Edited by M. Fahim Khan and Mario Porzio
Chapter 12: German Banking Supervision and its Relationship to Islamic Banks
Johannes Engels TASKS OF GERMAN BANKING SUPERVISION Following the adoption of the Law on Integrated Financial Services Supervision (Gesetz über die integrierte Finanzaufsicht – FinDAG), the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) was established on 1 May 2002. The functions of the former offices for banking supervision (Bundesaufsichtsamt für das Kreditwesen – BAKred), insurance supervision (Bundesaufsichtsamt für das Versicherungswesen – BAV) and securities supervision (Bundesaufsichtsamt für den Wertpapierhandel – BAWe) have been combined in a single state regulator that supervises banks, financial services institutions and insurance undertakings across the entire financial market and comprises all the key functions of consumer protection and solvency supervision. This Federal Financial Supervisory Authority makes a valuable contribution to the stability of Germany as a financial centre and improves its competitiveness (German Federal Financial Supervisory Authority 2003). The BaFin is a federal institution governed by public law that belongs to the portfolio of the Federal Ministry of Finance and as such has a legal personality. Its two offices are located in Bonn and Frankfurt/Main, where approximately 1500 persons are employed. The BaFin supervises about 2000 banks, 650 financial services institutions and around 630 insurance undertakings (BaFin Report 2008). The decision to set up the BaFin was made basically in light of the fundamental changes on the financial markets which required a legislative response that would ensure the future stability of the German financial system. So, the single regulator was set up mainly for the following reasons: an increasing number of clients of banks,...
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