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Banking Licence Fees and Regulation in Germany

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Q1: How do fees for a banking licence work in Germany?

Fees for a banking license in Germany are a significant upfront cost that banks must pay to operate in the country. The application fee alone can range from €5,000 to €20,000, and may increase up to €30,000. In addition to this initial fee, legal fees can range from €75,000 to €150,000 (plus value added tax). These fees are charged regardless of whether the applicant withdraws its application or BaFin issues a negative decision.

Q2: How do banks in Germany fund their balance sheets?

Banks in Germany typically fund their balance sheets in layers:

  • Capital base: comprising equity, subordinated debt, and hybrids.
  • Medium- and long-term senior debt.
  • Customer deposits (assumed to be stable).
  • Shorter-term liabilities, such as:
    • Commercial paper
    • Certificates of deposit
    • Short-term bonds
    • Repurchase agreements
    • Swapped foreign exchange liabilities
    • Wholesale deposits

Q3: What minimum capital requirements apply to banks in Germany?

German banks must meet at least the following minimum capital requirements:

  • Hard-core capital ratio: 4.5%
  • Core capital ratio: 6%
  • Total capital ratio: 8%

In addition, BaFin and the ECB check whether liquidity is sufficient.

Q4: What are the regulatory requirements for bank capital and liquidity in Germany?

German banks must meet various regulatory requirements related to capital and liquidity:

  • Hold funds for the:
    • Capital maintenance buffer
    • Countercyclical capital buffer
    • (If ordered) Capital buffer for systemic risks, globally systemically important institutions, and institutions with other systemic relevance
  • BaFin may order these buffers for risk exposures located in Germany or another non-European Economic Area state.

The ECB requires German credit institutions to hold compulsory reserves, but the exact amount or percentage is not specified.