of major participating interests) (1) Reports in accordance with section 2b (1) sentence 1 of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in trip- licate to the Main Office of the Land Central Bank appropriate for the respective credit institution on the form "Anzeige nach ~ 2 b Abs. 1 oder 4 KWG" (Report pursuant to section 2b (1) or (4) of the Banking Act) (Annex 1). The person required to report shall submit a statement of the facts germane to assessing his trustworthiness in accordance with the specimen attached to the form. At the request of the Federal Banking Supervisory Office, he shall also submit, in particu- lar, a complete, signed curriculum vitae, which must contain all his first names, his name at birth, his date and place of birth, the birth-names of his parents, his home address and nationality and an outline of his professional career; moreover, if his trustworthiness has been assessed by another authority, evidence of that assess- ment and its outcome shall be furnished to the extent necessary for determining whether he is trustworthy or whether facts are known which entitle the Federal Banking Supervisory Office to prohibit the acquisition of the participating interest in accordance with section 2b (1) sentence 5 clause 1 or clause 2, read in conjunc- tion with section 33 (1) sentence 1 number 2a or sentence 2, of the Banking Act. If the entity required to report is a corporation or partnership, sentences 2 and 3 above apply as appropriate to the legal representatives or general partners; the statement pursuant to sentence 2 above may be dispensed with if the entity required to report is among the authorities or special funds referred to in section 20 (1) 1 of the Banking Act, or if a corresponding statement has already been sub- mitted in accordance with section 9 (1) sentence 2 number 2 below or section 13 (4) below. The person or entity required to report shall attach to the report a corn- plete list of the appointed legal representatives or general partners. At the request of the Federal Banking Supervisory Office, the organisation chart and the partner- ship agreements, in particular, shall be submitted, and data shall be supplied on enterprises which hold participating interests in the reporting enterprise to the extent that is necessary for determining whether facts are known which entitle the Federal Banking Supervisory Office to prohibit the acquisition of the participating interest in accordance with section 2b (1) sentence 5 clause 1 or clause 2, read in conjunction with section 33 (1) sentence 1 number 2a or sentence 2, of the Bank- ing Act. (2) Reports in accordance with section 2b (1) sentence 3 clause 2 of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in triplicate to the Main Office of the Land Central Bank appropriate for the respective credit institution on the form "Anzeige nach ~ 2 b Abs. 1 oder 4 KWG" (Report pursuant to section 2b (1) or (4) of the Banking Act) (Annex 1). As long as a major participating interest is held, the facts germane to assessing his trustwor- thiness as provided in subsection (1) sentences 1 to 3 above shall be reported in respect of each newly appointed legal representative or new general partner. The report may be dispensed with if the relevant facts have already been reported pur suant to section 24 (1) 1 of the Banking Act or if the conditions of subsection (1) sentence 4 clause 2 above are met. (3) As long as a major participating interest is held, its holder shall report the fact in a single copy to the Federal Banking Supervisory Office and in triplicate to the Main Office of the Land Central Bank appropriate for the respective credit institu- tion if he is licensed to operate as a credit institution in another member state of the European Economic Community, if he becomes the parent enterprise of a credit institution licensed to operate in another member state or if he assumes the control of a credit institution licensed to operate in another member state. (4) Reports in accordance with section 2b (1) sentence 4 and (4) of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office 106 and in triplicate to the Main Office of the Land Central Bank appropriate for the respective credit institution on the form "Anzeige nach ~ 2 b Abs. 1 oder 4 KWG" (Report pursuant to section 2b (1) or (4) of the Banking Act) (Annex 1). (5) Reports in accordance with section 2b (1) sentence 6 of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in trip- licate to the Main Office of the Land Central Bank appropriate for the respective credit institution. 2. Reports pursuant to section 10 (4a) sentence 4, (4b) sentence 4 of the Banking Act, read in conjunction with section 32 (3) of the Act on Invest- ment Companies, section 10 (5) sentence 5, (5a) sentence 6, read in con- junction with subsections (5) sentence 5 and (8), of the Banking Act; sub- mission of records pursuant to section 10 (7) sentence 5 of the Banking Act (disclosure of the calculation of unrealised reserves; committee of experts; intention to conduct market-smoothing operations; loans to be deducted from the liable capital; interim accounts and auditor's reports) (1) Reports in accordance with section 10 (4a) sentence 4 of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in trip- licate to the branch office of the Land Central Bank appropriate for the credit insti- tution on the form "Anzeige nach ~ 10 Abs. 4 a Satz 4 KWG" (Report pursuant to section 10 (4a) sentence 4 of the Banking Act) (Annex 2). At the request of the Federal Banking Supervisory Office, the valuation records shall be submitted. (2) Reports on the appointment of members of committees of experts in accord- ance with section 10 (4b) sentence 4 of the Banking Act, read in conjunction with section 32 (3) of the Act on Investment Companies, shall be submitted in triplicate to the Federal Banking Supervisory Office. These reports shall be accompanied by the following documents: 1 a complete, signed curriculum vitae of the expert, which must contain all his first names, his name at birth, his date and place of birth, the birth-names of his parents, his home address and nationality, a detailed account of his profes- sional training, with evidence of due theoretical and practical knowledge of real property business and in the field of determining the loan value of land, the names of the enterprises for which the expert has worked during the past five years and data on the nature of the functions he has performed there; 107 2. a statement by the expert as to whether criminal proceedings are pending against him, whether criminal proceedings have been instituted against him on account of a crime or other offence, or whether he or an enterprise managed by him has been or is involved as a debtor in bankruptcy, composition or oath- of-disclosure proceedings, or in the proceedings for making a statutory declara- tion which have taken the place of oath of disclosure proceedings pursuant to Article 2 of the Act of June 27, 1970 (Fed~ral Law Gazette 1, page 911), or in any comparable proceedings; 3. a statement by the expert as to whether he is an employee of the credit institu- tion or of an enterprise associated with it, a member of a supervisory body of the credit institution or of an enterprise associated with it, or is economically dependent on the credit institution or on an enterprise associated with it for other reasons, or whether he has close personal or family ties with employees of the credit institution or of an enterprise associated with it which might involve the danger of the expert being unfavourably influenced, or whether he holds capital shares in the credit institution or an enterprise associated with it, and what the value of these capital shares is. (3) Reports in accordance with section 10 (5) sentence 5 and (5a) sentence 6, read in conjunction with subsection (5) sentence 5, of the Banking Act, shall be submit- ted in a single copy to the Federal Banking Supervisory Office and in duplicate to the branch office of the Land Central Bank appropriate for the credit institution. (4) Reports in accordance with section 10 (8) sentences 1 and 2 of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in duplicate to the branch office of the Land Central Bank appropriate for the credit institution. The reports must contain particulars of the level and method of calcula- tion of the key percentage computed pursuant to section 10 (2) sentence 2 or (4) sentence 4 of that Act, of the terms of the loan and of the collateral provided. Reports in accordance with section 10 (8) sentence 2 of that Act are to be marked as reports on changes. (5) The records specified in section 10 (7) sentence 5 of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in duplic- ate to the branch office of the Land Central Bank appropriate for the credit institu- tion. 108 3. Reports pursuant to section 12a (1) sentence 3 of the Banking Act (establishment, modification or discontinuance of certain participating interests or corporate ties) Reports in accordance with section 12a (1) sentence 3 of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in triplic- ate to the branch office of the Land Central Bank appropriate for the credit institu- tion on the form "Anzeige nach ~ 12 a Abs. 1 Satz 3 KWG" (Report pursuant to section 12a (1) sentence 3 of the Banking Act) (Annex 3). 4. Reports pursuant to section 13 (1), (2) and (7) of the Banking Act (large loans; subsequent decisions by the managers; general credit lines) (1) Reports in accordance with section 13 (1) sentences 1 and 2 of the Banking Act shall be submitted in triplicate to the branch office of the Land Central Bank appro- priate for the credit institution on the form "GroBkreditanzeige nach ~ 13 KWG" (Large loan report pursuant to section 13 of the Banking Act) (Annex 4). A separ- ate form shall be used for each borrower. If several debtors are deemed to be a single borrower in accordance with section 19 (2) of this Act, a separate form shall be used for each debtor, as well as the form "Zusammenstellung der GroBkredite nach ~ 13 KWG an eine Kreditnehmereinheit nach ~ 19 Abs. 2 KWG " (Summary of the large loans pursuant to section 13 of the Banking Act granted to a borrower unit in accordance with section 19 (2) of the Banking Act) (Annex 5). (2) Without prejudice to their duty to report individual large loans, credit institu- tions shall, pursuant to section 13 (1) sentence 4 of the Banking Act, submit to the Federal Banking Supervisory Office in a single copy once a year, and to the branch office of the Land Central Bank appropriate for the credit institution in duplicate, a list of their large loans subject to reporting requirements on the form "Sammelauf- stellung der Grol3kredite nach ~ 13 KWG" (List of large loans pursuant to section 13 of the Banking Act) (Annex 6); if the credit institutions have received prepared lists from the Land Central Banks, they may submit these. The lists shall be submit- ted by 1. savings banks, their regional institutions and the regional institutions of credit cooperatives, as at March 31, 2. credit institutions which only conduct banking business within the meaning of section 1 (1) sentence 2 number 8 of that Act, as at December 31, 1 09 3 credit cooperatives with a balance sheet total exceeding fifty million Deutsche Mark, as at March 31, 4. credit cooperatives with a balance sheet total of up to fifty million Deutsche Mark, as at September 30 of every odd year, 5. other credit institutions, as at September 30. In the cases specified in numbers 3 and 4 of the above sentence, the criterion shall be the balance sheet total shown in the last annual accounts approved prior to the reporting date of the list. The lists shall be submitted by the fifteenth day of the next calendar month but one following the reporting date in question. All large loans outstanding on the reporting date shall be included in the lists. If such loans are not, or are no longer, outstanding, a note to this effect shall be submitted. (3) Reports pursuant to section 13 (2) sentences 5 and 6 of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in duplicate to the branch office of the Land Central Bank appropriate for the credit institution . (4) General credit lines committed (section 13 (7) of the Banking Act) shall be reported, without prejudice to the duty to report individual credits which come up to the limit for large loans, as at the reporting dates appointed for the lists pursu- ant to subsection (2) sentence 2 above, by the fifteenth day of the next calendar month but one following the reporting date in question, on the form "Anzeige von Kreditrahmenkontingenten nach ~ 13 Abs. 7 KWG" (Report on general credit lines granted pursuant to section 13 (7) of the Banking Act) (Annex 7). Subsection 1 sentence 1 applies as appropriate to the reporting procedure. 5. Reports pursuant to section 13a (1), read in conjunction with subsection (4), of the Banking Act (large loans and general credit lines granted by groups of credit institutions) (1) Section 4 (1) above applies as appropriate to the reports on the large loans granted by credit institutions belonging to a group, taken as a whole, which reports are to be filed by parent institutions in accordance with section 13a (1), read in conjunction with subsection (4) sentence 1, of the Banking Act. The form "GroBkreditanzeige nach ~ 13 a KWG" (Large loan report pursuant to section 13a of the Banking Act) (Annex 8) and the form "Zusammenstellung der GroBkredite nach ~ 13 a KWG an eine Kreditnehmereinheit nach ~ 19 Abs. 2 KWG" (Summary of the large loans pursuant to section 13a of the Banking Act granted to a borrow er unit in accordance with section 19 (2) of the Banking Act) (Annex 9) sh~ll hP used for these reports. (2) Section 4 (2) above applies as appropriate to the lists of large loans granted by credit institutions belonging to a group, taken as a whole, and subject to reporting requirements, which lists are to be submitted by parent institutions in accordance with section 13a (1), read in conjunction with subsection (4) sentence 1, of the Banking Act. The lists shall be submitted on the form "Sammelaufstellung der Grol~kredite nach ~ 13 a KWG" (List of large loans pursuant to section 13a of the Banking Act) (Annex 10). (3) Section 4 (4) above applies as appropriate to the reports on the general credit lines committed by credit institutions belonging to a group, taken as a whole, which reports are to be filed by parent institutions in accordance with section 13a (1), read in conjunction with subsection (4) sentence 1, of the Banking Act. The form "Anzeige von Kreditrahmenkontingenten nach ~ 13 Abs. 7 KWG" (Report on general credit lines pursuant to section 13 (7) of the Banking Act) (Annex 7) shall be used. 6. Reports pursuant to section 14 (1) of the Banking Act (loans of three million Deutsche Mark or more) (1) Subject to the provisions of subsection (2) below, the reports in accordance with section 14 (1) sentence 1 of the Banking Act shall be submitted in triplicate to the branch office of the Land Central Bank appropriate for the credit institution on the form "Millionenkreditanzeige nach ~ 14 Abs. 1 Satz 1 KWG" (Report on loans of three million Deutsche Mark or more pursuant to section 14 (1) sentence 1 of the Banking Act) (Annex 11), and the reports in accordance with section 14 (1) sentence 2 of that Act on the form "Millionenkreditanzeige nach ~ 14 Abs. 1 Satz 2 KWG" (Report on loans of three million Deutsche Mark or more pursuant to sec- tion 14 (1) sentence 2 of the Banking Act) (Annex 12). A separate form shall be used for each borrower. If several debtors are deemed to be a single borrower in accordance with section 19 (2) of the Banking Act, a separate form shall be used for each borrower. The amounts taken up at the end of the period under review shall be inserted in the amount lines. (2) The Land Central Banks send the affected credit institutions prepared report forms for the next reporting date containing all the borrowers that the credit insti- tution had reported upon on the preceding reporting date; the affected credit institutions receive a separate prepared report form for each of their subsidiaries within the meaning of section 14 (1) sentence 2 of the Banking Act. Individual report forms are to be used only for those borrowers that are not listed in the pre- pared form. If a loan to a borrower listed in the prepared form is no longer liable to be reported, the name of that borrower is to be crossed out. In the event of changes in the name/firm-name, the residence/domicile or the status of belonging to a borrower unit pursuant to section 19 (2) of the Banking Act, corresponding action shall be taken; in this case, individual report forms shall be submitted in accordance with subsection (1) above, in which forms attention shall be drawn in the line "Notes" to the changes which have occurred. The prepared report forms shall likewise be signed with legally binding effect. (3) If, on a reporting date, a credit institution has to submit more than one indi- vidual report, the reports shall be accompanied by a separate summary for each subsidiary within the meaning of section 14 (1) sentence 2 of the Banking Act. The summary must contain the number of the reports and the sum total of the loans reported, which are to be broken down in accordance with the lines of the form The summary shall be signed with legally binding effect; it is not necessary for the individual report forms to be signed. The summary may, however, be dispensed with if the number of the individual reports and the sum total of the loans report- ed individually, broken down in accordance with the lines of the form, are listed at the end of the prepared form pursuant to subsection (2) above. (4) in the case of loans in which several credit institutions subject to reporting requirements are involved, in the sense that one credit institution grants the loan and another credit institution secures it by means of a guarantee, an acceptance or in some other way, 1. the credit institution granting the loan shall report it, depending on its nature, in lines 2 to 4 of the form, and shall insert in line 7 the name of the other credit institution subject to reporting requirements and the size of the amount se- cured, 2. the credit institution securing the loan shall report the guarantee, acceptance or other kind of collateral in line 5, and shall insert in line 6 the name of the other credit institution and the amount to be reported by that institution. Corresponding action shall be taken in the case of guarantees which are backed by counter-guarantees from other credit institutions. The above provisions apply as appropriate to the extent that subsidiaries within the meaning of section 14 (1) sentence 2 of the Banking Act are involved in the granting of loans in the sense specified in sentence 1 above. (5) When reporting syndicated loans, the syndicate manager - provided that he alone actually supplies the funds, while the syndicate members merely assume liability - shall insert the names of the members, together with their shares, in line 7 of the form. The same applies to syndicated loans extended by way of guaran- tee, in respect of which the syndicate manager can be called upon by the creditor to pay the full amount. The other credit institutions involved insert the name of the syndicate manager and their own share in the syndicated loan in line 6. (6) If, in the case of a syndicated loan, the funds are supplied in part by the indi- vidual lenders involved or if, in the case of a syndicated loan extended by way of guarantee, the liability of the syndicate manager to the creditor is limited to his share in the loan, each of the participating credit institutions reports its own share. In the first report the syndicate manager, besides specifying the total amount of the loan and the names of the syndicate members, points out in the line "Notes" that the loan in question is syndicated; the syndicate members state in the line "Notes" that the loan in question is syndicated and also indicate in the same line the total amount of the loan and the name of the syndicate manager. (7) To the extent that subsidiaries within the meaning of section 14 (1) sentence 2 of the Banking Act are involved in syndicated loans, subsections (5) and (6) above apply as appropriate. 7. Reports pursuant to section 15 (4) of the Banking Act (subsequent approval of loans to managers, etc.) Reports in accordance with section 15 (4) sentence 4 clause 2 of the Banking Act shall be submitted to the Federal Banking Supervisory Office in triplicate. 8. Reports pursuant to section 16 of the Banking Act (loans to managers, etc.) (1) Reports in accordance with section 16 sentences 1 and 2 of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in duplicate to the branch office of the Land Central Bank appropriate for the credit institution on the form "Organkreditanzeige nach ¤ 16 KWG" (Report on loans to managers, etc pursuant to section 16 of the Banking Act) (Annex 13). If several debtors are deemed to be a single borrower in accordance with section 19 (2) of 113 that Act, a separate form shall be used for each debtor. The report shall be accom- panied by a summary of the loans to all enterprises and persons that are deemed to be a single borrower. (2) If a loan to managers, etc. is also a large loan in accordance with section 13 (1) sentence 1 of the Banking Act, the report pursuant to section 16 of that Act can be made simultaneously with the large loan report. In such a case the particulars required in the report on loans to managers, etc. (Annex 13) shall be filed in the large loan report. (3) Under section 16 sentence 3 of the Banking Act and without prejudice to their duty to report individual loans to managers, etc., credit institutions shall submit in a single copy to the Federal Banking Supvervisory Office, and in duplicate to the branch office of the Land Central Bank appropriate for the credit institution, lists of their loans to managers, etc. subject to reporting requirements, in the form of a collection of consecutively numbered partial reports (Annex 13~ at intervals of five years, beginning in 1996, and showing the position as at Septernh~r 30 Section 4 (2) sentences 4 to 6 above apply as appropriate. 9. Reports pursuant to section 24 (1) to (3) of the Banking Act (staff changes, financial and organisational changes) (1) Reports in accordance with section 24 (1) 1 and 2 of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in trip- licate to the branch office of the Land Central Bank appropriate for the credit insti- tution. Reports on the appointment of a manager and the authorisation of a per- son to represent the credit institution in all aspects of its business in accordance with section 24 (1) 1 of that Act shal be accompanied by the folov/inrl (~cc ments: 1. a complete, signed curriculum vitae, which must contain all first names, the name at birth, the date and place of birth, the birth-names of the parents, the home address and nationality, a detailed account of the professional training, the names of all enterprises for which the person has worked and data on the nature of the functions he performed there, including spare-time activities, with the exception of honorary ones. As regards the nature of the person's func- tions, special attention shall be paid to his representational authority, his other internal decision-making powers and the areas of operations under his control within the enterprise; 2. a statement by the person as to whether criminal proceedings are pending against him, whether criminal proceedings have been instituted against him on account of a crime or other offence, or whether he or an enterprise managed by him has been or is involved as a debtor in bankruptcy, composition or oath- of-disclosure proceedings, or in the proceedings for making a statutory declara- tion which have taken the place of oath-of-disclosure proceedings pursuant to Article 2 of the Act of June 27, 1970 (Federal Law Gazette 1, page 911), or in any comparable proceedings. The above provisions also apply to the appointment of a deputy manager who is to perform the functions of the manager in the event of the latter being unable to do so. (2) Reports in accordance with section 24 (1) 3 of the Banking Act shall be submit- ted in respect of each direct participating interest on the form "Anzeige nach ~ 24 Abs. 1 Nr. 3 KWG" (Report pursuant to section 24 (1) 3 of the Banking Act) (Annex 14). Summary reports of direct participating interests (Annex 14) and sum- mary reports of indirect participating interests - on the form "Sammelanzeige mit- telbarer Beteiligungen nach ~ 24 Abs. 1 Nr. 3 Teilsatz 4 KWG " (Summary report of indirect participating interests pursuant to section 24 (1) 3 clause 4 of the Banking Act) (Annex 15) - shall be submitted, each in the form of a collection of consec- utively numbered partial reports, by the fifteenth day of February each year, show- ing the position on December 31; if there are no longer any such participating interests, a note to this effect shall be submitted. The reports shall be submitted in a single copy to the Federal Banking Supervisory Office and in triplicate to the branch office of the Land Central Bank appropriate for the credit institution. (3) Reports in accordance with section 24 (1) 4 to 9 of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in triplic- ate to the branch office of the Land Central Bank appropriate for the credit institu- tion. (4) Reports in accordance with section 24 (1) 10 of the Banking Act shall be sub- mitted separately for each member state of the European Economic Community, in duplicate to the Federal Banking Supervisory Office and in triplicate to the branch office of the Land Central Bank appropriate for the credit institution. The types of services shall be designated in accordance with the provisions of section 24(1) 10 of that Act and of the schedule appended to Directive 89/646/EEC of December 15, 1989 on the coordination of laws, regulations and administrative provisions relat- ing to the taking-up and pursuit of the business of credit institutions, and amend- ing Directive 77/780/EEC - Official Journal of the European Communities L 386, page 1 - (Second Banking Directive). The report to the Federal Banking Super- visory Office shall be accompanied by an officially certified translation, in duplicate, into an official language of the host member state. (5) Reports in accordance with section 24 (1) 11 and 12 of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in triplic- ate to the branch office of the Land Central Bank appropriate for the credit institu- tion on the form "Anzeige nach ~ 24 Abs. 1 Nr. 11 oder 12 KWG" (Report pursu- ant to section 24 (1) 11 or 12 of the Banking Act) (Annex 16); reports pursuant to section 24 (1) 12 of that Act shall be submitted by the fifteenth day of October each year, showing the position as at August 31; if there are no longer any such participating interests, a note to this effect shall be submitted. (6) Reports in accordance with section 24 (2) of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in triplicate to the branch office of the Land Central Bank appropriate for the credit institution. Credit institutions' intention to merge shall be reported by the credit institutions con- cerned as soon as it appears likely, in the light of the negotiations being held, that a merger will be effected. The outcome of the negotiations shall be reported immediately. (7) Reports in accordance with section 24 (3) of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in triplicate to the branch office of the Land Central Bank appropriate for the credit institution on the form "Anzeige nach ~ 24 Abs. 3 KWG" (Report pursuant to section 24 (3) of the Banking Act) (Annex 17). 10. Reports pursuant to section 24a (1) and (3) of the Banking Act (establishment of a branch in another member state of the European Economic Community) (1) Reports in accordance with section 24a (1) and (3) of the Banking Act shall be submitted separately for each member state of the European Economic Commun- ity, in duplicate to both the Federal Banking Supervisory Office and the branch office of the Land Central Bank appropriate for the credit institution. The report to the Federal Banking Supervisory Office shall be accompanied by an officially cer- tified translation, in duplicate, into an official language of the host member state. (2) The business plan must show the types of business operations envisaged, in accordance with the schedule appended to the Second Banking Directive. Types of business not specified in the schedule appended to the Second Banking Directive shall be listed separately and described in detail. All business operations envisaged shall be explained in detail. If it is planned to establish several branches in the host country, the relevant particulars shall be given. The business plan must also describe the organisational structure of the branch. For this purpose, the internal decision-making powers and the mode of integration of the branch in the credit institution's internal control procedure shall be described. 11. Reports pursuant to section 28 (1) sentence 1 of the Banking Act (auditors) Reports in accordance with section 28 (1) sentence 1 of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in duplic- ate to the branch office of the Land Central Bank appropriate for the credit institu- 12. Reports pursuant to section 29 (2) sentence 1 of the Banking Act (important facts which come to the auditor's attention) Auditors shall submit reports in accordance with section 29 (2) sentence 1 of the Banking Act in a single copy to the Federal Banking Supervisory Office and in du- plicate to the Main Office of the Land Central Bank appropriate for the respective credit institution. 13. Reports and documents pursuant to section 32 (1) of the Banking Act (applications for a licence) (1) Applications and documents in accordance with section 32 (1) of the Banking Act shall be submitted to the Federal Banking Supervisory Office in triplicate. (2) The applications shall indicate for which of the banking transactions specified in section 1 (1) sentence 2 of the Banking Act a licence is being sought. The applica- tions shall be accompanied by certified copies of the formation records, the part- nership agreement or the articles of association, as well as by the rules of proced- ure envisaged for the management. Furthermore, the names of the envisaged managers shall be indicated. 117 (3) To furnish evidence of the resources needed for business operations (section 32 (1) sentence 2 number 1 of the Banking Act), a certificate issued by a domestic credit institution shall be provided confirming that the starting capital has been paid up and is freely available to the managers, unencumbered by rights of third pa rties. (4) For the sake of assessing the trustworthiness of the managers, the statements provided for in section 9 (1) sentence 2 number 2 above shall be submitted. (5) For the sake of assessing the trustworthiness of the applicants and of the hold- ers of major participating interests, the statements provided for in section 1 (1) sentence 2 above shall be submitted. At the request of the Federal Banking Super- visory Office, the documents provided for in section 1 (1) sentence 3 above shall be submitted, and information shall be supplied. If the applicant or the holder of a major participating interest is a corporation or partnership, section 1 (1) sen- tences 2 and 3 above apply as appropriate to the legal representatives or the gen- eral partners; the statement pursuant to section 1 (1) sentence 2 above need not be submitted, however, if the applicant or the holder of a major participating inter- est is among the authorities or special funds referred to in section 20 (1) 1 of the Banking Act. Section 1 (1) sentences 5 and 6 above applies as appropriate. If the applicants or holders of major participating interests belong to groups, the struc- ture of the group, accompanied by an organisation chart of the group, shall be described. The documents provided for in section 32 (1) sentence 2 number 6 let- ters (d) and (e) of the Banking Act shall be elucidated at the request of the Federal Banking Supervisory Office. (6) For the sake of assessing the professional qualifications for managing a credit institution required of proprietors and managers, the documents specified in sec- tion 9 (1~ sentence 2 number 1 above shall be submitted. At the request of the Federal Banking Supervisory Office, further information shall be supplied. (7) The business plan to be attached to the application in accordance with section 32 (1) sentence 2 number 5 of the Banking Act shall include the following particu- lars: 1. the nature of the planned business, with a substantiated indication of its future course; for this purpose, projected balance sheets and projected profit and loss accounts for the first three full financial years after starting business operations shall be submitted; 2. a description of the organisational structure of the credit institution, accom- panied by an organisation chart indicating, in particular, the responsibilities of the managers; it shall be indicated whether, and where, branches are to be established; 3. a description of the planned internal control procedures of the credit institution. 14. Reports pursuant to section 53a of the Banking Act (representative offices of enterprises domiciled in another state) (1) Reports in accordance with section 53a of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in duplicate to the branch office of the Land Central Bank appropriate for the representative office. (2) Reports on the establishment of a representative office must include the fol- lowing particulars: 1. the precise designation and address of the representative office; 2. the names of the manager or managers of the representative office; 3. the nature and scale of the activities of the representative office; 4. the date of the commencement of the activities of the representative office; 5. the name or firm-name, registered office and address of the enterprise which has established the representative office; 6. the address of the head office of the enterprise; 7. the object of the business of the enterprise according to its articles of associ- ation; 8. the nature of the business actually carried on by the enterprise in its country of domicile and, if differing therefrom, in the country of domicile of its head of- fice; 9. the name and address of the authority to whose supervision the enterprise is subject in its country of domicile and, if differing therefrom, in the country of domicile of its head office. 1 1 9 (3) The reports pursuant to subsection (2) above shall be accompanied by the fol- lowing documents: 1. a statement by the enterprise, signed with legally binding effect, that it has decided to establish the representative office, and has entrusted the persons specified in subsection (2) 2 above with the management of that office; 2. a statement that no banking business within the meaning of section 1 (1) sen- tence 2 of the Banking Act will be conducted, and that, in the area of validity of that Act, the name or firm-name of the enterprise will be used only along with the addition "representative office"; 3. the latest annual accounts and annual report of the enterprise. (4) All changes that occur during the life of the representative office, as compared with the particulars given in the establishment report, shall be reported in a single copy to the Federal Banking Supervisory Office and in duplicate to the branch of- fice of the Land Central Bank appropriate for the representative office. 15. Submission of records pursuant to section 26 of the Banking Act (annual accounts, annual report and auditor's reports) (1) The records specified in section 26 (1) sentence 1 of the Banking Act shall be submitted in a single copy to the Federal Banking Supervisory Office and in triplic- ate to the branch office of the Land Central Bank appropriate for the credit institu- tion; when submitting the approved annual accounts, the date of approval shall be indicated . (2) In accordance with section 26 (1) sentence 3 of the Banking Act, after the com- pletion of the audit, the auditors shall submit their report in a single copy to the Federal Banking Supervisory Office and in duplicate to the Main Office of the Land Central Bank appropriate for the respective credit institution; this also applies in the cases referred to in section 26 (2) of that Act. (3) Subsections (1) and (2) above apply as appropriate to the records to be submit- ted in accordance with section 26 (3) of the Banking Act. 16. Submission route of credit cooperatives and savings banks Credit institutions which are members of a cooperative society audit association, or which are audited by the audit office of a savings bank and giro association, shall submit the reports and documents to be filed under this Regulation, other than the reports pursuant to section 6 above, through their association, along with a further copy intended for the association, provided that the association has noti- fied the Federal Banking Supervisory Office that it is agreeable to this procedure. The association immediately passes on the number of copies of the reports and documents specified in this Regulation, together with its comments thereon, to the Federal Banking Supervisory Office and the Main Office of the Land Central Bank appropriate for the respective credit institution. 17. Entry into force, termination This Regulation enters into force on the day after its promulgation. At the same time the Reports Ordinance of August 20, 1985 (Federal Law Gazette 1, page 1716) ceases to have effect. Berlin, July 6, 1993 The Federal Banking Supervisory Office K u n t z e Principles Concerning the Capital and Liquidity of Credit Institutions Announcement No. 1/69 of January 20, 1969 (Federal Gazette No. 17 of January 25, 1969), as last amended by the Announcement of December 29, 1992 (Federal Gazette, page 9763) (1) The Federal Banking Supervisory Office, acting in accordance with section 10 (1) sentence 3, section 10a (1) sentence 2 and section 11 sentence 3 of the Bank- ing Act in the wording of the Announcement of July 11, 1985 (Federal Law Gaz- ette 1, page 1472), as last amended by the Act Amending the Banking Act and Other Provisions Concerning Credit Institutions of December 21, 1992 (Federal Law Gazette 1, page 2211), hereby announces the Principles, drawn up in agreement with the Deutsche Bundesbank and after consultation of the central associations representing the credit institutions, according to which it will as a rule assess whether a credit institution's capital or the entire capital of a group of credit insti- tutions is adequate (section 10 (1) and section 10a (1) of the Banking Act) and whether the liquidity of a credit institution or the liquidity of the branch of an en- terprise within the meaning of section 53b (1) sentence 1 or (7) of the Banking Act - branch - is adequate (section 11 of the Banking Act). (2) If a credit institution or a branch fails to meet the requirements laid down in the Principles by more than an insignificant amount, or repeatedly, then there is norm- ally reason to suppose that the credit institution does not have the necessary cap- ital (Principle I and Principle la) or that the liquidity of the credit institution or branch is inadequate (Principles ll and lll). If a group of credit institutions fails to meet the requirements set by Principle 1, sentence 1 applies as appropriate. When assessing the adequacy of the capital of a credit institution or group of credit insti- tutions and the liquidity of a credit institution or branch, special circumstances which warrant lower or higher requirements, as the case may be, can be taken into consideration; in the case of a credit institution whose business comprises accept- ing deposits or other repayable funds from the general public and granting credits, the requirements must not be lowered when applying Principle 1. (3) Only Principles I and la apply to private mortgage banks which do not take advantage of their right of extended business operations pursuant to section 46 (1) of the Mortgage Bank Act, ship mortgage banks, building and loan associ- ations (including those operated as units of dependent legal status), public mort- gage banks, instalment sales financing institutions and credit institutions exclusive- Iy conducting banking business within the meaning of section 1 (1) sentence 2 numbers 7 and 8 of the Banking Act. (4) Only Principle la applies to central securities depositories. If they qualify as the parent institution of a group of credit institutions within the meaning of section 10a (2) of the Banking Act, they shall be included when applying Principle I to the group of credit institutions. (5) The Principles do not apply to investment companies. (6) The Principles in the wording of January 20, 1969 will first be applied to the month of January 1969. Announcement No. 1/62 of the Federal Banking Supervis- ory Office of March 8, 1962 (Federal Gazette No. 53 of March 16, 1962), as amended by Announcement No. 1/64 of August 25, 1964 (Federal Gazette No. 161 of September 1, 1964), is hereby repealed. Principle I (1) The ratio, expressed as a percentage, of the liable capital to the weighted risk assets of a credit institution (including a building and loan association operated as a unit of dependent legal status) must not fall below 8 %. The following shall be regarded as risk assets: 1. asset items, 2. off-balance-sheet transactions other than those included in number 3 or num- ber 4 below, 3. financial swaps, 4. financial futures contracts and option rights. (2) In the case of groups of credit institutions (section 10a (2) of the Banking Act), the ratio pursuant to subsection (1) sentence 1 above applies as appropriate to the ratio of total liable capital to total risk assets (other than participating interests in enterprises belonging to the group), as calculated by the pro rata consolidation method (section 10a (3) of the Banking Act), and to asset-side balancing items resulting from the consolidation of capital in accordance with section 10a (3) sen- tence 4 of the Banking Act. 123 (3) The following shall be regarded as asset items within the meaning of subsec- tion (1) sentence 2 number 1 above: 1. balances with central banks and postal giro offices, 2. public sector debt instruments, and bills of exchange eligible for refinancing with central banks, 3. cash items in the course of collection, for which payments have already been advanced, 4. loans and advances to credit institutions and customers (including the trade receivables of credit institutions trading in goods), 5. debt securities and other fixed-income securities, other than those evidencing a right referred to n subsection (1) sentence 2 number 4 above, 6. shares and other variable-yield securities, other than those evidencing a right referred to in subsection (1) sentence 2 number 4 above, (a) the stock-in-trade of credit cooperatives trading in goods, 7. participating interests, 8. shares in associated enterprises, 10. assets in respect of which a credit institution or an enterprise within the mean- ing of section 10a (2) sentence 5 number 1, number 2 or number 3 of the Banking Act has concluded leasing contracts as the lessor, 11. other assets, 12. prepayments. Subject to a lower weighting being applied, pursuant to subsections (9) to (12) below, the asset items within the meaning of sentence 1 numbers 1 and 2 and numbers 4 to 12 above shall be counted at 100 % of their basis of assessment; cash items in the course of collection within the meaning of sentence 1 number 3 124 above shall be counted at only 20%. Asset items which are to be deducted from the liable capital pursuant to section 10 (6a) of the Banking Act shall attract a zero weighting . (4) Subject to a lower weighting being applied, pursuant to subsections (9) to (12) below, the off-balance-sheet transactions within the meaning of subsection (1) sentence 2 number 2 above shall be counted as follows: 1. at 100 % of their basis of assessment: (a) bills of exchange in circulation drawn by the credit institution, discounted and credited to borrowers, (b) liabilities arising from the endorsement of rediscounted bills, (c) guarantees for asset items, (d) assets pledged as collateral security for third-party liabilities, (e) unconditional commitments by building and loan associations to fund in- terim loans granted by third parties to savers with such associations, (f) assets purchased under outright forward purchase agreements, (g) forward deposits, (h) asset sales with recourse, where the credit risk remains with the selling credit institution, (i) assets which the borrower has sold to the lender, and which are transferred subject to the condition that they must be retransferred or redeemed at the lender's request; 2. at 50 % of their basis of assessment: (a) documentary credits issued and confirmed, (b) warranties and guarantees other than those referred to in number 1 (c) above, (c) note issuance facilities (NlFs) and revolving underwriting facilities (RUFs), (d) undrawn credit facilities with an original maturity of more than one year which may not be cancelled by the credit institution at any time, uncondi- tionally and without notice; 3. at 20 % of their basis of assessment: documentary credits iccn~ nrl rA,nfirm_rl in \Alhirh th_ ....r~A..I..;A~ ~A;A_AAA~ acts as the collateral. .. .~ Ul IUt:'l Iyll Iy ~I II~JI I It:~l I ~ 125 (5) The basis of assessment for counting the risk assets is as follows: 1. in the case of asset items as defined in subsection (3) sentence 1 above, and in the case of the off-balance-sheet transactions referred to in subsection (4) above (other than guarantees for financial swaps, financial futures contracts and option rights): the book value, less fees booked but creditable to sub- sequent financial years and less rentals paid by the lessee or a purchase of lease receivables, with the book value as the maximum deduction, 2. in the case of financial swaps and the guarantees assumed in connection there- with: the principal amount, 3. in the case of financial futures contracts, option rights and the guarantees assumed in connection therewith: the credit institution's right to the delivery or purchase of the underlying instrument, on the assumption that the contracts are actually performed. Where, in the case of financial futures contracts or financial swaps involving a swap of interest and principal, all claims and obligations between two parties denominated in the same currency and having the same value date are netted by novation under the terms of a contractual agreement, the claim arising from the remaining balance shall be regarded as the basis of assessment. Risk assets de- nominated in a foreign currency shall be translated into Deutsche Mark at the ex change rate ruling on the respective reporting date (reporting date rate); instead of the reporting date rate, the credit institution, when translating those participat- ing interests (including holdings in associated enterprises) which it does not treat as an integral part of its foreign currency position, may use the exchange rate ruling at the time when such interests were first entered in its books. For the cur- rencies officially quoted on the Frankfurt Currency Exchange, the spot middle rates of exchange shall be used and, for other currencies, the middle rates derived from the determinable buying and selling rates quoted on the respective reporting date shall be applied. (6) Financial swaps within the meaning of subsection (1) sentence 2 number 3 above, financial futures contracts and option rights within the meaning of subsec- tion (1) sentence 2 number 4 above, and guarantees assumed in connection with these risk assets shall be counted uniformly, at the credit institution's discretion, either by the original exposure method or by the marking-to-market method; a credit institution may switch at any time from the original exposure method to the marking-to-market method. If the original exposure method is used, the risk assets specified in sentence 1 above shall be counted by applying maturity-related per- centages to the relevant basis of assessment, as defined in subsection (5) sentence 1 number 2 or number 3 above. If the marking-to-market method is employed, the risk assets referred to in sentence 1 above shall be counted at the potential re- placement cost which, according to the daily assessment, would arise if the counterparty were to fail, plus a factor (the "add-on") specified in subsection (7) sentence 2 below to reflect the potential future increase in risk; no add-on is applied to single-currency floating/floating-interest-rate swaps. The amount of the potential replacement cost is determined by the level of the additional expenditure or of the lower earnings which would arise in the event of contracting an equival- ent position. (7) The maturity-related percentages within the meaning of subsection (6) sen- tence 2 above are as follows: 1. if the replacement cost is due entirely to changes in interest rates, given a resid- ual maturity of up to one year: more than one year: 0.5 % 1.0 % for each full and each incomplete year, less 1 %; 2. if the replacement cost is due entirely or partly to changes in exchange rates or other prices, given an original maturity of up to one year: more than one year: 2.0 % 3.0 % for each full and each incomplete year, less 1 %. The add-on within the meaning of subsection (6) sentence 3 clause 1 above, as a percentage of the basis of assessment as defined in subsection (5) sentence 1 number 2 or number 3 above, is as follows: 1. if the replacement cost is due entirely to changes in interest rates, given a resid- ual maturity of more than one year: 2. if the replacement cost is due entirely or partly to changes in exchange rates or other prices, given a residual maturity of up to one year: more than one year: 1 .0 % 5.0 %. (8) Of the loans included in subsection (3) number 4 above, and granted by build- ing and loan associations to savers with them who are not borrowers as defined in subsections (10) and (12) below, the following shall be counted at only 70 % of their value: 1. Ioans granted by building and loan associations under allocated savings con- tracts (including loans granted in accordance with subsection (9) number 2 below), 2. interim and bridging loans granted by building and loan associations to savers with them pending receipt of a building loan, if at least 60 % of such loans are granted in compliance with the loan-to-value ratio pursuant to section 7 (1) sentence 3 of the Building and Loan Associations Act and are secured by mortgages on real estate. (9) Of the risk assets referred to in subsection (1) sentence 2 above, the following shall be counted at 50 % of their value: 1. risk assets in accordance with subsection (1) sentence 2 numbers 3 and 4 above, unless they qualify for a lower weighting, 2. until January 1, 1996, loans satisfying the requirements of section 12 (1) and (2) of the Mortgage Bank Act, insofar as they do not exceed the first three- fifths of the value of the real estate; thereafter, loans which are secured by mortgages on residential property that is or will be occupied or let by the bor- rower and which satisfy the requirements of section 12 (1) and (2) of the Mort- gage Bank Act, insofar as they do not exceed the first three-fifths of the value of the real estate, 3. prepayments as defined in subsection (3) sentence 1 number 12 above, where the credit institution is unable to identify the counterparty. (10) Of the risk assets referred to in subsection (1) sentence 2 above, the following shall be counted at 20 % of their value: 1. risk assets constituting claims on, or carrying the explicit guarantee of, (a) a public corporation operated as a non-commercial body by one of the per- sons referred to in subsection (12) number 1 (a) below, or a non-commer- cial enterprise owned by one of the persons referred to in subsection (12) number 1 (a) below, (b) a zone A foreign regional government or local authority within the mean- ing of Article 2 (1) second indent of the EC Council Directive of December 18, 1989 on a solvency ratio for credit institutions (89/647/EEC) (EC Solv ency Ratio Directive), subject to subsection (12) number 1 (d) below, (c) the European Investment Bank, (d) a multilateral development bank within the meaning of Article 2 (1) seventh indent of the EC Solvency Ratio Directive and Article 1 of the Com- mission Directive of December 19, 1990 (K(90) 3068, final version), (e) a credit institution domiciled in the area of validity of the Banking Act (in- cluding a branch within the meaning of section 53 of the Banking Act) and a zone A credit institution within the meaning of Article 2 (1) fourth indent of the EC Solvency Ratio Directive, but not constituting these institutions' own funds as defined in the EC Council Directive of April 17, 1989 on the own funds of credit institutions (89/299/EEC), (f) a zone B credit institution within the meaning of Article 2 (1) fifth indent of the EC Solvency Ratio Directive, provided that the original maturity of the risk assets does not exceed one year and that they do not constitute own funds; 2. risk assets insofar as they are secured, to the satisfaction of the appropriate authorities, by collateral in the form of (a) securities issued by the European Investment Bank, (b) securities issued by a multilateral development bank within the meaning of number 1 (d) above, (c) securities issued by a zone A regional government or local authority as de- fined in number 1 (b) above, ~d~ ~ash ~enocit~ Ic)~ with ;~ 7~nP A ~r~r~it inctitntir~n ~c r~Pfin~r~ in nl lrnh~r 1 (e) above, other than the lending institution, (e) certificates of deposit or similar instruments issued by a zone A credit insti- tution as defined in number 1 (e) above, other than the lending institution. (11) Debt securities issued before January 1, 1998 and covered in accordance with the provisions of the Mortgage Bank Act, the Ship Mortgage Bank Act or the Act on Mortgage and Similar Bonds Issued by Public Credit Institutions (Gesetz uber die Pfandbriefe und verwandten Schuldverschreibungen offentlich-rechtlicher Kreditanstalten) shall be counted at only 10 % of their value. 129 (12) Of the risk assets referred to in subsection (1) sentence 2 above, the following shall attract a zero weighting: 1. risk assets constituting claims on, or carrying the explicit guarantee of, (a) the Federal Government or one of its special funds, a Land Government, a local authority or local authority association in the area of validity of the Banking Act, (b) a zone A foreign central .government or central bank as defined in subsec- tion (10) number 1 (b) above, (c) a zone B central government or central bank as defined in subsection (10) number 1 (f) above, if the risk assets are denominated and funded in the national currency of the borrower or issuer, (d) a regional government or local authority in another member state of the European Communities, if such risk assets attract a zero weighting in that member state, the member state notifies the Commission accordingly and the Commission has publicised this fact; 2. risk assets constituting claims on the European Communities; 3. risk assets insofar as they are secured, to the satisfaction of the appropriate authorities, by collateral in the form of (a) zone A central government or central bank securities as defined in subsec- tion (10) number 1 (b) above, or securities issued by the European Com- munities, (b) certificates of deposit or similar instruments issued by and lodged with the lending institution, (c) cash deposits lodged with the lending institution; 4. risk assets in accordance with subsection (1) sentence 2 number 3 or 4 above, the replacement cost of which is due entirely or partly to changes in exchange rates, if the original maturity of the contract is less than 15 calendar days; 5. risk assets in accordance with subsection (1) sentence 2 number 4 above consti- tuting claims on, or carrying the guarantee of, a stock market institution. Principle la (1) The total amount of certain positions of a credit institution involving price risks ("risk positions") should not exceed 42 % of that credit institution's liable capital at the close of business on any day. (2) The following are risk positions within the meaning of subsection (1) above: 1. the sum of the differences, as determined in accordance with subsections (3) and (4) below, between the credit institution's asset and liability positions de- nominated in foreign currency and in gold, silver or platinum (precious metals), 2. the sum of the risk coefficients, as determined In accordance with subsections (5) to (7) below, for counting the risk-enhancing positions arising under interest- rate-futures and interest-rate-option contracts (interest-rate contract positions), 3. the sum of the differences, as determined in accordance with subsection (8) below, between delivery rights and delivery obligations arising under futures and option contracts involving other price risks. The risk positions as defined in sentence 1 above should not exceed the following percentages of the credit institution's liable capital at the close of business on any day: 1. the risk position pursuant to number 1 above: 21 %, 2. the risk position pursuant to number 2 above: 14%, and 3. the risk position pursuant to number 3 above: 7%. (3) The following items constitute asset and liability positions within the meaning of subsection (2) sentence 1 number 1 above if they are denominated in foreign currency or in gold, silver or platinum in an unprocessed state (i.e. excluding prod- ucts made of these precious metals): A. asset positions 1. Ioans and advances to credit institutions and customers, and balances in foreign currency accounts carried by the Deutsche Bundesbank, 2. bills of exchange, 3. Treasury bills and Treasury discount paper, 4. securities, other than shares and other participatory securities, 5. stocks of (a) gold, (b) silver, (c) platinum, 6. delivery and payment rights arising under spot and futures contracts, and rights to the payment of principal amounts under financial swaps, 7. rights and contingent rights under sale and repurchase agreements to the rede- livery of items listed under asset positions numbers 1 to 6 above, insofar as such items are not included in these asset positions, 8. rights of the credit institution as an option writer, arising when third parties exercise option rights, to receive the purchase price represented by the strike price and to receive the underlying instrument, 9. rights of the credit institution, arising when exercising its own option rights, to receive the purchase price represented by the strike price and to receive the underlying instrument, insofar as this reduces a difference which would other- wise exist und constitute a liability in accordance with subsection (4) sentence 1 clause 1 below; B. Iiability positions 1. amounts owed to credit institutions and other creditors, 2. debt securities, 3. own acceptances and promissory notes outstanding, 4. delivery and payment obligations arising under spot and futures contracts, and obligations to pay principal amounts under financial swaps, 132 5. obligations and contingent obligations under sale and repurchase agreements to redeliver items listed under asset positions numbers 1 to 6 above, insofar as such items are included in these asset positions, 6. obligations of the credit institution as an option writer, arising when third par- ties exercise option rights, to pay the purchase price represented by the strike price and to deliver the underlying instrument, 7. obligations of the credit institution, arising when exercising its own option rights, to pay the purchase price represented by the strike price and to deliver the underlying instrument, insofar as this reduces a difference which would oth- erwise exist and constitute an asset in accordance with subsection (4) sentence 1 clause 1 below. (4) The differences for determining the risk position pursuant to subsection (2) sen- tence 1 number 1 above shall be calculated separately for each currency and each precious metal by ascertaining the balance in absolute terms deriving from the asset and liability positions computed in accordance with subsection (3) above. Regardless of how the individual value adjustments in respect of asset positions in foreign currency or Deutsche Mark have been effected, they must be deducted from these positions. When translating asset and liability positions denominated in a foreign currency into Deutsche Mark, spot middle rates shall be used for the cur- rencies officially quoted on the Frankfurt Currency Exchange, and middle rates derived from the determinable buying and selling rates shall be used for other cur- rencies. Asset and liability positions in gold shall be translated into Deutsche Mark at the rate quoted on the Frankfurt Gold Exchange for 12.5 kg bars (1 kg = 32 fine ounces). Asset and liability positions in silver and platinum shall be translated at the rates per fine ounce quoted on the London Metal Exchange. (5) The risk coefficients for determining the risk position pursuant to subsection (2) sentence 1 number 2 above shall be calculated separately for each currency, using a risk-recording system classified by time with four consecutive zones, each of which is subdivided into periods of calendar quarters or calendar years. The fol- lowing shall be combined to form zones within the meaning of sentence 1 above: 1. all the calendar quarters specified in sentence 3 clause 2 below (the short-term zone), 2. the five calendar years following the short-term zone (the medium-term zone), 3. the five calendar years following the medium-term zone (the medium-to-long-term zone), and 4. the three calendar years following the medium-to-long-term zone (the long-term zone). The coverage of the short-term zone within the risk-recording system changes over time at the end of each calendar quarter upon the compilation of the fixed- interest-rate balance sheet pursuant to subsection (7) sentence 2 clause 2 below; the short-term zone which starts in the second calendar quarter following the rel- evant reporting date within the meaning of clause 1 of this sentence comprises as at March 31 as at June 30 as at September 30 as at December 31 the last two calendar quarters of the current year and all calendar quarters of the following year (six-quarter periods), the last calendar quarter of the current year and all calendar quarters of the following year (five-quarter periods), all calendar quarters of the following two years (eight-quarter periods), the last three calendar quarters of the following year and all calendar quarters of the next year but (seven-quarter periods). (6) To determine the risk coefficient of each zone, asset-side and liability-side risk ratios and, to the extent specified in subsection (7) sentence 4 below, non-nettable add-ons shall be derived from the risk-enhancing elements of interest-rate contract positions in the individual periods of each zone, and subsequently aggregated over all the periods. In the risk-recording system, the interest-rate contract positions shall be computed as the balance of all the asset and liability components of interest- rate-futures contracts and option-writer positions arising from interest-rate-option contracts that are attributed to the same period; the credit institution's own interest-rate-option rights, which shall be recorded separately (classified by asset options and liability options), are included in the calculation of the interest-rate- contract position in the individual periods with the differences (which shall be determined separately) between the asset and the liability components of each overall option contract, provided that their volume, as ascertained in accordance with clause 1 of this sentence, is reduced by netting against either of these differ- ences. Interest-rate-futures and interest-rate-option contracts for the immediate hedging of individual fixed-interest-rate items within the meaning of subsection (7) sentence 2 below - which contracts have been entered into after the reporting date of the latest fixed-interest-rate balance sheet to be compiled - are left out of account in the calculation of the interest-rate contract position until the following fixed-interest-rate balance sheet is drawn up, provided that the express purpose of hedging was documented at the time the contracts were concluded. The interest- rate-futures and interest-rate-option contracts to be incorporated in the calculation of the interest-rate contract positions are included with all their asset and liability components, in line with their effect in terms of interest rates, and on the assump- tion that the contracts are actually performed. In the risk-recording system, each asset and liability component shall be attributed to those periods which precede the period in which it matures; components which mature in a calendar year sub- sequent to the long-term zone within the meaning of subsection (5) sentence 2 number 4 above shall be attributed to all periods of the recording system. (7) In any period of the risk-recording system, the risk-enhancing element of an interest-rate contract position, as calculated in accordance with subsection (6) above, consists of the difference by which the absolute amount of the overall interest-rate position (which is composed of the interest-rate contract position plus the open fixed-interest-rate position) exceeds the absolute amount of the open fixed-interest-rate position; depending on the underlying interest-rate contract posi- tion, the risk-enhancing element is either an asset or a liability. The open fixed- interest-rate positions are determined in each case by computing the balance of the nominal amounts of all the on-balance-sheet and off-balance-sheet fixed-interest- rate items (other than the components of the interest-rate contracts specified in subsection (6) sentence 2 above) that are attributed to the same period; these positions are to be taken from the latest of the fixed-interest-rate balance sheets which the credit institution must compile within one month by a consistent method, at least as at the end of each calendar quarter, in line with the break- down by period of the risk-recording system. In the fixed-interest-rate balance sheet every fixed-interest-rate item shall be attributed to those periods which precede the period in which its interest rate ceases to be fixed. To compute the risk ratios which are to be found in the periods of all the zones and the add-ons which are likewise to be taken into account in the first three quarters of the short-term zone, the risk- enhancing elements within the meaning of sentence 1 above are weighted with period-related percentages; these percentages are: 1. if the risk ratios are derived for each quarter: for each year: 2. if the add-ons are derived for each quarter: 0.5%, 2.0%, 0.5%. In each of the zones as defined in subsection (5) sentence 2 numbers 2 to 4 above, the risk coefficient is formed by the absolute amount of the balance of the asset- side and liability-side risk ratios of the respective periods, and in the zone as de- fined in subsection (5) sentence 2 number 1 above it is formed by the sum of the absolute values of this balance and the add-ons in accordance with sentence 4 above. (8) The differences for determining the risk position pursuant to subsection (2) sen- tence 1 number 3 above shall be calculated separately, classified by the type of instrument posing a price risk underlying the futures and option contracts; in each case the differences are formed by the absolute amount of the balance computed, in respect of all futures contracts and option-writer positions under option contracts (on the assumption that the contracts are actually performed), from the credit institution's delivery rights and delivery obligations, provided that these contracts do not hedge the price risk posed by a portfolio of instruments of the same type. The credit institution's own option rights are included in the balance along with its aggregate delivery rights under call options and its aggregate deliv- ery obligations under put options, provided that the level of the balance, as deter- mined in accordance with sentence 1 clause 2 above, is reduced by netting against either of these aggregates. (9) The asset and liability components of option contracts shall be included in the calculation of the risk positions pursuant to subsection (2) sentence 1 above to the extent of the minimum percentages prescribed by sentence 5 below or of higher ratios deriving from a computer-assisted option-price model consistently used by the credit institution. The minimum percentages are determined by ihe value of the ratio (Anrechnungskoeffizient - AK) which is to be calculated for every option contract at the close of business every day. This ratio shall be calculated, 1 in the case of contracts (a) involving call options included in the risk positions pursuant to subsection (2) sentence 1 number 1 or 3 above, and (b) involving asset-side interest-rate options included in the risk position pursu- ant to subsection (2) sentence 1 number 2 above, by the formula AK=FR-Sp X 360 SP RM 2 in the case of contracts (a) involving put options included in the risk positions nllrcll~nttf)cllhc~ction (2) sentence 1 number 1 or 3 above, and (b) involving liability-side interest-rate options included in the risk position pur- suant to subsection (2) sentence 1 number 2 above, by the formula AK =SP-FR X 360 SP RM where "FR" = the Futures Rate applying to the underlying instrument, "SP" = the agreed Strike Price, and "RM" = the Residual Maturity of the option in days. Where the residual maturity is less than 30 days, the number "30"is to be inserted in place of "RM". The minimum percentage is as follows: for ratios (Anrechnungskoeffizienten) of less than - 0.02 from - 0.02 to less than + 0 20%, from + 0 to less than + 0.08 50%, from + 0 08 to less than + 0 14 70%, of + 0 14 and more Principle ll 95%. A credit institution's assets in the form of 1. Ioans and advances to credit institutions and customers with agreed maturities or periods of notice of four years and over, 2. unlisted securities, 3. participating interests, 4. shares in a controlling company or a cnmn~ny holding a majority interest, 5 land and buildings, and 6. furniture and equipment, less the value adjustments, should not exceed the sum of the long-term financial resources specified below. The following shall be regarded as long-term financial resources: 1 the capital and reserves, 2. the amounts (other than savings deposits) owed to credit institutions and other creditors with agreed maturities or periods of notice of four years and over, 3. 10% of the amounts (other than savings deposits) owed to other creditors pay- able on demand and with agreed maturities or periods of notice of less than four years, 4 60% of the savings deposits, 5. the debt securities outstanding and sold prior to issue with maturities of more than four years, 6. 60% of the debt securities outstanding and sold prior to issue with maturities of less than four years, 7. 60% of the provisions for pensions, 8. 20% of the amounts owed to associated credit institutions with agreed matur- ities or periods of notice of six months and over but less than four years (only in the case of the regional institutions of savings banks and credit cooperatives). Sentences 1 and 2 apply as appropriate to a branch of an enterprise within the meaning of section 53b (1 ) sentence 1 or (7) of the Banking Act. Principle lll 1. 20% of the loans and advances to credit institutions with agreed maturities or periods of notice of three months and over but less than four years, 2. Ioans and advances to customers with agreed maturities or periods of notice of less than four years (including the trade receivables of credit institutions trading in goods), 3 bills of exchange drawn by the credit institution, discounted and credited to borrowers, and promissory notes drawn by borrowers, discounted and credited to them, in the credit institution's portfolio (other than promissory notes of the Bank for International Settlements and the Import and Storage Agencies (Ein- fuhr- und Vorratsstellen) and promissory notes drawn for the purpose of taking up loans of the Export Credit Company (Ausfuhrkredit-Gesellschaft mbH) and the Industrial Plant Financing Company (Gesellschaft zur Finanzierung von Industriean/agen mbH)), and contingent claims in respect of such bills and notes in circulation, 4 listed shares and investment fund units, 5. "other assets" (including stocks of goods held by credit institutions trading in goods), 1 39 less the value adjustments, should not exceed the sum of the financial resources specified below. The following shall be regarded as financial resources: 1. 10% of the amounts owed to credit institutions payable on demand and with agreed maturities or periods of notice of less than three months, other than loans and advances to customers on behalf of the credit institution, 2. 50% of the amounts owed to credit institutions with agreed maturities or periods of notice of three months and over but less than four years, other than loans and advances to customers on behalf of the credit institution, 3 80% of the amounts owed to credit institutions in respect of loans and advances to customers on behalf of the credit institution, 4. 20% of the savings deposits, 5. 60% of the other amounts owed to other creditors payable on demand and with agreed maturities or periods of notice of less than four years, 6. 80% of the amounts owed in respect of business in goods and trade payables, other than the liabilities of credit institutions trading in goods included in num- ber 8 below, 7. 20% of the debt securities outstanding and sold prior tn iCCII~ with maturities of less than four years, 8 80% of the own acceptances and promissory notes in circulation, of the bills drawn by the credit institution, discounted and credited to borrowers and of the promissory notes drawn by borrowers, discounted and credited to them, in circulation (other than promissory notes of the Bank for International Settle- ments and the Import and Storage Agencies and promissory notes drawn for the purpose of taking up loans of the Export Credit Company and the Industrial Plant Financing Company), plus the financial surplus or less the financial deficit under Principle ll, as the case may be. Special publications No. 8 The balance of payments statistics of the Federal Republic of Germany; February 1991 (in German: 2nd edition, May 1990) The monetary policy of the Bundesbank March 1994 Macroeconometric model of the German economy April 1994 Monetary policy regulations April 1994 Banking Act September 1994