Regulatory Alerts2023-03-01
Classification System for Securities Firms and Financial Service Institutions
The BaFin issued this document in March 2023 to establish the classification system for securities firms and financial service institutions following the implementation of the Securities Trading Act (WpIG). It defines the criteria for categorizing institutions into Large, Medium, and Small securities firms, as well as specific Financial Service Institution (FDI) groups, based on balance sheet totals, asset under management, and transaction volumes. The text also delineates the regulatory status of entities engaged in crypto custody, crypto securities registry management, and other specific financial services under the German Banking Act (KWG).
Status: 3/2023 1 The FDI Groups I, II, and III have been transferred into Large, Medium, and Small Securities Firms upon the entry into force of the Securities Trading Act (WpIG).
Classification System for Securities Firms and Financial Service Institutions
| Securities Firms (WpI) according to WpIG | Financial Service Institutions1 (FDI) according to KWG |
|---|---|
| Large WpI | Group IIk |
| Securities firms (within the meaning of MiFID) that engage in proprietary trading and/or issuance business, and fulfill one of the following conditions: | |
| a) The total value of the consolidated balance sheet total of the securities firm amounts to 15 billion EUR or more, calculated as the average of the preceding twelve months. | |
| b) The total value of the consolidated balance sheet total of all securities firms of a group, whose individual balance sheet total is less than 15 billion EUR, exceeds in total the amount of 15 billion EUR. | |
| c) The securities firm is subject to a decision by the competent authority according to § 8 para. 1 WpIG. |
Securities firms that engage in proprietary trading and/or issuance business and whose assets exceed a threshold of 30 billion EUR (Art. 4 para. 1 (b) (i), (ii) CRR) are to be CRR credit institutions in the future.
Medium WpI | Group IV Securities firms (within the meaning of MiFID) that exceed at least one of the thresholds from Art. 12 para. 1 IFR, which characterize small securities institutions, but do not reach the thresholds for Large WpI.
Small WpI | Group V Securities firms (within the meaning of MiFID) that do not exceed any of the following thresholds listed in Art. 12 para. 1 IFR: • Value of AUM < 1.2 billion EUR; • Value of COH < 100 million EUR/day for cash business or < 1 billion EUR/day for derivatives; • Value of ASA = 0; • Value of CMH = 0; • Value of DTF = 0; • Value of NPR = 0; • Value of CMG = 0; • Value of TCD = 0; • Total balance sheet and off-balance sheet sum of the securities firm < 100 million EUR; • Annual gross total income from securities services and investment activities of the securities firm < 30 million EUR, calculated as the average based on the annual figures of the two-year period immediately preceding the respective financial year.
a) Crypto custody business b) Crypto securities registry management
Institutions that do not trade financial instruments on their own account and are authorized to acquire ownership or possession of funds or securities from clients.
No securities firms, as crypto custody business and crypto securities registry management are national authorization matters according to KWG.
a) Third-country deposit mediation b) Currency exchange business
a) Factoring b) Financial leasing