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Liechtenstein Tightens Banking Regulations Amid Global Uncertainty
The Principality of Liechtenstein has taken steps to strengthen its banking regulations, reflecting growing concerns over financial stability and risk management in the sector.
Enhanced Oversight and Supervision
According to government officials, the revised framework aims to enhance oversight and supervision of banks operating within the country’s borders. Key updates include:
- Stricter requirements for licensing
- Enhanced capital adequacy standards
- Improved reporting and disclosure obligations for banks
National Authorities
The Liechtenstein Financial Market Authority (FMA) serves as the primary regulator for banking activities in the country, working closely with the Banking Supervision Division to ensure compliance with regulatory standards.
Key Responsibilities of the FMA
- Reviewing applications for bank licenses on a case-by-case basis
- Ensuring banks adhere to regulatory standards and requirements
- Conducting regular audits and inspections to monitor compliance
Activities Requiring a Banking License
A range of activities now trigger the requirement for a banking license in Liechtenstein, including:
- Deposit-taking services
- Credit provision
- Securities trading
The FMA reviews applications on a case-by-case basis, taking into account factors such as capital requirements, risk management practices, and corporate governance structures.
Regulatory Framework
Liechtenstein’s regulatory regime distinguishes between different types of licenses for various banking services. Specific requirements apply to institutions offering:
- Deposit-taking services
- Credit provision
- Investment activities
A separate framework governs the issuance of electronic money and payment services.
Crypto Assets
Liechtenstein has implemented a moratorium on the issuance and custody of cryptocurrencies, pending further regulatory guidance. However, crypto assets do qualify as deposits, and holders are entitled to protection under deposit insurance schemes.
Capital Requirements
Banks holding crypto assets must adhere to enhanced capital requirements, with risk weights applied to these assets in accordance with Basel III guidelines.
Licensing Process
The application process for bank licenses involves a comprehensive review of the applicant’s business plan, financial projections, and governance structure. The FMA aims to complete the evaluation within six months, subject to additional information requests or further scrutiny as necessary.
Remuneration Policies
Restrictions on remuneration policies apply to banks operating in Liechtenstein, with a focus on ensuring that compensation practices align with prudent risk management and sound corporate governance principles.
Resolution Regime
Liechtenstein has established a resolution regime for banks, which includes provisions for:
- Bail-in
- Going-concern capital (TLAC)
- Other measures designed to mitigate financial instability
The FMA works closely with international partners to ensure coordination and consistency in the implementation of these arrangements.