Country Case - Germany

Outline

• Debt Management Policy

• The Frankfurt Stock Exchange (FSE)

• Requirements for trading on the regulated

market

• Requirements for trading on the secondary

market

• DAX 30

• Analysis

• OUTLOOK

▪ The Federal Republic of Germany – Finance Agency is

the central service provider for the Federal Republic of

Germany's borrowing and debt management. Thus, it is

wholly owned by the Federal Republic of Germany,

represented by the Federal Ministry of Finance.

▪ Due to a debt-to-GDP ratio above the 60% threshold

fixed in the Maastricht Treaty, caused primarily by the

heavy payments to reconstruct former communist

Eastern Germany after reunification, the German

government decided to introduce a balanced budget

amendment called "debt brake" . In 2009, it was

approved with a two-thirds majority both by the

Bundestag and the Bundesrat.

▪ With the debt brake, the structural

federal deficit, and not the cyclical

deficit, must not exceed 0.35% of the

GDP starting 2016. Structural deficits

will be completely forbidden starting

2020. The only exceptions are natural

disasters or strong recessions.

▪ Germany has achieved budget surpluses for the

complete country starting from 2012 and was

able to reduce its debt-to-GDP ratio from 82.5%

to 74.8%. In 2014, Germany achieved a budget

surplus of 18.0 billion euros or 0.6% of GDP. This

means that Germany's debt is not growing any

more, but is actually shrinking.

The Frankfurt Stock Exchange (FSE) is

the main stock exchange in Germany

and it is divided into two segments: the

regulated market and the open market.

The regulated market has two

subdivisions:

▪ the prime standard,

▪ the general standard.

The open market is also divided in the

entry standard and the quotation board

for secondary listings.

The legislation covering listing requirements on the German

capital markets are:

▪ the Stock Exchange Act,

▪ the Securities Trading Act,

▪ the Securities Prospectus Act,

▪ the Exchange Rules for the Frankfurt Stock Exchange,

▪ the Stock Exchange Admission Regulation.

Additionally, the German Commercial Code also provides for the

registration of investment companies.

Local and foreign companies wanting to trade on the German

regulated capital markets must comply with certain requirements.

These are:

▪ the issuer must publish a prospectus approved by the German

Federal Financial Services Supervisory Authority (BaFin)

▪ the German company’s shares must be freely transferable,

▪ the company must file an application for listing with the FSE.

The total market value of the shares to be listed must be at least 1.25

million euros if they are traded on the open market. German

companies wanting to list their shares on the entry standard must have

a minimum share capital of 750,000 euros. After being admitted to the

listing, the securities can be traded with the German capital market.

In order to list a German company on a secondary capital market, the

issuer must comply with the same regulations as for listing requirements

on the primary market. The following steps must be followed when

applying for a listing on German capital markets:

▪ appointing advisers and investment banks,

▪ preparing a business plan,

▪ preparing the prospectus,

...