Register of Grants, Use of Funds and Measures: Ensuring Accurate Figures and Maintaining Transparent, Traceable Planning and Documentation

Why the directories cause headaches every year

The preparation phase is underway. For many banks and savings banks, the directory of grants, uses and measures is an annual obligation that requires considerable coordination. On the one hand, the grants received in the past financial year must be documented completely, correctly and in an audit-proof manner. On the other hand, the supervisory authority expects forward-looking planning on how these funds will be used in the future to further improve the quality of investment services. In practice, this is precisely where a conflict arises, because in the end, the figures must add up.

This requirement regularly leads to values being checked and adjusted multiple times and calculated back and forth between departments during entry.

The percentage approach to costs and its derivation are often no longer completely traceable.

Regulatory basis and objective

The obligation to maintain records arises from the regulatory requirements for investment firms (German Securities Trading Act (WpHG) and the supplementary EU Delegated Regulations (MiFID II/MiFIR).

The objective is to create transparency regarding benefits and to ensure that these are used exclusively in the interests of customers. Monetary and non-monetary benefits must be recorded in full, with monetary benefits additionally presented in an annual usage register. The decisive factor here is not only complete recording, but also verifiable proof that the funds are actually used for quality-improving measures. In addition, the supervisory authority expects a plan for the coming financial year that plausibly shows how future benefits are to be used.

Typical problems in banking practice

In practice, it is particularly the approach to values that proves problematic. Different data sources are often used, such as commission statements from product partners, internal evaluations and accounting accounts, and evaluations of the back office.

The aim is to present a consistent figure that will stand up to scrutiny. This is precisely why calculations are often repeated, adjusted and reconciled until the figure is accepted both technically and from an accounting perspective.

Personnel costs are a particularly challenging issue. As a rule, these cannot be charged in full, but only on a pro rata basis, provided that they can actually be allocated to quality-improving activities. This distinction is particularly difficult in areas such as compliance, auditing, quality assurance or support functions. Not every activity can or may be included, and it is often unclear what proportion actually improves quality. This results in estimates, methodological uncertainties and discussions about the correct derivation.

In addition, many institutions do not have clear rules about who is responsible for which figures and who delivers them and how. Of course, access to specific salaries is always particularly sensitive. While the accounting department focuses on correct account reconciliation, specialist departments provide content assessments and compliance monitors regulatory admissibility. Without clear responsibilities and processes, it remains unclear who ultimately prepares, validates and approves the figures.

Typical audit findings from supervisory practice

These structural weaknesses are regularly reflected in audit findings. Often, it is not the fundamental admissibility of the grants that is criticised, but rather the lack of transparency in their derivation.

• Discrepancies between the list of grants and the accounting records are identified without the calculation logic being sufficiently documented.
• Values are adjusted several times during the audit, giving the impression that there is no reliable methodology.
• Formulas are incorrectly stored or totals are simply calculated incorrectly.

Findings are also regularly made with regard to personnel costs. Flat-rate approaches without derivation or very general descriptions are not sufficient. In compliance activities in particular, it is often not clear what proportion actually improves quality (because it involves the implementation of regulatory requirements and not genuine quality improvements) and why certain costs were taken into account or excluded.

Another recurring issue is the question of the so-called zero line. Auditors regularly discuss the starting level at which a quality improvement is assumed and how additional measures are distinguished from this. Closely related to this is the question of the level of detail in the documentation. Presentations that are too brief are considered insufficient, but at the same time there is a concern that overly detailed descriptions will make the company vulnerable to criticism – and lead to errors in the following year’s adjustments, especially in Excel templates. This uncertainty often leads to very different levels of detail within the directories.

Added value for banks and customers – aspiration and reality

From a regulatory perspective, the added value is clearly defined. Contributions should be used exclusively to improve the quality of investment services for customers. In theory, this leads to better qualified advisors, more stable processes, better IT systems and thus higher-quality advice.

In practice, however, this added value often remains abstract. Many of the measures implemented serve primarily to meet existing regulatory requirements or maintain ongoing operations. For customers, the specific benefits of individual measures are often neither visible nor measurable. Internally, too, the register is rarely perceived as a management tool, but primarily as a regulatory obligation.

For the bank, the actual added value therefore lies less in direct customer benefits and more in risk minimisation. A consistent, comprehensible register of grants, use of funds and measures reduces audit findings, provides a solid basis for arguments with the supervisory authority and prevents discussions during the audit. At the same time, the process forces us to regularly address the question of which costs actually improve quality and where the line between necessary operations and additional added value lies.

It is precisely this critical examination that can – despite all justified scepticism – be beneficial in the long term. It creates transparency about cost structures, reveals implicit assumptions and forces clear decisions about what can be taken into account and what is deliberately left out. The real added value thus lies less in the individual list than in the structured handling of a regulatory-sensitive issue.

Takeaways for practice

Register of grants, use of funds and measures are less of a calculation problem and more of a structural issue.

Uniform valuation approaches, clear responsibilities and a documented methodology reduce the back and forth with the figures.

Personnel costs should be deliberately examined critically and derived in a comprehensible manner, especially for activities required by regulatory law.

A clear definition of the zero line and an appropriate level of detail create certainty in audits.