Financial Crime World

Liechtenstein’s Regulatory Framework for the Financial Sector

Capital Buffers

In Liechtenstein, the Financial Market Authority (FMA) plays a crucial role in maintaining financial stability by conducting annual analyses to identify systemically relevant institutions (A-SRIs). The main points related to capital buffers are:

  • Identification of A-SRIs: The FMA conducts an annual analysis to identify A-SRIs and reports the results.
  • Capital Buffer Assignment: A-SRIs may be assigned a capital buffer of up to 2% of their total risk amount, in line with Article 92 of the Capital Requirements Regulation (CRR).

Recovery and Resolution

The Recovery and Resolution Act (RRA) provides a framework for resolving systemically important financial institutions in Liechtenstein. Key points related to recovery and resolution include:

  • Role of the FMA: The FMA is appointed as Liechtenstein’s resolution authority, exercising its functions independently from other FMA units.
  • Resolution Objectives:
    • Ensuring continuity of critical functions
    • Avoiding significant adverse effects on the financial system
    • Protecting public funds and minimizing reliance on extraordinary support
    • Protecting covered deposits and investments
    • Protecting client funds and assets
  • Tools for Resolution:
    • Sale of business tool
    • Bridge institution tool
    • Asset separation tool
    • Bail-in tool

Specific Fields of Business

Given the small size of Liechtenstein’s financial market, policy aims to anticipate developments and regulate new initiatives in the financial sector. Key points related to specific fields of business include:

  • Regulation of Blockchain and Distributed Ledger Technology: The Law on Token and Trustworthy Technology Service Providers entered into force on January 1, 2020, regulating blockchain and distributed ledger technology products.
  • Licensing and Supervision: The FMA is responsible for licensing and supervising these service providers, which must comply with due diligence requirements.
  • European Commission’s Draft Regulation: The European Commission has published a draft Regulation on Markets in Crypto-Assets, establishing joint standards for the EU and EEA.