Factoring companies are supervised
Since the 25ht of December 2008, companies that offer factoring within the scope of § 1 para. 1a no. 9 of the German Banking Act (Kreditwesengesetz – KWG) are considered as financial service institutions (Finanzdienstleistungsinstitut) which require both a license and supervision. They therefore fall under a qualified supervision by the German financial supervisory authority (BaFin), in cooperation with the German central bank (Deutsche Bundesbank).
However, factoring companies need not fulfil a number of prudential requirements as in comparison to other financial services and especially banking activities, factoring has some special features, and factoring companies are largely SME-sized and -related. Hence, factoring companies which are licensed and supervised as financial service institutions do not have to comply with most regulatory capital and liquidity requirements, even though they have to adhere to a number of other prudential rules, in particular organisational requirements concerning risk management as well as reporting duties vis à vis supervisory authorities. Moreover, these supervisory authorities have rights of inspection and control over factoring companies, who in turn take on the supervisory costs. All the members of our association are supervised as financial service or credit institutions by either BaFin and Bundesbank or (in the case of significant institutions – SIs) directly by the ECB. As a positive side effect of the aforementioned introduction of licensing and prudential requirements for factoring companies through the changes of the KWG by the Annual Tax Act 2009 (Jahressteuergesetz 2009), some relief in trade/business tax (Gewerbesteuer, cf. § 19 GewStDV) which had hitherto only been available to credit institutions was now also extended to factoring companies licensed and supervised as financial service institutions. This entails factoring companies being able to refinance themselves trade tax-neutrally. Competitive disadvantages with a view to traditional bank lending and when comparing national and foreign factoring companies are therefore a thing of the past.
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