Liechtenstein’s Banking Sector: Outsourcing, Capital Requirements, and Consumer Protection

Competitive Edge in the Global Financial Market

In an effort to remain competitive in the global financial market, Liechtenstein’s banking sector has been exploring the option of outsourcing certain processes and services to third-party providers. However, this practice must comply with strict guidelines set by the Financial Market Authority (FMA) and European Union supervisory authorities.

Outsourcing Requirements

According to Article 14a of the Banking Act, banks may outsource certain functions without prior approval from the FMA if they adhere to the relevant guidelines outlined in Article 34b. However, outsourcing internal auditing is only permitted with FMA approval, while other key functions defined in Article 35 require prior notification.

• The bank’s board of directors and core management duties cannot be outsourced.
• Banks must demonstrate due diligence when selecting and instructing an outsourcing provider.
• Banks must have the necessary resources to monitor the provider on a continuing basis.

Capital Requirements

Newly established banks are required to have a fully paid-up capital of at least 10 million Swiss francs or its equivalent in euros or US dollars. Investment firms, on the other hand, must have a minimum capital of at least 730,000 Swiss francs or its equivalent.

• The FMA has the discretion to reduce the initial capital requirement for certain banks and investment firms, taking into account the nature and scope of their intended business activities.

Customer Relations

In Liechtenstein, there is no specific law governing the relationship between banks and customers. Instead, general contract and transaction laws outlined in the Civil Code (Allgemeines Bürgerliches Gesetzbuch) apply.

• Banks often use standard contracts and terms and conditions, which must meet certain criteria to be valid and applicable.
• Unusual provisions that are detrimental to customers will not become part of the contract unless the bank explicitly informs the customer.

Cross-Border Banking Activities

Liechtenstein banks can only operate in the country with a license issued by the FMA. However, banks from European Economic Area (EEA) countries may provide banking services in Liechtenstein without a license if their home Member State’s competent authority has notified the FMA prior to their first-time activity.

• Non-EEA banks must establish a branch in Liechtenstein and obtain an FMA license before providing banking services.
• Other than that, banks from third countries can only offer banking services on a “reverse solicitation” basis, which is subject to unclear criteria.

Conciliation Board

The Liechtenstein government has introduced an extrajudicial conciliation board to settle disputes between customers and banks. The board acts as a mediator to resolve complaints submitted by customers and encourages discussions between the disputing parties to reach a mutually acceptable solution.

• Neither party is bound to accept the generated solution, and they are free to take further legal action if necessary.

Conclusion

Overall, Liechtenstein’s banking sector must adhere to strict guidelines when outsourcing processes and services, maintaining adequate capital requirements, and protecting customer interests through transparent contracts and terms and conditions. By doing so, the sector can maintain its competitive edge in the global financial market while ensuring a safe and secure environment for customers.