Liechtenstein Banks Face Increased Scrutiny on Outsourcing and Capital Requirements

The financial regulator in Liechtenstein has issued new guidelines for banks operating in the country, emphasizing the importance of outsourcing processes and activities while ensuring compliance with regulatory requirements.

Outsourcing Guidelines

According to the Financial Market Authority (FMA), banks may outsource certain functions without prior approval, provided they adhere to specific guidelines. However, key functions such as internal auditing can only be outsourced with FMA approval.

• Banks are required to exercise due diligence when selecting and instructing outsourcing providers.
• They must have adequate resources in place to monitor the provider’s activities on a continuing basis.

Capital Requirements

Liechtenstein banks are expected to maintain minimum capital requirements of at least 10 million Swiss francs. Investment firms, meanwhile, must hold a minimum of 730,000 Swiss francs in capital.

Rules Governing Banks’ Relationships with Customers

A recent analysis has highlighted the importance of understanding the rules governing the relationship between Liechtenstein banks and their customers.

• While there is no specific law governing this relationship, the general principles laid down in the Liechtenstein Civil Code (ABGB) apply.
• The contract of mandate is commonly used in banking transactions, with agents obliged to act diligently and honestly on behalf of their principals.
• Banks may assume that customers have waived their right to receive fees or commissions received from third parties, provided certain conditions are met.

Cross-Border Banking Activities

Liechtenstein’s banking sector has become increasingly globalized, with banks operating across borders. Under the freedom to provide services, EEA-based banks can operate in Liechtenstein without a licence, subject to notification of the FMA.

• Non-EEA banks must establish a branch in Liechtenstein and obtain a licence from the FMA.
• They may only provide banking services on a “reverse solicitation” basis, although the criteria for this are not entirely clear.

Conciliation Board

In a move to promote dispute resolution, the Liechtenstein government has introduced an extrajudicial conciliation board in the financial services sector.

• The board can be called upon to settle disputes between customers and banks, acting as a mediator to resolve complaints.
• While it does not have authority to make judicial rulings, its role is to encourage discussions between disputing parties and lead them to a mutually acceptable solution.