EURO ZONE BANKS REQUIRED TO HOLD MINIMUM CAPITAL OF $730,000

The European Union (EU) has introduced a new regulation requiring banks operating in the euro zone to hold a minimum capital of at least 730,000 Swiss francs or its equivalent in US dollars. This move aims to strengthen financial stability and ensure the resilience of the banking system.

Minimum Capital Requirements

According to the Financial Market Authority (FMA), the minimum capital requirement may be reduced in certain cases, taking into account the nature and scope of the bank’s business. However, this amount provides a solid foundation for banks to operate effectively and maintain customer trust.

Liechtenstein Banks Must Maintain Initial Capital

In Liechtenstein, banks must have an initial capital of at least one million Swiss francs or its equivalent in euros or US dollars. This is stated in Article 24 para. 2 of the Bank Act (BankG), which ensures that a bank’s own funds do not fall below the initial capital after taking up business.

Protecting Customer Interests

While there is no specific law governing the relationship between banks and their customers in Liechtenstein, general rules and provisions on contracts and legal transactions outlined in the Liechtenstein Civil Code (ABGB) apply. The contract of mandate is commonly used in banking business, where a bank acts as an agent for its customers.

• The bank must procure transactions diligently and honestly.
• The bank must transfer all benefits arising from the transaction to the customer.

Freedom to Provide Services

Liechtenstein banks are entitled to operate under the freedom to provide services, which allows them to offer banking services across EU member states. However, banks outside the EU can only provide services in Liechtenstein through a branch or on a “reverse solicitation” basis.

Conciliation Board for Financial Dispute Resolution

In an effort towards alternative dispute resolution, Liechtenstein has introduced an extrajudicial conciliation board to settle disputes between customers and banks. The board acts as a mediator to resolve complaints submitted by customers, but neither party is bound to accept the generated solution.

Conclusion

These new regulations are designed to promote financial stability and protect customer interests in the euro zone and beyond. By strengthening capital requirements, protecting customer interests, and promoting freedom to provide services, these measures aim to create a more resilient banking system that benefits both customers and banks alike.