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Liechtenstein’s Financial Sector: A Model of Stability and Innovation

In a move to strengthen the country’s financial sector, Liechtenstein has implemented a range of regulations to ensure stability, security, and innovation. The Financial Market Authority (FMA) is responsible for overseeing the sector, ensuring that banks and other financial institutions operate in accordance with international standards.

Remuneration and Bonus System

According to Article 7a, Paragraph 6 of the Banking Act (BA), banks and investment firms are required to introduce and maintain remuneration policies that are consistent with sound risk management practices. The FMA shares this information with European supervision bodies.

  • The remuneration policy aims to ensure that bonuses are tied to specific goals and are not discretionary.
  • Most banks in Liechtenstein pay bonuses, which vary in structure and scope.
  • The FMA has determined that certain rules do not apply to small institutions or employees who receive relatively low variable remuneration.

Regulatory Capital and Liquidity

Liechtenstein’s banking sector is characterized by its financial strength and stability, with an average capital adequacy ratio of over 18%. The country’s regulatory framework ensures that banks maintain sufficient liquidity to meet their obligations.

  • The FMA oversees the implementation of international standards, such as the Basel III Accord, which aims to strengthen bank capital requirements.
  • Liechtenstein has also implemented a resolution regime, allowing for the orderly resolution of distressed banks without disrupting financial markets.

Specific Fields of Business

Liechtenstein is committed to innovation and has introduced regulations to support the growth of new technologies, such as blockchain and distributed ledger technology. The country has registered over 10 categories of service providers in this sector, including token and trustworthy technology service providers.

  • The FMA regulates these services under the Due Diligence Act, ensuring that operators comply with anti-money laundering and customer documentation requirements.
  • Liechtenstein is also exploring the potential of stablecoins, with issuers subject to strict capital and supervision requirements.

Conclusion

Liechtenstein’s financial sector is a model of stability, security, and innovation, driven by the country’s commitment to international standards and its ability to adapt to new technologies. The FMA plays a crucial role in overseeing the sector, ensuring that banks and other financial institutions operate in accordance with regulatory requirements.

As the country continues to evolve, it remains committed to supporting the growth of innovative industries, while maintaining its reputation as a safe and secure financial hub.