FINMA Notification Requirement for Bank Participations

Swiss banks are required to notify the Financial Market Supervisory Authority (FINMA) in advance when a qualified participation is acquired or disposed of. A qualified participation exists if a natural person or legal entity holds directly or indirectly at least 10% of the capital or voting rights of a bank, or can otherwise exercise significant influence over the management of the bank.

Proper Business Conduct Requirement

Any person who intends to hold a qualified participation in a bank must guarantee that their influence will not be used in a way that is detrimental to the prudent and proper management of the bank. To assess compliance with this requirement, FINMA must be provided with certain indications and documents, as set forth in Article 8 of the Banking Ordinance.

Banks Under Foreign Control

If a Swiss-controlled bank passes under foreign control as a result of the acquisition of a participation, it must require an additional licence from FINMA. A new additional licence is also required if there is any change in a qualified participation held by a foreigner in a foreign-controlled bank. The granting of the additional licence is subject to certain conditions, including reciprocity and guarantees that the bank’s corporate name does not indicate or suggest a Swiss character.

Corporate Governance Requirements

Swiss banks are subject to specific corporate governance requirements, which include:

• A board of directors comprised of at least three members, with a third of the members being independent
  • An audit committee and risk committee, with a majority of independent members
  • A compensation and nomination committee for systemically important institutions
• A risk management framework and internal control system
• An internal audit function that reports directly to the board of directors

Registration and Oversight of Senior Management

The board of directors and executive management of Swiss banks must have adequate management expertise and specialist knowledge and experience in the banking and financial services sector. Members of the board of directors and executive management must also maintain a good reputation and fulfill the requirement of proper business conduct.

Remuneration Requirements

Swiss banks are subject to remuneration requirements, which include:

• A compensation system for independent control bodies
• Restrictions on the payment of bonuses
• The board of directors is responsible for defining the requirements for members of the executive management and approving their remuneration

These regulatory requirements aim to ensure the stability and integrity of the Swiss financial market by promoting good governance practices and preventing conflicts of interest.