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Liechtenstein’s Banking and Finance Sector: A Regulatory Overview

In an effort to provide a comprehensive understanding of the banking and finance sector in Liechtenstein, this article will delve into the country’s regulatory framework, highlighting key aspects such as ownership restrictions, client asset protection, and resolution mechanisms.

Ownership Restrictions

The Financial Market Authority (FMA) examines the suitability and financial soundness of interested acquirers of banks, considering factors such as:

  • Identity
  • Shareholder structure
  • Good repute
  • Experience

The regulator also assesses potential risks related to compliance with regulatory requirements, money laundering, and terrorist financing.

Foreign Shareholdings

There are no specific restrictions on foreign shareholdings in Liechtenstein banks, apart from the general requirements outlined above.

Systemically Important Banks

Liechtenstein has implemented a special regime for domestic and globally systemically important banks, which includes enhanced supervision and capital requirements.

Sanctions for Violations

In cases of banking regulation violations, the FMA can impose sanctions such as:

  • Licence revocation
  • Fines
  • Imprisonment

The regulator may also refer cases to the Liechtenstein Princely Court of Justice.

Resolution Regime

Liechtenstein has implemented the Bank Recovery and Resolution Directive (BRRD) into national law, establishing a resolution regime for banks and investment firms.

Client Asset Protection

In accordance with EU directives, Liechtenstein’s Banking Act guarantees bank deposits and investor protection. The Deposit Guarantee and Investor Compensation Foundation PCC (EAS) provides additional coverage for regulated financial institutions.

Bail-in Tool

Liechtenstein has transposed the BRRD into national law, including a bail-in tool as a possible resolution mechanism.

Gone-Concern Capital (TLAC)

The country requires banks to hold gone-concern capital (TLAC), in line with EU regulations.

The financial centre is influenced by EU legislation and global standards. FinTech and digitalization are topical matters, while the small size of Liechtenstein presents a challenge in managing regulatory development and attracting qualified workforce.

Biggest Threat to Financial Sector Success

Liechtenstein’s biggest challenge lies in managing rapid regulatory development, maintaining high service quality, and attracting qualified workforce to remain competitive with other financial centres worldwide.

By understanding these key aspects of the banking and finance sector in Liechtenstein, investors and financial institutions can better navigate the country’s regulatory environment and make informed decisions about their operations.