Financial Crime World

FMA Ensures Proper Monitoring of Business Conduct

In a bid to maintain the stability of Liechtenstein’s financial system, it is crucial for the Board of Directors and General Management to guarantee proper monitoring of business conduct, ensuring that banks and investment firms operate within the framework set by the Financial Market Authority (FMA).

Regulatory Framework

The Banking Act (BA) sets out a comprehensive regulatory framework for banks and investment firms in Liechtenstein. The BA covers areas such as capital adequacy, risk management, and customer protection. Additionally, the Financial Markets Services Act (FMSA) regulates the provision of financial services, including licensing and supervision of financial institutions.

Key Provisions

  • Capital adequacy: Banks and investment firms must maintain adequate capital buffers to ensure their ability to meet financial obligations.
  • Risk management: The FMA has implemented a robust risk management framework for banks and investment firms, ensuring compliance with regulatory requirements and assessing the effectiveness of risk management practices.
  • Customer protection: The FMA regulates the provision of financial services, including licensing and supervision of financial institutions, to ensure that customers are treated fairly and transparently.

Risk Management and Supervision

The FMA conducts regular on-site inspections to monitor compliance with regulatory requirements and assess the effectiveness of risk management practices. This ensures the stability of the financial system and protects customers from potential risks.

Monitoring Activities

  • On-site inspections
  • Review of risk management practices
  • Assessment of compliance with regulatory requirements

Capital Adequacy and Liquidity

The BA requires banks and investment firms to maintain adequate capital and liquidity buffers. The FMA monitors capital adequacy and liquidity ratios to prevent excessive risk-taking and ensure the stability of the financial system.

Key Indicators

  • Capital adequacy ratio
  • Liquidity coverage ratio
  • Risk-weighted assets

Blockchain and Distributed Ledger Technology

Liechtenstein has established a regulatory framework for blockchain and distributed ledger technology (DLT). The Law on Token and Trustworthy Technology Service Providers entered into force in 2020, providing a framework for the establishment, storage, trading, and monitoring of DLT products.

Key Provisions

  • Licensing and supervision of DLT service providers
  • Regulation of token offerings and trading
  • Protection of customers’ interests

Resolution Authority

The Financial Market Authority (FMA) serves as Liechtenstein’s resolution authority, tasked with resolving failing financial institutions to prevent systemic risk. The FMA has implemented a range of resolution tools to ensure the continuity of critical functions and protect public funds.

Key Tools

  • Sale of business tool
  • Bridge institution tool
  • Asset separation tool
  • Bail-in tool

Conclusion

In conclusion, the Board of Directors and General Management must ensure proper monitoring of business conduct in Liechtenstein’s financial sector. The FMA has implemented a robust regulatory framework to maintain the stability of the financial system, protect customers, and promote innovation in areas such as blockchain and DLT.