In case you wish to carry out an e-money-business or to provide banking, payment, or financial services, you will in principle need an authorisation from the supervisory authority in the country where you wish to offer the respective services (“Target Markets”). This does not mean, however, you will need several authorisations from different supervisory authorities within the European Economic Area (“EEA”), in case you wish to provide services requiring authorisation in different EEA member states.
Rather, credit institutions, securities trading companies, payment and e-money institutions and leasing and factoring institutions belonging to banks which have a licence in one EEA member state may, in principle, also carry out their business in other EEA member states. The German Banking Act (“KWG”) and the Payment Services Supervision Act (“ZAG”) offer various possibilities for cross-border activities. Activities requiring a cross-border authorisation can be carried out either by establishing a branch (“freedom of establishment”) or by way of the free movement of services (“freedom to provide services”). The freedom of establishment and the freedom to provide services (with respect to services being subject to authorisation) are generally referred to as the “European passport” (in the following referred to as “Passporting”).
With regard to Passporting, the KWG and the ZAG distinguish between
- the outgoing passport, i.e. an institution established in Germany wishes to become active in other EEA member state (see section 24a KWG and section 38 ZAG)
- and the Incoming Passport, i.e. an institution established in another EEA country wishes to become active in Germany (see section 53b KWG and section 39 ZAG)
Notification
The institution must always notify the planned cross-border activity to its home supervisory authority (“Notification”). The home supervisory authority checks whether all necessary information and requirements are met and informs (with all necessary information) the supervisory authorities in the respective EEA member states being Target Markets about the planned cross-border activity. The supervisory authorities in the respective Target Markets then examine the application for the incoming passport in accordance with the relevant national provisions and take necessary measures (e.g. notification to other authorities or a listing in national registers). At the end of the procedure, the institution will receive a so-called Welcome Letter from the supervisory authority in the respective Target Market.
Limits of Passporting
However, Passporting only simplifies cross-border activities to the extent that the legal requirements for the respective service are harmonised at European level. This is not the case for all services requiring authorisation in Germany. For example, the supervision of leasing and factoring institutions is not harmonised under European law. Nor are the requirements for the provision of leasing and factoring services harmonised at European level. In some EEA member states, such services can even be provided without an authorisation. For example, CRR credit institutions and leasing and factoring institutions affiliated to CRR credit institutions have exceptional rules and can provide leasing and factoring services under a European passport.
For this reason, when services subject to authorisation are offered cross-border, it must always be checked whether these services can be provided in other EEA member states with a European passport or whether authorisation must be applied for in accordance with the respective regulations of the Target Market.
Please note, even if the European passport applies further requirements may exist under national laws (e.g. a requirement for business registration).
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