[citation needed] In 1934, this was transformed into the Aufsichtsamt für das Kreditwesen,[3]: 598  by new comprehensive banking legislation (German: Kreditwesengesetz of 5 December 1931).

1952 in West Berlin and relocated to Bonn in 2000), and the Federal Supervisory Office for Securities Trading (German: Bundesaufsichtsamt für den Wertpapierhandel [de] or BAWe, est.

[citation needed] This was achieved under the Financial Services and integration Act (German: Gesetz über die integrierte Finanzaufsicht, known as FinDAG) enacted on 22 April 2002.

[7] On 19 September 2008, in response to threats from the 2007–2008 financial crisis and following measures taking by the United States, BaFin banned short selling on eleven German finance stocks.

[8] On 19 May 2010, in response to 2010 European sovereign debt crisis, BaFin banned naked short selling of credit default swaps on euro-area government bonds until 31 March 2011.

[10] In November 2020, the European Securities and Markets Authority (ESMA) published the results of its review which assessed the events leading to the collapse of Wirecard and the supervisory response by BaFin.

[citation needed] This review identifies a number of deficiencies, inefficiencies and legal and procedural impediments relating to the following areas: the independence of BaFin from issuers and government; market monitoring by both BaFin and the Financial Reporting Enforcement Panel (FREP); examination procedures of FREP; and the effectiveness of the supervisory system in the area of financial reporting.

[citation needed] According to new cooperation principles between the two authorities, BaFin is to only inform the ministry in critical cases, for example when a large corporation is involved or if there is an impact on financial markets stability.

[15] The main task of BaFin is the supervision of banks, insurance companies, and the trading of securities and ensure the viability, integrity, and stability of the German financial system.

[citation needed] In addition to these divisions, the so-called "operational pillars", there are a number of departments that have cross-organizational or perform administrative tasks, such as "risk modeling", "money laundering" and "international responsibilities".

[citation needed] BaFin employs roughly 2,530 at its two offices[16] and is fully funded by fees and levies of the supervised institutions and companies and so is independent of the federal budget.

[citation needed] It takes into account the management, minimum capital requirements, reliability, solid leadership, and the sustainability of the business when approving licenses.

[citation needed] Financial institutions must provide BaFin with: All information will be assessed and evaluated in close cooperation with the Deutsche Bundesbank.

[citation needed] BaFin enforcement powers range from the issuing of subpoenas and questioning people, suspending or prohibition trading in financial instruments up to being able to forward cases to the public prosecutor.

[citation needed] BaFin also has the power to remove the top leaders of a bank, suspend shareholders' voting rights or appoint an outside supervisor to oversee management.

An examination by the German Federal Court of Audit (Bundesrechnungshof) in Koblenz noted in March 2004 that the internal control system of authority is insufficient.

[27] In September 2006 a report by PricewaterhouseCoopers and BaFin internal audit found that the requirements of the federal government to prevent corruption had not been implemented.

[28] In April 2009 an internal BaFin list containing the volume of loans and securities "from troubled business" and banks was leaked to the newspaper Sueddeutsche Zeitung.

[34] The Federal Ministry of Finance later disclosed that one fifth of BaFin staff had engaged in some kind of investment activity in 2019 and 2020, with an increasing interest in Wirecard in the months ahead of its collapse.