Financial Crime World

Switzerland’s Financial Regulatory Bodies: A Look into FINMA’s Mandate and Operations

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The Swiss financial regulatory body, FINMA, is responsible for overseeing Switzerland’s financial markets. Its mandate is to protect creditors, investors, and policyholders by ensuring that banks, insurance companies, and other financial institutions operate in a safe and sound manner.

History of FINMA

FINMA was established on January 1, 2009, with a greater degree of independence than its predecessors. This independence allows it to exercise effective supervision over the financial industry without interference from political authorities.

Governance Structure

The institution is governed by a board of directors and managed by an executive board, ensuring strong corporate governance.

  • The regulator’s functional independence means that neither the Swiss Parliament nor the government can issue directives on how FINMA carries out its regulatory duties.
  • However, FINMA remains subject to parliamentary scrutiny and must account to the parliamentary commissions overseeing its work.

Financing

FINMA is financed through levies and fees charged for its supervisory work, with institutions it regulates also paying an annual levy to cover costs not met by fees. The regulator’s accounts are audited by the Swiss Federal Audit Office.

Mandate and Objectives

FINMA’s mandate is to protect financial market clients and ensure that Switzerland’s financial markets function effectively. Its supervisory tasks include:

  • Authorization of banks, insurance companies, and other financial institutions
  • Supervision of regulated entities to ensure compliance with supervisory law
  • Enforcement of supervisory law in cases where violations occur
  • Regulation of activities authorized by FINMA

Risk-Oriented Approach

FINMA adopts a systematic risk-oriented approach in its supervisory activities, ensuring continuity and accountability. This strengthens confidence in the proper functioning, integrity, competitiveness, and sustainability of Switzerland’s financial centre.

Operations

To achieve its goals, FINMA:

  • Delegates part of its supervisory work to audit firms
  • Appoints agents on a case-by-case basis
  • Fosters national cooperation with other regulatory bodies
  • Represents Switzerland in competent specialist committees
  • Responds to requests for assistance from foreign supervisory authorities

Strategic Planning

FINMA’s Board of Directors sets strategic goals based on legally defined tasks and objectives, which are submitted to the Federal Council for approval every four years. The regulator has an organizational structure with a clear distinction between strategic management through the Board of Directors and operational management through the Executive Board.

Conclusion

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Overall, FINMA plays a crucial role in ensuring the stability and integrity of Switzerland’s financial markets. Its independence, governance structure, and risk-oriented approach make it well-equipped to carry out its supervisory duties effectively.