Banking and Regulatory
Central supervision, stress tests – no rest for banks
The major banks in the eurozone can get no peace: following last year's stress test, in which banks were assessed for their equity capital ratio and stability, 120 banks were placed under the direct supervision of the European Central Bank (ECB) in November 2014. For many institutions, this means an increase in administration and paperwork, not to mention the associated costs. Of the many critics, however, only the business development bank L-Bank has so far stuck its head above the parapet in Europe: the bank is challenging the ECB's Single Supervisory Mechanism (SSM) before the European General Court.
The strict regulation, together with the European Commission's state aid projects, has also led to more cross-border restructuring of banking consortia and M&A deals. Deutsche Bank, for example, put its subsidiary Postbank up for sale, and in the case of Deutsche Pfandbriefbank the German government as majority shareholder decided on an IPO.
More movement in the Frankfurt market
Strategic development in another area, however, has seen greater progress: since the introduction of the ECB SSM, many firms have shifted their entire European regulatory expertise to Frankfurt in an attempt to work more closely with the new supervisors. Freshfields in particular has excelled here, having given a counsel to the ECB legal department – ironically, shortly after his involvement in the L-Bank court case against the European SSM, which competitors viewed with both awe and criticism.
Even the less visible legal arms of the large accounting firms beefed up their teams in banking law and depended on some of the market’s highest-profile regulatory lawyers: former managing partner at Mayer Brown, Dr. Jörg Wulfken, jumped ship to PricewaterhouseCoopers Legal, while the best-known regulatory specialist at DLA Piper, Dr. Mathias Hanten, defected to Deloitte Legal.
Major banks also investing in fintech
While many banks are reducing their presence by closing down branches, new players in the private- and business-client segments are gaining market share. Meanwhile, banks are taking the providers of electronic financial services such as Kreditech, Lendico and Zenap – all from the so-called fintech sector – very seriously. Now banking giants such as Deutsche Bank are investing in startups to ensure they do not miss the boat here.
Even legal advisors have the fintech sector in their crosshairs. Leading firms such as Freshfields Bruckhaus Deringer and Linklaters and their close rivals such as Hogan Lovells – which are traditionally anchored among established banks – have been early movers in this market segment. But even those firms that still have the climb ahead of them were recently active here. Aderhold, for example, has already profited from its strong roots in those sectors outside the financial industry where payment services and compliance issues are increasingly attracting the attention of regulatory authorities. Lindemann Schwennicke & Partner and Noerr demonstrated that practices that can build on a strong Berlin presence and contacts in the local startup scene are at an advantage in fintech issues.
This subchapter covers those firms which provide regulatory advice to banks as well as advice on financial products or transactions in the financial sector. Opening new branches, equity guidelines, solvency issues, disclosure obligations as well as authorization proceedings and their retraction are all dealt with in this chapter.
As regulation becomes stricter as a result of the financial crisis, contacts to national and European institutions also play a significant role, so that many banking practices work closely together with the administrative fields. Moreover, this chapter also refers to special litigation practices at several firms in so far as they have developed sector expertise regarding financial institutions. There are therefore overlaps with practice areas including ?state aid law, ?restructuring and insolvency and ?dispute resolution.