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Fit and Proper Directors Required for Liechtenstein Banks
The Financial Market Authority (FMA) in Liechtenstein has outlined strict requirements for individuals serving on the management boards of banks operating in the country.
No Simultaneous Positions
According to regulations, no individual can simultaneously hold positions on the management board of one bank and the board of directors of another bank.
Remuneration Policies Must Be Sound
Liechtenstein banks are required to establish and implement remuneration policies that meet the standards set out in:
- Capital Requirements Regulation (CRR)
- Annex 4.4 BankV
- Relevant European Commission and European Banking Authority guidelines
Banks of significant size must also establish a remuneration committee comprising members of the board of directors.
Internal Audit Department and External Auditors
Banks in Liechtenstein are required to have an internal audit department that reports directly to the bank’s board of directors. Additionally, every year, external auditors must conduct an independent audit of the bank’s business operations, which is acknowledged by the FMA.
Risk Management and Compliance
Banks must have a risk management system separate from their operational activities, as well as a dedicated compliance department. Employees are also required to report any violations of banking regulations. Key personnel responsible for critical functions must have:
- A good reputation
- Adequate experience and qualifications
Place of Management
The effective place of management of a bank must be located in Liechtenstein, with members of the management board expected to work effectively from this location. The FMA requires banks to demonstrate sufficient substance in Liechtenstein, including:
- Office space
- Key personnel employed there
- To operate their business effectively
Outsourcing
Banks are allowed to outsource certain processes or services to third-party providers, but must comply with relevant guidelines issued by the EU supervisory authorities. The FMA must approve outsourcing of internal auditing, while other key functions may be outsourced after prior notification.
Capital Requirements
Liechtenstein banks must have a fully paid-up capital of at least:
- CHF 10 million or its equivalent in euros or US dollars upon authorization
Investment firms must have a minimum initial capital of:
- CHF 730,000 or its equivalent
The FMA has the authority to reduce these requirements in certain cases.
Rules Governing Customer Relationships
In Liechtenstein, banks are governed by general rules and provisions on contracts and legal transactions set out in the Civil Code (ABGB). The contract of mandate is commonly used in banking relationships, with agents required to act diligently and honestly in accordance with their promises and powers of attorney.