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FINMA Requires Advance Notification of Significant Shareholdings in Banks

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The Swiss Financial Market Supervisory Authority (FINMA) has issued guidelines requiring banks to notify it in advance of significant changes to their shareholdings. This move aims to ensure the stability and integrity of the financial system by allowing FINMA to monitor potential risks posed by foreign ownership or control.

Guidelines for Significant Shareholdings

Under the new rules, any person who intends to hold a qualified participation in a bank must guarantee that the influence acquired will not be used in a way that is detrimental to the prudent and proper management of the bank. Banks are required to report to FINMA:

  • Any person who acquires or sells a qualified participation
  • Any changes to their shareholdings that exceed certain thresholds

Guidelines for Banks under Foreign Control

The guidelines also apply to banks under foreign control, which must obtain an additional license from FINMA if they pass under foreign ownership or control. A bank is considered to be under foreign control if:

  • Foreigners holding qualified participations directly or indirectly hold more than half of the voting rights
  • The bank is controlled in any other way by foreigners

Corporate Governance Requirements for Banks

FINMA has also issued guidelines on corporate governance requirements for banks, including rules on:

Board Composition

Banks must have a board of directors composed of at least three members, with a third of them being independent. None of the members can be part of the bank’s executive management unless FINMA agrees to grant an exception.

Risk Management and Internal Controls

  • Banks must establish audit and risk committees, which must be comprised of a majority of independent board members
  • Systemically important institutions must also establish a compensation and nomination committee at group level

Remuneration Requirements for Bank Executives

FINMA has issued guidelines on remuneration requirements for bank executives, including rules on:

Compensation Systems

Each member of the executive management must maintain a good reputation and fulfill the requirement of proper business conduct.

Compliance with Guidelines

Banks must comply with these guidelines to ensure continued regulatory approval. The new guidelines are aimed at ensuring the stability and integrity of the financial system by promoting good governance practices and transparency in banking operations.

Source: FINMA, “Guidelines on Corporate Governance Requirements for Banks” and “Guidelines on Remuneration Requirements for Bank Executives”.