Banking and Capital Markets Law: Banking and capital markets law is more than just a set of rules for how financial companies do business. Banking and capital markets law has a big effect on our daily lives because of the rules it sets. e.g. on:
- cashless payment transactions
- retirement provision
- the business world
What our legal advice covers – Banking and Capital Markets Law
Banking law also governs banks, capital markets, and other parts of financial services law.
But because financial transactions are so important to all parts of our lives, from personal to business to industrial, they are often at the center of legal problems that fall under banking law.
Introduction to banking and capital markets law
Recent big changes in economic policy include the Banking and Capital Markets Law, loan terms that shouldn’t be allowed, the diesel scandal, and Brexit.
There have been changes that will have effects for years to come, and banking and capital markets law are trying to figure out how to deal with them.
On the one hand, these events have a direct effect on the capital markets and, by extension, on the credit institutions in each country. On the other hand, they can also affect the law in many situations. These are felt through lawsuits, using the right to get out of a contract, and taking other legal steps.
All of these different things are covered in the next section, which is about banking and capital markets law.
So far, the examples have shown that banking and capital markets law covers a wide range of topics and is very complicated.
Banking and Capital Markets Law – Info
The following laws either have important banking and capital markets law or have additional rules:
- Stock Exchange Law
- New Investment Act – InvG
- Prospectus regime under the Sales Prospectus Act (VerkaufsprospektG) and the Securities Prospectus Act (WpPG)
- Law on company takeovers of listed stock corporations
- German Banking Act – KWG
- Act on the Tracing of Profits from Serious Crimes (Money Laundering Act – GwG)
- Stock Corporation Act – AktG
- Commercial Code – HGB
- Criminal Code – StGB
- Small Investor Protection Act
Many ordinances, laws, guidelines, administrative regulations, notices (like those from the Federal Financial Supervisory Authority, or BaFin), and general terms and conditions (like special conditions for securities transactions) give more detailed rules.
The Securities Trading Act sets rules for an important part of capital markets law (WpHG). There are rules about insider trading, market manipulation, disclosure requirements, and other things that securities services companies have to do.
The following directives, laws, and regulations are currently part of banking and capital markets law:
- Risk Limitation Act with new regulations on land charges as security
- MoMiG – Act to Modernise the Law on Private Limited Companies and Combat Abuses
- Amendment of the Law on Debt Securities (SchVGEG)
- General terms and conditions of banks
- Implementation of the Single Euro Payments Area (SEPA)
- Investment Loans (LMA Standards)
- Financial Markets Directive (MiFID)
- Payment Services Directive
- Consumer Credit Directive
- Market Abuse Directive
- Transparency Directive
What is Credit Contract Law?
Giving out loans and credits is part of what banks do every day. A loan agreement between the borrower and the bank as creditor sums up the rules, which are often very long.
In Banking and Capital Markets Law, the loan agreement sets out how the loan will be paid back and how collateral will be taken. If the Schufa has bad information, loans can be turned down. Because of this, sometimes legal action is taken to get the Schufa entry removed.
Another important part of banking and capital markets law is credit contract law, which deals with both the borrower and the lender.
When a lawyer is helping a borrower who thinks he or she has been wronged, he or she will often look for mistakes in the contracts. Most of the time, the goal is to make sure that these contracts can be ended early without having to pay a penalty.
As a part of banking and capital markets law, credit contract law also handles disputes about foreign currency loans.
The area of loan collateral in banking and capital markets law
Different things can be used as collateral for loans. So, the field of loan collateral is also pretty big.
The most common types of basic collateral are probably mortgages and land charges. People often use these when they need to borrow a large amount of money.
Loan collateral is also a very important part of business transactions, and you need to know a lot about banking and capital markets law to do it right.
Export credit insurance means that you are covered if you don’t pay back money you owe for export goods.
Contracts for space insurance mean that product inventories are given to the lender as security.
With so many options for credit insurance, it is often necessary to have a deep understanding of private international law.
Banking Law and Capital Markets Law Difference
In contrast to capital market law, Banking and Capital Markets Law governs how a bank and its customers do business with each other. Banking and Capital Markets Law is made up of many different laws. Banking and Capital Markets Law is the area of law that deals with accounts and their special forms, as well as the general terms and conditions of German credit institutions.
General Terms and Conditions (AGB) for credit institutions are usually what a contract with a bank is based on (AGB-Banken or AGB-Sparkassen). Most of the time, AGBs don’t work. For instance, some of the expenses clauses in the GTCs of banks are not valid.
When it comes to expenses made on behalf of or in what is thought to be the customer’s best interest, the GTC clause doesn’t have a limit on how much can be spent.
When it came to clauses about costs for providing, selling, and returning loan collateral, the BGH said that these costs were not in the customer’s best interest, but in the bank’s.
General banking law as a sub-area of banking and capital markets law
No simple or broad answer can be given to the question of what banking law is. On the one hand, there is how banking law is understood by institutions. On the other hand, there is how banking law is understood by how it works. Banking law is about how the law works with the credit system, how banks are regulated, and how banks do business.
The most important roles are played by the Federal Financial Supervisory Authority (BaFin), the Federal Cartel Office, and the central banks.
Banking law includes the laws that govern how credit institutions make loans and accept deposits, as well as how they handle payments, securities, and custody. It also covers liability issues that can come up when bad advice or information is given. It also has laws about checks and bills of exchange.
1. The concept of institutional banking law
This idea of banking law means that it is a set of rules about how banks and credit institutions can work together legally. In this way, a “bank” is not only defined by the way it is set up but also by the business it does.
2. Banking law as an idea that works
The main idea behind banking law is where economic activity takes place. This is very different from how hard it can be to tell the difference between banks and companies that only do business like banks. As a result, banking law, which is part of banking and capital markets law, includes the whole set of laws that govern the banking industry.
- the creation of money
- the circulation
- and the destruction of money.
This means any legal matter that has something to do with money. This also includes “alternative payment and remittance systems.” More and more, big cross-border transactions are being handled by these kinds of systems, without a license or supervision from the government. Hawala banking is the most well-known example. A way that works outside of the usual banking system.
Payment traffic law is probably the most concrete example of how this works in real life. This includes all business deals between a customer and his bank, as well as those with other companies that offer payment services.
For example, this includes disagreements about a client’s bank account, especially when:
- bank transfers go wrong or
- debit orders are wrongly debited
- Fees are wrongly charged for account management or other financial transactions
Cross-border problems, like transfers to countries outside the SEPA area, are also taken into account.
Public and private banking law
Public banking law and private banking law are the two types of banking law.
Public banking law
The term “public banking law” refers to jobs where the government is involved and has a lot of say.
One of the most important parts of public banking law is the law about how the government looks after banks.
Its main job is to make sure that all of the rules and regulations of banking and capital markets law are being followed.
The goals that have been set are:
- set up and control the banking business
- Protect free trade from bad things that could happen in the banking system.
- to handle market participants so that they behave in a certain way.
- That is right from both an economic and a business point of view.
A key part of public banking law is also the area of monetary law.
Laws about banking for private people
Private banking law is a set of rules that governs the legal relationships between banks, their customers, and other banks in the normal course of their business.
A key part of private banking law is in the German Civil Code (BGB). When banks do business with corporate clients, they must always follow the special rules of the German Commercial Code (HGB) and the basic business rules of the banking industry.
You can also use the idea of private banking law for securities and capital market law.
According to the rules of private banking law, there are three main areas of banking activity: lending business, account and payment transactions, and last but not least, capital market business.
Cashless payment transactions
Banks also help their customers make payments that don’t involve cash or checks. Payments can be made through a current account by transfer, cheque, bill of exchange, direct debit, debit card, ec card, or direct debit.
In the past few years, online Banking and Capital Markets Law new ways to pay like PayPal have become more popular. In banking law, claims for damages must be looked at when a card is lost, skimmed (secretly read at an ATM in the card reader), or phished (fraud by means of false e-mail, website or SMS).
When is the bank responsible if something goes wrong with a transfer, a direct debit, a credit card transaction, or a cheque or bill of exchange? Most of the time, it depends on the situation.
Our lawyers will be happy to meet with you for free to talk about your case.
The basics of capital market law
Capital market law is now a separate area of the law. It came about when Banking and Capital Markets Law, corporate law, and stock exchange law all came together. But there isn’t a single set of rules for capital market law right now.
In this case, the term “capital market” refers to all of the markets where people buy and sell investments with money. This includes all transactions that raise or make money available over the medium or long term to pay for the creation of physical capital.
There are some overlaps between capital market law and Banking and Capital Markets Law because banks and savings banks act as providers and middlemen between capital providers and capital borrowers.
Transactions are settled through traditional stock exchanges, commodity and futures exchanges, and other trading venues. These aren’t always called stock exchanges, even though they trade in capital investments.
For private investors, small and medium-sized businesses, family offices, institutional investors, and municipalities, there is a growing need for advice in the following areas of capital market law:
- Investment fraud
- Protection for investors
- Stock funds
- Funds for containers
- Energy funds
- Aircraft fund
- Loans in foreign currency
- Grey market for capital
- The right to share in the profits
- Closed-end funds
- Hotels and vacation spots
- hedge funds
- The law about investments
- Interests being represented
- Real estate funds
- Bonds that anyone can buy
- The law about investments
- Money for life insurance
- Renting out money
- Media funds
- Loan to someone else
- open-end fund
- Fund for private equity
- Partiar loans
There are important legal issues in capital market law that also come up in business and company law.
Capital market law: What the legal field is all about
Capital market law is about how securities can be made and traded. This includes stocks, bonds, mortgage bonds, and debentures. It also includes promissory notes, derivatives, option rights, and other securities that can be bought and sold and are used as investments.
There are a lot of different ways to get money. Some types of funds are:
- Ship funds
- Real estate funds
- Media funds
- Money market funds
- Fund of funds
- Equity funds
- Bond funds
Investors can buy investment certificates in the form of units if they want to.
Small and medium-sized businesses should also get specific advice if an investment transaction fails or if there are risks with how assets are managed and who is responsible for them.
Capital market law can be complicated when it comes to how corporate financing, like mezzanine financing, is set up.
Capital markets in the EU
Due to the international nature of capital markets, there is a need to harmonize the relevant laws in many ways, but not all of them. This is so that:
- To ensure equal opportunities for all market participants.
- To use the full potential of national financial markets in a better way.
About 80% of the laws in Germany that have to do with Banking and Capital Markets Law and the stock market are based on this goal.
The Securities Trading Act (WpHG) is the most important piece of capital market law in Germany. Other important laws include the Stock Exchange Act (BorsG), Investment Act (InvG), Securities Prospectus Liability Act (WpPG), Payment Services Supervision Act (ZAG), and Securities Acquisition and Takeover Act (WpÜG).
Capital market regulation
The goal of capital market regulation is to make sure that the market runs smoothly and to protect investors. The two goals don’t contradict each other; instead, they help each other. Because investor protection creates a foundation of trust, the capital market would not work very well without it.
In order to protect investors, the Herfurtner law firm publishes new warnings for investors on a regular basis.
A look at securities and capital markets law
In banking and capital markets law, securities and capital markets law cover a wide range of things.
This includes, for example:
- Getting ready for a company’s first public offering (IPO).
- The writing of terms and conditions for bonds
- Representing the interests of investors who have been hurt, such as when banks and savings banks have given them bad advice.
- Getting claims paid when there has been investment fraud.
Capital market law – lawyer
The most common type of investment fund is an open-ended fund. The investment company can give out as many fund units as it wants. You can already buy these with a relatively small amount of money and then sell them again at the current redemption price.
This means that investments can be spread out among different companies and investments with a manageable amount of work. In this way, you can also limit the risk as a whole.
So, a team of experienced specialists who run a fund must follow clear rules about how to invest.
Closed-end funds are created to get money for big projects. Examples are real estate, media or tangible assets. Most of the time, investors have to put in a fairly large amount as a minimum.
When the fund is first set up, the specific investment goals and the expected return on capital are laid out. Once all of the units have been sold, the fund is usually closed for ten to twenty years.
The units are redeemed when the fund is dissolved, such as when the investment property is sold. You can’t get your money back earlier or can only do so at a big loss.
Compensation in case of incorrect advice – lawyer helps with problems with the bank
Along with the things that have already been mentioned, money laundering and data protection are also very important in banking and capital markets law. A lawyer also needs to know the tax laws that apply to him in order to give his clients the best advice possible. In many cases, this also has to do with tax law for investments.
Banking and Capital Markets Law say that banks and savings banks have to do certain things when they give advice to clients. When investors make investments, they naturally take on a lot of risks. There must be information about how commissions are paid and how refunds are made.
For example, people can ask for money back if they were given bad advice about foreign currency loans. When insider trading or rigging prices happens, criminal law says that Banking and Capital Markets Law can be used to punish the people involved.
Another example is when someone wants to sue for damages because they were given bad advice about breaking the law when they sold “junk real estate.”
Investor protection is a part of banking and capital markets law. Its goal is to protect investors from these risks or limit their right to sue for damages. Please also look at our current list of things investors should be aware of.
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