What are financial services?
What are financial services? One might think that this question can be answered unambiguously. However, the context of the question is crucial. Are we talking about a regulatory law or a civil law context?
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Financial services under regulatory law
In response to the above question, a regulatory lawyer would refer to Section 1 (1a) Sentence 2 of the German Banking Act (Kreditwesengesetz “KWG”). According to this provision, the services and activities listed there are financial services. These include investment brokerage, finance leasing and, relatively recently, the crypto custody business.
The definition from Section 1 (1a) Sentence 2 KWG is particularly important for assessing if a financial service requiring a licence is provided.
Financial services in civil law
The civil lawyer would refer to the German Civil Code (Bürgerliches Gesetzbuch “BGB”) and present § 312 (5) first Half-Sentence BGB as the answer. According to this provision, financial services are banking services as well as services in connection with the granting of a loan, insurance, pension provision for individuals, investment of money or payment.
What is immediately noticeable is that this definition is very broad. On the one hand, the services of Section 1 (1a) Sentence 2 KWG can be subsumed without further ado (“services in connection with the …investment of money“), on the other hand, this definition also covers other regulated services, such as payment services (“services in connection with …payment“). Furthermore, it is sufficient if the service in question is merely “in connection” with one of the services listed there.
This definition is important for the assessment of obligations towards consumers and rights of consumers.
Background to the different definitions
Section 312(5) first Half-Sentence BGB is based on the definition of Art. 2 lit. b Directive 2002/65/EC (so-called Financial Services Distance Selling Directive)[1] and Art. 2 No. 12 Directive 2011/83/EU (so-called Consumer Rights Directive), which lay down requirements for transactions with consumers at a distance and off-premises (information obligations, right of withdrawal, etc.). These directives only deal with consumer law and not with regulatory law. Accordingly, the inclusion of this definition in the BGB led to a deviation from the definition of financial services already contained in the KWG.
Conclusion
The original question can be answered unambiguously if the respective context is clear (regulatory law = Section 1 (1a) Sentence 2 KWG; civil law = Section 312 (5) first Half-Sentence BGB).
Fun fact
Financial instrument pursuant BGB and KWG have the same meaning.
[1] Directive 97/7/EC contained only a non-exhaustive list of financial services.
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