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Regulatory Framework for Banks and Investment Firms in Liechtenstein

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Liechtenstein has established a comprehensive regulatory framework governing banks and investment firms to ensure a stable and secure financial environment. This framework is designed to protect depositors, investors, and the broader economy.

Licensing Requirements

Obtaining a License

  • Banks and investment firms must obtain a license from the Financial Market Authority (FMA) before commencing operations.
  • The FMA conducts regular on-site inspections to ensure compliance with regulations.

Remuneration and Bonus System

Effective Risk Management

  • Banks and investment firms are required to introduce and maintain remuneration policies and practices that are consistent with sound and effective risk management.
  • The FMA shares information on these policies with European supervision bodies.

Regulatory Capital and Liquidity

Strong Financial Position

  • Liechtenstein banks have a strong financial position, with an average core capital (Tier 1 ratio) of more than 20%.
  • They hold more equity capital resources than required under Basel III or EU capital requirements.
  • The FMA defines obligations regarding own funds and capital adequacy requirements.

Recovery and Resolution

Effective Resolution Mechanisms

  • The Recovery and Resolution Act (RRA) transposes the European Recovery and Resolution Directive (BRRD).
  • The RRA appoints the FMA as Liechtenstein’s resolution authority, which is responsible for drawing up resolution plans and exercising resolution powers.

Specific Fields of Business

Regulating Emerging Technologies

  • Liechtenstein has implemented specialized regulation in areas such as token and trustworthy technology service providers.
  • The Law on Token and Trustworthy Technology Service Providers entered into force on 1 January 2020, providing a framework for the establishment, storage, trading, and monitoring of blockchain and distributed ledger technology products.

Conclusion

Liechtenstein’s commitment to regulatory oversight in the banking and financial sector has created a stable and secure environment for both domestic and international businesses. The country’s comprehensive framework ensures that banks and investment firms operate with transparency, accountability, and a focus on sound risk management practices.