Establishing a bank?

Establishing a bank?

ECB issues guidance for the preparation and submission of applications for bank licences



Stefan Günthner

Director, Advisory

KPMG AG Wirtschaftsprüfungsgesellschaft


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New banks and financial service providers with specialist product portfolios, foreign banks, Fintechs with innovative business model ideas as well as traditional banks wishing to expand their business model: all need the required licences to be able to conduct their business. These need to be applied for at the respective supervisory bodies.

In the past years the number of licence applications from banks in Europe has risen  - among others driven by Brexit. Establishing a bank nevertheless remains complex and each venture is specific in respect of complying with requirements, timing and cost efficiency.

Level playing field within the EU

The ECB and national supervisory authorities apply the respective relevant regulatory requirements and administrative practice for the examination of licence applications. In order to ensure a competitive environment, a uniform supervisory practice and procedure should be in place for the interpretation of these requirements.

For a long period, this was not ensured and each national supervisory authority applied its own standard and European law was interpreted in a heterogeneous manner. Consequently, there was no standard for the assessment of content and procedure itself for licence applications. Even applications at the same national authorities frequently proceeded at very different levels in respect of granularity and process.

This did not fit with the fact that ever more banks are striving to operate on a pan-European basis  - it was therefore high time that the EBA, ECB and national competent authorities (NCA) operate in a practical manner to prevent potential 'regulatory arbitrage'.

More specific requirements

In 2017 the European Banking Authority (EBA) published technical standards with the aim of establishing a standard for licence applications and corresponding procedures. To put these into more concrete terms and support the interpretation of standards, the ECB and NCAs developed guidelines for licence applications as well as supervisory practices and procedures which would present in detail exactly how the ECB interprets CRD IV, the EBA standards and domestic law.

In providing this help, the ECB serves as a 'gatekeeper'. The focus of the guidelines is to ensure that market players are robust and fulfil the requirements under national and EU law.

For this purpose, EBA and ECB focus on the level of capital at banks applying for licences, as well as their activities, structural organisation and the competence of their management and relevant shareholders. Of course, other aspects are also examined thoroughly. As such, there have been changes at European level in recent years to design the application procedure more clearly and transparently for both new and established players.

Expertise and execution are crucial 

The precise definition of requirements standardised across Europe makes it much simpler for potential applicants to gain an overview. This newly acquired transparency and level playing field can be used to identify which information has to be submitted in which format and how the procedure is generally designed.

At the same time, there continues to be a need for specific experience to be able to answer what kind of focus which stakeholders take in the application process and how and in what granularity the relevant information must be submitted and how proportionality is applied. This is dependent not only on the institution's size, but also on its future business and operating model.

The key factors for preparing a successful licence application, its rapid composition, implementation and launch remain the same: people, expertise and planning! There are still a number of interdependencies and challenges for new market players, particularly from the submission of the application to integration into business operations: “the devil continues to be in the details.”

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