Corporate Governance in Crisis Mode: An Overview of the Main Legal Parameters of the Management of a Credit Institution

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The crisis currently caused by the SARS-CoV-2 virus or coronavirus (COVID-19)-pandemic is hitting the German and global economy unexpectedly and with unprecedented severity. In contrast to the financial crisis of 2008/2009, the banking industry is neither the trigger nor the culprit, nor is it at the centre of the rescue measures launched by the German Federal States, the German Federal Government and the EU. Rather, the credit institutions are “first responders” in this crisis, providing the battered economy with liquidity under the backing of the KfW (a German state-owned development bank) at short notice.

But what about the credit institutions themselves? In the aftermath of the financial crisis, numerous new regulations were introduced, which made it clear that credit institutions must exercise the utmost caution. Now, crisis management requires them to act quickly and efficiently. But the credit institutions themselves must also safeguard their balance sheet and ensure ongoing business activities during the crisis. Further, they need to take care not to get into difficulties due to falling share prices and a nationwide fluctuating economy.

This article provides an overview of the duties to which the managers of a credit institution are subject in view of the current new challenges, taking into account the reactions already received from the regulatory supervisory authorities, the European Central Bank (ECB) and the German Federal Financial Supervisory Authority (BaFin).