The Banking Directive Implementation and Bureaucracy Reduction Act (Bankenrichtlinienumsetzungs- und Bürokratieentlastungsgesetz, “BRUBEG”) passed the German Bundesrat on 6 March 2026 and will bring substantial regulatory changes to the M&A landscape in Germany’s banking sector. The BRUBEG transposes Directive (EU) 2024/1619 (“CRD VI”) into national law and introduces new sections 2h and 2i and section 24(1f), (3a), sentence 1, no. 8 to the German Banking Act (Kreditwesengesetz, “KWG”), establishing extensive new approval and notification requirements for transactions involving CRR credit institutions and consolidating financial holding companies. It also significantly tightens the fit and proper requirements for board members and key function holders.
Financial sector M&A: new approval and notification requirements
Background: What’s new?
To date, German law has primarily required formal regulatory approval only for the direct or indirect acquisition of a qualifying holding – 10% or more of capital or voting rights – in a credit institution (including a CRR credit institution), or for exerting significant influence over such undertakings, via the ownership control procedure (Inhaberkontrollverfahren) under section 2c KWG. By contrast, the risks assumed by CRR credit institutions through their own acquisitions of shareholdings or assets were only addressed through ongoing supervision or informal pre-clearance with the competent regulatory authority. The BRUBEG – implementing CRD VI – now introduces far-reaching reforms for CRR credit institutions.
New approval and notification requirements for transactions
1. Acquisition of a material holding (section 2h KWG)
The new section 2h KWG establishes an approval procedure for the acquisition of material holdings by CRR credit institutions. These institutions must notify in advance the intention to acquire – whether directly or indirectly – such a material holding (see section 2h(1), sentence 1 KWG). Implementation of the acquisition is permitted only after approval by the regulatory authority, or once the authority’s assessment period has expired without the transaction having been prohibited by the authorities (see section 2h(14), sentence 2 KWG).
- Undertakings required to notify: A notification is required from CRR credit institutions and (mixed) financial holding companies obliged to consolidate under section 10a(2), sentence 2 KWG. This does not cover branches of CRR credit institutions from the European Economic Area (“EEA”), branches of credit institutions domiciled in non-EEA states or non-CRR credit institutions within the meaning of the KWG.
- Material holdings: A holding is deemed material if it reaches 15% or more of the institution’s eligible own funds (see section 1(9b) KWG), i.e. the sum of its Common Equity Tier 1 capital (“CET1”), Additional Tier 1 capital (“AT1”) and Tier 2 capital (“Tier 2”). The relevant benchmark is the (forecast) book value at closing of the transaction.
The materiality test must first be carried out at the level of the individual CRR credit institution and, if an EU parent institution exists that is responsible for prudential consolidation, also at group consolidated level.
- Competent authority: If the threshold for a material holding is reached or exceeded solely on an individual basis, the notification must be submitted to the competent authority (i.e., for significant CRR credit institutions, the European Central Bank (“ECB”), and for less significant CRR credit institutions, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, “BaFin”) (see section 1(5) KWG)) and the Deutsche Bundesbank (“Bundesbank”). If the threshold is simultaneously reached or exceeded on the basis of the consolidated situation of the EU parent institution (see Article 4(1)(29) of the Capital Requirements Regulation (“CRR”)), the notification must also be submitted to the consolidating regulatory authority (see Article 4(1)(41) CRR). If the consolidating regulatory authority is BaFin or the ECB, the notification must also be submitted to the Bundesbank.
Whereas owner control procedures pursuant to section 2c KWG fall within the exclusive competence of the ECB, this is not the case for procedures pursuant to section 2h KWG.
- Procedure: Once the regulatory authority confirms receipt of a complete notification, it has an assessment period of 60 working days (see section 2h(4) KWG). It may request additional information up to the 50th working day, which suspends the assessment period for a maximum of 20 working days (see section 2h(8) and (9) KWG). For holdings in non-EEA undertakings or where an exchange of information with anti-money laundering (“AML”) regulatory authorities is required, the suspension may be extended to a maximum of 30 working days (section 2h(10) KWG).
- Timeline: Based on practical experience with ownership control procedures under section 2c KWG and depending on the type of target and complexity of the transaction structure, institutions should plan up to 14 months from signing for the regulatory authority to issue its assessment of material holdings (from submission of documentation to approval). Under the new section 2c(4), sentence 2 KWG, the assessment period for an ownership control procedure is extended where both procedures run in parallel and the procedure under section 2h KWG ends later – or vice versa – so that both procedures are intended to conclude simultaneously.
- Grounds for prohibition: The regulatory authority may prohibit the intended acquisition (see section 2h(12) KWG) if
- facts justify assuming the acquirer will not be able to comply with prudential requirements;
- there are reasonable grounds to suspect that in connection with the intended acquisition, of money laundering or terrorist financing is committed or attempted; or
- information remains incomplete despite a request for additional details.
- Intra-group exemptions: The regulatory authority is not required to assess acquisitions of material holdings within the same group (see Article 4(1)(138) CRR) where the undertakings fall under Article 113(6) CRR or the same institutional protection scheme. This is a discretionary exemption and does not remove the notification requirement.
In addition to acquisition notifications, CRR credit institutions must also notify in advance any intended disposal of a material holding to the regulatory authority and Deutsche Bundesbank (see section 2h(1) KWG; section 24(1f), sentence 4; section 24(3a), sentence 1, no. 9 KWG).
2. Mergers and divisions (section 2i KWG)
The new section 2i KWG introduces a notification requirement for planned mergers or divisions involving CRR credit institutions and (mixed) financial holding companies (see section 2i(1), sentence 1 KWG). Previously, the intention to merge was only subject to notification requirements pursuant to section 24(2) KWG, i.e., with respect to mergers with a credit institution, financial services institution, securities institution, e-money institution, or an institution within the meaning of section 2(4) of the German Crypto Markets Supervisory Act (Kryptomärkteaufsichtsgesetz).
Under transformation law, section 2i KWG covers split-ups, split-offs and spin-offs, while the term merger encompasses the full (or partial) transfer of assets and liabilities to an existing or newly established undertaking. A planned merger or division may not be completed until the regulatory authority has issued a positive opinion (see section 2i(7) KWG).
Unlike the acquisition of material holdings, section 2i KWG does not provide for any materiality threshold. The Act assumes that such restructuring measures always have significant implications for the prudential profile of both the undertakings involved and entities resulting from such restructurings.
- Timing of notifications: According to the wording of section 2i(1), sentence 1 KWG, notifications must be conducted after the adoption of the draft terms of the merger or division and before completion of the planned transaction. Because the German Transformation Act (Umwandlungsgesetz, “UmwG”) does not specify what constitutes “adoption”, the regulatory authorities should clarify the moment at which notification is required. This could be either (i) preparation of the draft merger agreement (see section 4(2) UmwG), (ii) notarisation of the merger agreement (see section 6 UmwG) or (iii) the shareholders’ approval of the merger agreement (see section 13 UmwG). In practice, notification immediately after preparation of the draft merger agreement is recommended to facilitate the earliest possible approval.
- Assessment criteria: In its assessment, the regulatory authority focuses on (i) the reliability and financial soundness of the CRR credit institutions or (mixed) financial holding companies involved, (ii) the ability of the undertakings resulting from the operation to comply with applicable prudential requirements, (iii) whether the implementation plan for the intended merger or division is realistic and sound from a prudential perspective, and (iv) the absence of any reasonable suspicion of money laundering or terrorist financing.
- Procedure: The regulatory authority confirms receipt of a notification concerning a planned division or merger in text form within ten working days and specifies the end of the assessment period. For intra-group transactions between CRR credit institutions, financial holding companies or mixed financial holding companies, the assessment period is 60 working days from the confirmation of receipt (see section 2i(4) KWG). The regulatory authority may request additional information up to the 50th working day, which suspends the assessment period for a maximum of 20 working days. For holdings in non-EEA undertakings or where an exchange of information with AML regulatory authorities is required, the suspension may be up to 30 working days (see section 2i(6) KWG).
For mergers and divisions outside a group, or for intra-group transactions that do not involve both a CRR credit institution and a (mixed) financial holding company, there is no statutory assessment period.
- Intra-group exemptions: In the case of an intra-group merger involving only CRR credit institutions or (mixed) financial holding companies belonging to the same group, the regulatory authority is not required to carry out an assessment (see section 2i(2) KWG). For intra-group mergers, a review within the 60-day period will therefore only take place if the regulatory authority does not grant the exemption.
However, this exemption does not apply to divisions.
- Coordination with transformation law: The notification and approval procedure under section 2i KWG (new version) must be factored into the planning of the merger or division process under transformation law. For cross-border mergers and divisions, the commercial register issues the relevant certificate, which should reflect the regulatory authority’s opinion under section 2i(11) KWG.
3. Material transfer of assets and liabilities
Under section 24(1f), sentence 1 and section 24(3a), sentence 1, no. 8 KWG, the planned material transfer of assets or liabilities is subject to notification, and each undertaking involved in the transfer is required to notify. The notification requirement also applies where only undertakings belonging to the same group are involved in the transfer. The notification requirement does not trigger an approval procedure.
- Material transfer: A transfer is material if it accounts for at least 10% of the undertaking’s total assets or liabilities (see section 1(9a), sentence 1 KWG). If the transfer takes place between undertakings belonging to the same group, the threshold increases to 15% (see section 1(9a), sentence 2 KWG).
Certain categories of assets to be transferred are excluded, in particular (i) non-performing assets, (ii) assets designated for inclusion in cover pools (i.e. assets securing payment obligations attached to covered bonds and legally segregated from other assets), (iii) assets designated for securitisation, and (iv) assets related to resolution tools.
- Timing of submission: The undertaking required to notify must notify the planned transfer in advance and without undue delay. The notification should therefore be submitted upon the signing of the purchase agreement at the latest.
4. Legal consequences of infringements
The negligent or intentional failure to submit the notifications required under section 2h, section 2i and section 24(1f), section 24(3a), sentence 1, no. 8 KWG or their incorrect, incomplete or late submission constitutes an administrative offence (see section 56(2), no. 1, letters c, d, l and o KWG).
Breaches of notification requirements concerning the acquisition of a material holding (section 2h(1), sentence 1 KWG) and the material transfer of assets and liabilities (section 24(1f), section 24(3a), sentence 1, no. 8 KWG) may be sanctioned with administrative fines of up to EUR 5 million (see section 56(6), no. 1 KWG), while breaches of the obligation to notify planned mergers or divisions may be sanctioned with administrative fines of up to EUR 100,000 (see section 56(6), no. 5 KWG).
Practical implications
- When the BRUBEG enters force, many transactions involving CRR credit institutions and (mixed) financial holding companies will be subject to a notification and approval requirement that was previously handled as part of ongoing supervision or through informal pre-clearance but did not constitute a regulatory procedural requirement in the transaction process.
- Investors, CRR credit institutions and (mixed) financial holding companies should ensure that the relevant internal departments (M&A, Legal, etc.) promptly familiarise themselves with the new notification regime. This is in particular important because the new notification requirements do not prescribe strict limits on the duration of the procedure. Insufficient preparation can therefore potentially result in regulatory authorities requesting additional information, causing delays in the procedure. Going forward, notification and approval procedures will have to be factored in when planning the timing of M&A transactions.
- Undertakings contemplating such transactions or already in negotiations should take these notification and approval requirements into account in their timing considerations and in their transaction documentation. This applies in particular to transactions that have not yet been completed at the time the BRUBEG enters into force. Early coordination with regulatory authorities is therefore advisable to ensure the approval procedure runs smoothly.
- Regulatory authorities will be required to establish an administrative practice that provides clarity on key aspects, in particular for approval procedures under sections 2h and 2i KWG. This concerns in particular the point in time at which notifications must be submitted for acquisitions of a material holding (“in advance”) and for mergers and divisions (“adoption of the draft terms of the merger or division”).
Regulatory authorities will be required to establish an administrative practice that provides clarity on key The European Banking Authority (“EBA”) is to develop regulatory technical standards (“RTS”) by 10 July 2026 that, among other things, specify the list of information to be submitted alongside the notification. The regulatory authority will publish the relevant requirements on its website before then.
Strengthening of the fit and proper requirements
In implementing the requirements of CRD VI, the BRUBEG introduces a significant expansion of the scope of the fit and proper requirements for corporate governance.
Obligation to conduct ongoing assessments and ensure compliance with fit and proper requirements
Members of a management body have to be at all times of sufficiently good repute, act with honesty, integrity and independence of mind and possess sufficient knowledge, skills and experience to perform their duties (cf. section 25c(1), sentence 1 KWG). Comparable obligations apply to the members of the administrative or supervisory body (section 25d(1), sentence 1 KWG). It has to be procured that members of the corporate bodies fulfil the fit and proper requirements on an ongoing basis – which is manifested in the KWG e.g. in the obligation to enable necessary training (see section 25c(4) and (25d) KWG).
The BRUBEG introduces an explicit obligation to permanently assess and procure the suitability of the members of the corporate bodies and on the consequences of the lack or loss of professional qualifications or trustworthiness (section 25c(1b), no. 2 and 3; section 25d(1a), no. 2 and 3 KWG): If the requirements are not met prior to appointment, institutions may not appoint the unsuitable candidates as member of managing or supervisory body. If incumbent members of a managing or supervisory body do not (or no longer) fulfil the requirements, they must either be removed from office without delay, or measures must be taken without delay to ensure that the person concerned meets the requirements (again).
The BRUBEG also extends the regulatory authority’s existing ex-post removal powers by introducing ex-ante powers of intervention: The regulatory authority may, in future, intervene before a candidate commences their duties and issue an order preventing their appointment as a managing director or as a member of the administrative or supervisory body of an institution (section 25c(1c) and section 25d(1b) KWG). Institutions, financial holding companies and mixed financial holding companies that are “large undertakings” within the meaning of the newly introduced section 1(1c) KWG (i.e. large institutions and large subsidiary undertakings as well as, under section 2f(1) KWG, authorised parent financial holding companies and authorised mixed parent financial holding companies that have a large institution within their group) must notify the intention to appoint a managing director or an appointed representative of a managing director (section 24(1), no. 1 and section 24(3a), no. 1 KWG), or a member of the administrative or supervisory body (section 24(1), no. 15 and section 24(3a), no. 4 KWG), no later than 30 working days before the person takes up that function. This has significant implications for planning post-transaction management changes.
Fit and proper requirements extended to holders of key functions
The BRUBEG significantly extends the personal scope of the fit and proper requirements. While these strict prudential requirements so far applied only to members of the management body (generally the management board or managing directors) and of the supervisory body (supervisory board), the BRUBEG extends them to the holders of (specific) key functions as well (section 25e(1) and (2) KWG). Holders of special key functions are persons who have a material influence on the management of institutions or of financial holding companies or (non-exempt) mixed financial holding companies (section 1(2b) KWG) and perform specific functions. These include the heads of the internal control functions (risk control, compliance and internal audit) and the head of finance (section 1(2a) and 1(2d), sentence 2 KWG).
The appointment and removal of holders of special key functions at large undertakings must be notified (section 24(1), no. 15b KWG).
Consequently, the assessment of compliance with fit and proper requirements by existing holders of special key functions – alongside members of the managing body and the members of the administrative or supervisory body – will in future play a significantly greater role in the context of corporate transactions. The same applies to the selection of personnel to fill special key functions following completion of an acquisition.
Forward
