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FINMA Outlines Qualifications for Bank Participants

Zurich - The Swiss Financial Market Supervisory Authority (FINMA) has outlined new requirements for individuals holding qualified participations in banks operating in Switzerland.

Influence and Prudent Management

According to FINMA’s guidelines, any person seeking to acquire a qualified participation must ensure that the influence acquired will not be used in a way detrimental to the prudent and proper management of the bank. To assess compliance with this requirement, FINMA has set forth certain indications and documents that must be provided, as outlined in Article 8 of the Banking Ordinance.

Acquisition and Disclosure Requirements

Individuals acquiring a qualified participation must indicate whether it is being acquired for their own account or on a fiduciary basis, as well as any options or similar rights granted on the participation.

Banks Under Foreign Control

Swiss-controlled banks that fall under foreign control due to the acquisition of a participation must obtain an additional license from FINMA. This also applies if there is a change in a qualified participation held by a foreigner in a foreign-controlled bank.

• A bank is considered under foreign control if foreigners holding qualified participations directly or indirectly hold more than half of the voting rights, or if the bank is controlled in any other way by foreigners.
• The granting of this additional license is subject to certain conditions, including reciprocity guarantees from the countries where the foreigners holding the qualified participation have their domicile or registered office.

Corporate Governance Requirements

Banks operating in Switzerland are required to comply with specific corporate governance requirements outlined in the banking legislation, as well as in various FINMA circulars. This includes:

• The requirement that the board of directors be comprised of at least three members, with a third being independent and not part of the bank’s executive management.
• The establishment of an audit committee and risk committee, which must be composed of a majority of independent board members.
• Systemically important institutions must also establish a compensation and nomination committee at least at group level.

Registration and Oversight of Senior Management

The board of directors must have adequate management expertise and specialist knowledge and experience in banking and financial services, and must be sufficiently diversified to represent all key aspects of the business. Board members are appointed by the shareholders’ meeting, and the board must define the requirements for its members and committees.

• Members of the executive management must also have adequate management expertise and specialist knowledge and experience in banking and financial services, and must be appointed by the board of directors.
• Each member of the board of directors and executive management must maintain a good reputation and fulfill the requirement of proper business conduct (“fit and proper” requirements).

Remuneration Requirements

FINMA has also outlined remuneration requirements for banks operating in Switzerland, including guidelines for compensation systems for independent control bodies. These requirements aim to ensure that remuneration practices are fair, transparent, and aligned with the long-term interests of the bank.

Overall, FINMA’s new guidelines aim to promote good governance and proper business conduct among Swiss banks, while also ensuring that they operate in a way that is safe and sound for customers and investors.