Road to CRD 6 – the German version of red tape for M&A in the financial services sector

Notification and approval requirements in relation to the acquisition and divesture of a material holding in any (financial or non-financial) entity are implemented in new Sec. 2h KWG (acquisition – approval requirement) and Sec. 24(1f) sent. 4, (3a) no. 9 KWG (divesture – notification requirement).

Pursuant to Sec. 2h(1) and (2) KWG, CRR credit institutions and licensed financial holding companies are required to notify their competent authority (i.e. either ECB or BaFin) in advance about their intention to acquire a ‘material holding’ in another entity. This acquisition is subject to the competent authority’s approval.

The term ‘material holding’ is defined in new Sec. 1(9b) KWG and means a direct or indirect holding in another entity that equals 15% or more of the acquirer’s own eligible own funds (eigene anrechenbare Eigenmittel), i.e. the sum of its CET1, AT1 and Tier 2 capital, at entity level or at the consolidated level of the group respectively. In this respect, it is unclear on what basis the value of the holding is to be determined, such as based on the purchase price, the book value at the seller or the (forecast) book value at the acquirer.

In a group context, the threshold can be exceeded at both the individual level of the acquirer and the consolidated level of the parent institution or licensed financial holding company – this means that both the direct and the indirect acquirer can be subject to the notification requirement in parallel. If the target of the transaction is a credit institution, the new approval requirement will overlap with the QHP under Sec. 2c KWG. Both filings will have to be made in parallel (see Sec. 2c(4) KWG, Sec. 2h(5) KWG).

The notification requirement is triggered by the ‘intention’ to acquire the material holding. As to the question of when an intention can be assumed, reference can be made to the interpretation of Section 2c KWG, which also focuses on the ‘intention’ to acquire a qualifying holding.

The notification triggers a suitability assessment by the competent authority based on a limited set of criteria (including the acquirer’s ability to comply with prudential requirements and AML/CTF risks in connection with the transaction), which makes sense given that the acquirer is a licensed institution (Sec. 2h(12) KWG). 

The implementation of the intra-group exemption was eagerly awaited. And the result is confusing. While the wording of Sec. 2h(6) KWG copies the CRD 6 text and says that the competent authority shall not be required to carry out an assessment in the case of intra-group transactions, thereby suggesting that there may be intra-group transactions where an assessment can be carried out, the legislative materials seem to imply that an assessment requirement does not exist. The legislator should clarify this question as part of the further legislative process.

The information to be provided to the competent authority for the purposes of the assessment will be determined, in a first step, by the competent authority (i.e. the ECB or BaFin), which is required by law to publish a list of the relevant information on its website (Sec. 2h(1) sent. 5 KWG). This will be a challenge in the early stages. While the notification requirement will come into force on 11 January 2026, EBA is tasked to submit a draft RTS on information, process and assessment methodology only by 10 July 2026 (Art. 27b(7) CRD) – there will therefore be a period without uniform requirements. 

The procedure is similar to the well-known qualifying holding procedure under Sec. 2c KWG. The assessment period is 60 business days, calculated upon completeness of the notification, is extendable to up to 90 business days, and the procedure ends with an implied approval mechanism (Sec. 2h(4), (7)-(10), (13) and (14) KWG).

Finally, in case of an intended divesture of a material holding, a simple notification is required, indicating the size of the holding concerned (Sec. 24(1f) sent. 4 KWG for CRR credit institutions, and Sec. 24(3a) no. 9 KWG for (mixed) financial holding companies). This requirement exists irrespective of whether it is a direct or an indirect holding and irrespective of whether an ‘acquisition’ procedure is triggered for the proposed acquirer.

The violation of the notification requirement is subject to an administrative fine, both in the case of an acquisition and in the case of a divesture of a material holding (Sec. 56(2) KWG). As set out in the legislative materials, the acquisition of a material holding without approval does not constitute an additional administrative offence.

Notification requirements in relation to a ‘material transfer’ of assets and liabilities are implemented in new Sec. 24(1f) sent. 1-3 KWG (for CRR credit institutions) and Sec. 24(3a) no. 8 KWG ((mixed) financial holding companies). No approval is required. Both the transferor and the transferee – and potentially also other entities involved in the transaction – may be subject to the notification requirement where they are CRR credit institutions or (mixed) financial holding companies. There is no intra-group exemption.

The term ‘material transfer’ is defined in Sec. 1(9a) KWG and means a transfer of assets or liabilities by sale or any other type of transaction that equals at least 10% of the entity’s total assets or liabilities respectively (or at least 15% in the case of an intra-group transaction). For purposes of calculating the threshold, certain transfers of assets are excluded, including transfers of non-performing assets or assets that are earmarked for securitisations. 

According to the Draft Act, a ‘planned’ material transfer must be notified ‘in advance without delay’. The wording is unfortunate, since the question arises as to whether there is a difference between a ‘planned’ and an ‘intended’ transfer. 

The Draft Act does not specify any information to be provided to the competent authority together with the notification. The aforementioned draft RTS, which EBA is tasked to submit by 10 July 2026, should contain information on this.

The violation of the notification requirement is subject to a fine (Sec. 56(2) KWG). 

Notification and approval requirements for mergers and divisions are implemented in new Sec. 2i KWG. The terms ‘merger’ and ‘division’ are defined in Sec. 1(9c) and (9d) KWG in close alignment to the Mobility Directive (EU) 2019/2121, but are broader in scope, as domestic mergers and divisions are covered as well.

Pursuant to Sec. 2i(1) KWG, CRR credit institutions and (mixed) financial holding companies – the legislator probably unintentionally failed to include the restriction to licensed financial holding companies (again) – are required to notify a planned merger or division to the competent authority ‘after the adoption of the merger or division plan’ and in advance of the completion of the planned operation. The ‘competent authority’ is the supervisory authority which will be responsible for supervising the entity resulting from such operation. In the case of a division, it is the supervisory authority in charge of the supervision of the entity carrying out the division. It is prohibited to close the merger or division before approval of the competent authority.

As in the case of the acquisition of a material holding, the information to be provided to the competent authority for the purposes of the assessment of the merger or division will be determined, in a first step, by the competent authority (i.e. the ECB or BaFin), which is required by law to publish a list of the relevant information on its website (Sec. 2i(1) sent. 3 KWG). The aforementioned draft RTS, which EBA is tasked to submit by 10 July 2026, will specify this information further.

Under the new regime, mergers and divisions will effectively trigger an approval requirement. The notification triggers a suitability assessment by the competent authority of the parties involved in the merger or division based on a broad set of criteria (including the reputation of parties involved, their financial soundness, their ability to comply with prudential requirements, an assessment of whether the implementation plan of the merger or division is realistic and sound from a prudential perspective and AML/CTF risks in connection with the operation). 

Sec. 2i(2) KWG provides for an intra-group exemption. The competent authority is not required to carry out the assessment in the case of intra-group mergers to which only CRR credit institutions or (mixed) financial holding companies are parties. This is in line with CRD 6, whose wording suggests that intra-group mergers between or with other entities of the same group, for example, a CRR credit institution and an unregulated entity, cannot benefit from the exemption. Notably, as set out in CRD 6, divisions cannot benefit from the intra-group exemption. This is likely due to the fact that the competent authority of the dividing company wants to ensure that the remaining company retains sufficient substance.

The complete submission of a notification triggers an assessment period of 60 business days. However, this only applies in the case of mergers or divisions between CRR credit institutions and (mixed) financial holding companies of the same group (Sec. 2i(4) sent. 2 KWG) . For mergers or divisions outside of a group, there is no assessment period or other time limit, potentially resulting in considerable hurdles for such transaction. This point should be rectified in the legislative procedure..

The violation of the notification requirement is subject to an administrative fine. The same applies to a violation of the prohibition to close before obtaining approval, which will also become subject to an administrative fine (Sec. 56(2) KWG).