With lawyers qualified in more than five jurisdictions, PwC Legal’s more than 20-lawyer-strong Banking, Finance and Capital Markets (BFCM) team in Germany handles all aspects of national and international banking law. It serves global and domestic banks, financial institutions (including crypto-broker and crypto custodians), insurance firms, German and foreign investment funds (including private credit funds), payment services providers, real estate developers, alternative lenders and lending platforms, FinTechs as well as EU authorities.
The PwC Legal BFCM team in Germany is experienced in handling complex financing transactions and regulatory projects, specifically in: covering multiple jurisdictions across diverse practice groups and areas of the law, supported by multidisciplinary expertise from wider PwC and PwC Legal teams; applying commercial know-how and understanding; and delivering pragmatic client-centric legal and non-legal focused solutions to clients’ problems and commercial objectives within a short timeframe.
The opportunities for clients to seize in the Eurozone at present in terms of the region’s regulatory, supervisory and monetary policy framework include:
• All aspects of German and pan-EU financial services regulatory reforms from conducts of business to prudential regulatory matters
• Cryptoassets (Regulation on Markets in Cryptoassets (MiCA) and Regulation on Pilot Regime for DLT Infrastructure(PDMIR)
• Introduction of the pan-EU credit servicing regulatory framework
• Digital and non-digital operational resilience in light of the EU’s Digital Operational Resilience Act (DORA) as well as the EU Directive on Resilience of Critical Infrastructure and Entities
• Compliance with the intermediate parent undertaking (IPU) requirements and licensing requirements and general Banking Union supervisory priorities
• Reforms and opportunities for payment service providers
The digitalisation of financial services is playing an increasingly important role in PwC Legal’s advice to clients, as clients are increasingly seeking legal and regulatory advice at the interface between digital customer processes, technology and banking and insurance law. For example, PwC Legal’s BFCM team advises numerous FinTech companies on the regulatory and contractual framework conditions of their activities.
A major focus of practice in 2021 was and continues to be in the area of legal tech. The team worked on numerous projects to further digitalise its client work and internal processes. The team is breaking new ground in terms of harnessing LegalTech as well as process and project management techniques to improve quality and efficiency in the way it handles projects. For example, the team uses its bespoke client collaboration platform “Engagement Center”, an interactive online portal that is tailored to each case and can be used to manage documents, assign and track tasks and create process-based workflows across regulatory projects and for ongoing compliance work. The Engagement Center is supplemented by a growing range of legal and RegTech solutions on offer to clients from the “PwC Store”.
The team has also developed proprietary, client-facing digitised solutions – such as an anti-money laundering tool, a regulatory horizon-scanning and risk-mapping tool that is backed by a knowledge repository, and a data lake of nine million and counting set of enforcement fines and sanctions issued by more than 450+ regulatory and supervisory authorities.
Dr Michael Huertas’s Team
The German Banking, Insurance and Investment Law Sector Group was reorganised in July 2021, with the hire of Partner Dr Michael Huertas taking over as the Sector Group Head, which was previously held by Joerg Wulfken. This new team setup of the BFCM, focusing on transactional matters, and the Financial Institutions Regulatory Europe (FIRE) focusing on regulatory advisory, includes a deepening of the relationships of PwC Legal with the ECB and EIOPA in Frankfurt, the EBA and ESMA in Paris, and the European Commission in Brussels for the benefit of clients as well as securing representations from those authorities in respect of strategic EU projects.
Dr Huertas noted: “Our lawyers’ professional multidisciplinary experience, their multijurisdictional qualifications coupled with an unparalleled network spanning across the EU-27 and global markets, means that our lawyers in Germany can help clients in navigating challenges and seizing opportunities – regardless of where they plan to do business.”
Over the past months, the BFCM team has, under the leadership of Dr Huertas, also launched PwC Legal’s EU Regulatory Compliance Operations, Risk and Engagement (EU RegCORE) as a thought leadership centre, which provides an integrated platform to bundle knowledge to assist clients and other teams – including across PwC and PwC Legal network firms – on complex as well as strategic questions related to Banking Union, Capital Markets Union, Brexit as well as Eurozone-specific regulation and supervision and monetary policy operations.
Dr Huertas noted: “Some of our lawyers have more than 15 years’ experience in their specialist area, as well as in-house experience gained at major financial services firms and regulatory authorities. In addition to my time at the European Central Bank assisting in the setup of the Single Supervisory Mechanism and working on other Banking Union and Capital Markets Union projects – such as the Asset-Backed Securities (ABS) Purchase Programme and the EU Securitisation Regulation in its conception, drafting and implementation – many of the other lawyers in the team have either worked or been on secondment in-house at various financial services clients as well as public authorities.”
The Six Pillars
PwC Legal’s BFCM Team forms a core component of the Banking, Insurance and Investment Sector Group led by Dr Huertas. Its transactional practice is based on the following six pillars in its support to clients as well as supporting other teams of PwC Legal and PwC more broadly (whether in Germany, across the EU or further afield):
• structuring and documentation of structured finance issuance – in particular securitisations (true sale and synthetic issuances, including on an STS basis) – and structured note issuances as well as repack transactions;
• structuring and documentation of debt capital market issuances, EMTN programmes and regulatory capital instruments;
• derivatives – ISDA (English, Irish and US law) and under the German Master Agreement – transactions as well as securities financing transactions – GMRA for repo and GMSLA for securities lending (both English law) as well as under the German Master Agreement for Financial Market Transactions;
• complex lending transactions (LMA and German law) as either lender or borrower/hedging counsel (in particular acting for non-financial corporates);
• advice on drafting and negotiation of general trading terms and conditions (in particular prime-brokerage and prime-custody documentation) as well as regulatory and public reporting requirements; and
• advising institutional investors in relation to their legal, regulatory and ESG due-diligence related to various types of financial market transactions and asset classes as well as necessary notification processes with regulatory authorities.
Moreover, PwC Legal's FIRE Team is embedded in the Banking, Insurance and Investment Sector Group. The FIRE team has extensive knowledge of the regulatory environment and risk management, compliance and supervisory culture at global, EU and national level. They not only advise in the context of transactions, but also accompany clients on a regular (sometimes permanent) basis, and thus support them in complying with their regulatory requirements on “build the business” as well as “run the business” matters.
The FIRE Team’s practice focus is based on providing legal and regulatory support to clients as well as other PwC Legal and PwC teams with respect to their clients’ pan-EU, German and other multijurisdictional compliance obligations and supervisory expectations.
A key strength is the depth of expertise on all aspects of the authorisation process for different types of financial services firms looking to set up or expand their regulatory footprint in Germany or further throughout the EU-27. Through the unparalleled expertise of senior lawyers, such as Maxi Wilkowski (Senior Manager) and Dr Joerg Schwerdtfeger (Senior Manager) the team is able to provide extensive advice to our clients. Maxi Wilkowski, who is a German qualified lawyer and has been working for PwC Legal in the Banking, Insurance and Investment Law Sector Group since 2006, mainly focuses on regulatory aspects, as licencing and notification procedures with the German or European regulators, reporting requirements, risk management and compliance topics. Dr Joerg Schwerdtfeger, who is also a German-qualified lawyer, joined PwC Banking, Insurance and Investment Law Sector Group in 1999. He is an expert in Cash Management; payment services, factoring and leasing. He is responsible for leading multi-jurisdictional projects and is very well experienced in structured finance and lending.
Within PwC, PwC Legal operates on a cross-team and cross-disciplinary basis in order to offer clients a 360-degree advisory approach, including advice that extends “beyond law”. This includes regulatory and tax advice, as well as supporting clients with expertise from PwC’s advisory and assurance experts. In being able to provide full-scope and multijurisdictional legal expertise from Germany, coupled with the multidisciplinary expertise from PwC’s unparalleled breadth, PwC Legal stands firmly apart from other international law firms, which do not have the possibility of offering a cross line of services (X-LoS) cooperation within one brand.
Since Dr Huertas joined PwC Legal, the FIRE team has won more than 45 new mandates, in addition to supporting X-LoS and cross-border work with other PwC and PwC Legal teams in neighbouring European countries, the UK, the US, Canada, Hong Kong and Singapore. Of these new mandates, approximately 80% are cross-territory, in which the team in Germany cooperates with at least two or more foreign jurisdictions. These mandates have also led to new assignments for other practice areas within PwC and PwC Legal, most notably tax and transfer pricing, dispute resolution, employment, IP & IT (data protection). These new instructions have benefited PwC and PwC Teams in respective offices in Germany, Paris, London, Dublin, New York, Vienna and various other offices in Central and Eastern Europe as well as teams in APAC jurisdictions.
Other Key Differentiators
Dr Huertas noted: “We continue to support clients in navigating challenges and seizing opportunities from the increasing pace and depth of Europeanisation of financial services rulemaking and supervisory engagement driven by EU-led as opposed to national authorities. This extends well beyond Banking Union and/or Capital Markets Union reform workstreams to all corners of financial markets in which the EU is looking to ensure that the Single Rulebook for financial services is increasingly built upon a single supervisory culture, and where national options, discretions and other divergences in law, market practice and systems are streamlined so as to eliminate fragmentation and drive harmonisation of the EU’s Single Market for financial services. During 2022 – and well through to 2024 – this is being achieved via legislative and regulatory policymaking via various rulemaking instruments along with wide-reaching improvements to institutional mandates, resources and focus areas of the EU-authorities as well as their interaction with national authorities.”
Recent Selected Matters
PwC Legal’s FIRE Team provided comprehensive advice on a cryptoasset service provider client’s German market entry, including strategic advice taking into account activities in other jurisdictions, preparation of a licence application and coordination with the BaFin to obtain clearances under the BaFin’s new regulatory rules governing the offering of cryptoasset services as well as electronic securities settled on the blockchain. Equally, the team provided advice to the client on how to forward-plan for the introduction of the EU’s Markets in Cryptoassets Regulation (MiCA) as well as the Digital Operational Resilience Act (DORA) and how this differs (conceptually as well as in core compliance obligations) from the UK’s regime under the Money Laundering Regulations 2017 and other rules and supervisory expectations existing at the time as set by the UK’s FCA. Given the divergences between the UK’s rules from that of the EU along with German specifics, the FIRE Team was able to provide the client with pragmatic advice on how to meet its obligations in obtaining a licence, as well as its post-authorisation regulatory footprint across all of its operations, including challenges raised by the EU, UK and US interpretations of FATF’s “travel rule”.
In another project – for another leading EU-headquartered cryptoasset service provider – the FIRE Team assisted the client with all regulatory and strategic issues relating to the client's expansion plans, in particular the territorial expansion and extension of its product range and the optimisation of its business model. The team, working together with PwC Ireland’s Advisory and Corporate Secretarial Team, also advised on the establishment of a "Designated Activity Company" regulated under Irish law and its application to the Central Bank of Ireland for registration as a virtual asset service provider. Furthermore, the client was advised on the establishment of a "talent hub" in Dublin from an employment and tax perspective. Following delivery of the relevant phases of the project, the team has been tasked with ongoing instructions to help the client with its Irish operations.
In its broader reaching work, the FIRE Team continues to advise a number of traditional financial service firms and regulated stock exchanges with their entry into cryptoasset markets, as well as native digital asset firms and FinTech with regard to a number of different business models. Equally, the FIRE Team is actively involved in efforts of industry associations and participates in many working groups to amend industry standard documentation used for derivatives, securities lending and repo transactions to make these fit for purpose for use with digital assets (whether under MiFID i.e., digital asset financial instruments) or MiCA (as cryptoassets).
Last, but not least, PwC Legal’s BFCM Team recently assisted a CEE-domiciled client with exposures to the conflict in Ukraine in all aspects of the economic and legal structuring (in relation to EU and Luxembourg law) of a non-STS synthetic securitisation private placement issuance from Luxembourg backed by consumer credit agreements (under local law). The project was run by PwC Legal and PwC Germany as a X-LoS project, in order to offer the client the greatest possible added value and the desired expertise, including the depth of CEE country expertise from PwC Legal.
A Framework for Securitisation
Dr Huertas added: “The core of our advice is EU and UK law, specifically the Securitisation Regulation – both in its EU and UK versions – establishing a specific framework for simple, transparent and standardised – so-called STS – securitisations, as well as the supervisory practice shaped by ESMA and the FCA. With regard to the EU side and ESMA's supervisory practice, our advisory work to date has focused on the design and implementation of the governance, risk and compliance guidelines and procedures provided for by the EU Securitisation Regulation, as well as the implementation of an operational framework for the activity as an EU Securitisation Repository. In parallel, we advised on the regulatory framework in the UK and the differences in regulatory practice between ESMA and the FCA with regard to the development of the UK securitisation market post-Brexit. Our cross-jurisdictional competences, especially with regard to German and English law, as well as our proven expertise in European law, were essential prerequisites for the design of the licence applications and the implementation of the related regulatory issues.
“The team’s cross-jurisdictional capabilities under German and English law as well its proven European expertise remain fundamental to the structuring and operationalisation of the client’s EU and UK business operations. What we believe sets us apart from our peers on this project and comparable instructions is that we have successfully helped European DataWarehouse build out this new regulated part of its business, which supports the EU’s and UK’s real economy. We have done so in a truly integrated multi-jurisdictional fashion – providing specialist advice on the law and supervisory priorities.”