Legal Framework

Legal Framework

Legal Framework

NRW.BANK has a full bank licence. It has the legal status of a public law bank.

“Verständigung I & II” Agreements

The “Verständigung I” agreement reached between the EU Commission and the Federal Government on July 17, 2001 provides for the legal status of the public-law banks to remain unchanged. Under this agreement, the state guarantees - institutional liability and guarantor liability - were to be abolished after a transitional phase ending on July 18, 2005. The liabilities were then to be modified in a way which would make them similar to the relationship between a private shareholder and a private-law company.

 

In a subsequent agreement, the so-called “Verständigung II”, dated March 1, 2002, the European Commission and the Federal Government defined special regulations for legally independent development banks engaging in the competition-neutral infrastructure and development business. Under this agreement, institutional liability and guarantor liability will continue to apply to this type of bank, which means that they continue to benefit from excellent funding conditions.

 

These advantages may be used exclusively for economic and structural development tasks. These tasks were defined in a law with effect from March 31, 2004.

 

To fulfil these formal requirements for qualification as a “Verständigung II Bank”, the North Rhine-Westphalian Parliament adopted the “Act on the Reorganisation of Landesbank Nordrhein-Westfalen into the Development Bank of the State of North Rhine-Westphalia“ (“Reorganisation Act“) in March 2004 in a broad political consensus, giving NRW.BANK the official status of a development bank that will continue to benefit from institutional liability and guarantor liability.
 

Institutional liability (Anstaltslast) and guarantor liability (Gewährträgerhaftung)

Institutional liability is the obligation of the public-law guarantor to secure the financial basis of a bank, to keep it functional and cover any potential financial gaps. Insolvency is virtually impossible. Institutional liability is limited neither in terms of the amount nor in terms of time. It is regarded as a general principle of law.

 

Guarantor liability is a direct obligation, which is based on a law or ordinance, of a public-law institution (state, municipality, other corporation under public law) towards creditors of a public-law bank for all liabilities of that bank. It obliges the guarantor to step in in case of insolvency or liquidation of the bank. It is not a general principle of law and requires an express legal basis.

Funding

According to Section 4 (3) of the Reorganisation Act, NRW.BANK benefits from an explicit funding guarantee, on the basis of which issues by NRW.BANK have a solvency weighting of “zero”. This means that banks who are creditors of NRW.BANK are no longer required to back their claims on NRW.BANK with liable capital. NRW.BANK will pass the resulting funding advantages on to the recipients of development funds in North Rhine-Westphalia.

Further Information

U.S. Patriot Act Certification

Conflicts of Interest Policy

Information on the Treatment of Conflicts of Interest in Connection with the Business Activities of the Municipal Financing Unit of NRW.BANK (Valid as of November 2007, Last Update in January 2018)

NRW.BANK is a credit institution in the legal form of an institution under public law and has its Head Office in Düsseldorf and Münster. NRW.BANK has been mandated by the government to support the federal state and its municipal corporations in meeting their public tasks, particularly in the fields of structural, economic, social and housing policy and carry out and administer promotional measures in line with the EU State aid rules. It acts in a competition-neutral manner and is governed by the principle of sustainability.

 

NRW.BANK holds a full banking licence and acts as a competition-neutral promotional bank. As a financial institution, NRW.BANK is subject to the banking supervisory regulations of the European Central Bank (ECB).

 

NRW.BANK aims to avoid conflicts of interest which may arise in the context of its mission. The Bank has taken a number of preventive measures to achieve this aim. The Managing Board of NRW.BANK is responsible for the implementation of the corporate governance regulations (company organisation, company policy, company strategy and compensation policy), which prevent conflicts of interest, and monitors them regularly.

 

Nevertheless it cannot be ruled out that conflicts of interest may arise in isolated cases. In such cases, NRW.BANK handles these conflicts professionally and strictly in line with the interests of its customers. NRW.BANK ensures that the disclosure of conflicts of interest to customers is made only when the organizational and administrative arrangements established to prevent or manage its conflicts of interest are insufficient.. Potential conflicts of interest that cannot be avoided in spite of comprehensive control measures will be disclosed to the affected customers before any contracts are concluded or any consulting services are provided by the Bank.

 

In accordance with the legal and supervisory regulations (German Securities Trading Act (WpHG) and Guideline on Markets for Financial Instruments in Europe (MiFID II), the Bank provides the following detailed information on the extensive measures it has taken to handle such conflicts of interest.

 

Conflicts of interest may arise between NRW.BANK, other companies of NRW.BANK, the management, the employees of NRW.BANK or other related parties of NRW.BANK and the customers of NRW.BANK or between the interests of NRW.BANK’s customers.

 

NRW.BANK ensures that potential conflicts of interest are identified and managed in an appropriate and efficient manner. The aim is to prevent conflicts of interest from arising in the first place.

 

However, conflicts of interest cannot be ruled out entirely and may arise, in particular, in the provision of securities-related services

  • when providing investment advice in the context of municipal financial and interest rate management;
  • when receiving or granting gifts and gratuities from or to third parties;
  • when customers grant gifts and gratuities to employees;
  • from business relationships of NRW.BANK to issuers of financial instruments, for example when lending relationships exist or the Bank participates in issues or cooperations;
  • when obtaining information that is not publicly known;
  • from personal relationships of the employees, the management or parties related to them to other companies or persons;
  • from the work of these persons on supervisory or advisory boards of other companies or
  • when procuring services of other companies of the NRW.BANK Group which pursue their own business policy interests.
 

As a securities service provider, NRW.BANK is obliged to check, as a minimum, the following conflict situations:

  • Financial advantage: “if and to what extent the securities service provider or one of the persons listed may achieve a financial advantage or avoid (reduce) a financial loss at the expense of the customer”;
  • Conflicting interest: “if and to what extent the securities service provider or one of the persons listed could have an interest in the result of a service provided to the customer that is inconsistent with the customer’s interest in this result”;
  • Incentives: “if and to what extent the securities service provider or one of the persons listed could have a financial or other incentive to place the interests of another customer or another group of customers above the interest of the customer”;
  • Competition: “if and to what extent the securities service provider or one of the persons listed could engage in the same business as the customer”;
  • Incentives from third parties: “if and to what extent the securities service provider or one of the persons listed could receive or could in future receive gifts or gratuities as defined in Section 70 (2) WpHG”.
 

NRW.BANK expects its employees to act with integrity and diligence; to demonstrate legally compliant and professional behaviour; to adhere to market standards and, in particular, to act in accordance with the customers’ best interest at all times. The employees of NRW.BANK are required to abide by certain standards and duties of conduct in accordance with the Bank’s mission statement. Moreover, NRW.BANK has committed itself to transparent and responsible management: By adopting its own Public Corporate Governance Code, the Bank has voluntarily committed itself to good corporate governance.

 

The integrity and quality of NRW.BANK is evident, in its professional approach to potential conflicts of interest. As such, NRW.BANK has established an independent compliance function under the direct responsibility of the management. The compliance function is, among other things, responsible for regularly monitoring the avoidance, the identification and the management of conflicts of interest by the business units.

 

The non-exhaustive list below contains the key measures and methods implemented by NRW.BANK to avoid and resolve actual and potential conflicts of interest:

  • Implementation of organisational processes and instructions to safeguard customer interest in the provision of investment advice in the context of municipal financial and interest rate management;
  • existence of a procedure for the assessment of all relevant risks as well as definition of the target market for the approval of financial instruments and all major adjustments of existing financial instruments before the latter a marketed or sold to customers; regular review of the offered or distributed financial instruments, in particular with respect to their suitability for the defined target market;
  • existence of clearly defined principles for the provision of investment advice in the context of municipal financial and interest rate management which ensure that services are provided at market terms and all customers are treated equally;
  • provision of clear, comprehensive and transparent information by NRW.BANK in order to ensure proper and professional customer service;
  • promotion of good corporate governance at the Bank by the Supervisory Board and the management of NRW.BANK;
  • regulations governing the acceptance and granting of gifts and gratuities and their disclosure;
  • establishment of information barriers to protect confidential information by way of a separation of responsibilities and/or by way of physical separation of individual business units;
  • maintenance of an insider list and a watch list; these measures serve to monitor the flow of sensitive information (insider information) and to avoid the potential misuse of such information;
  • regulations governing personal transactions of employees of NRW.BANK (employee transactions) and disclosure to the compliance function of transactions of employees who may be faced with conflicts of interest in the context of their business activity;
  • regular comprehensive training of the employees of NRW.BANK.
 

NRW.BANK will disclose unavoidable conflicts of interest to the respective customer prior to providing advice or closing a transaction. In case of any such disclosure, sufficient details will be communicated to private customers, professional customers and eligible counterparties.

 

More detailed information about the treatment of conflicts of interest at NRW.BANK is available on request.

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