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Guaranteeing Proper Monitoring of Business Conduct: A Key Responsibility for Board of Directors and General Management

The board of directors plays a crucial role in ensuring the overall direction, supervision, and control of banks and investment firms in Liechtenstein. According to Article 22, Paragraph 4 of the Banking Act (BA), the board is responsible for guaranteeing that the bank or investment firm operates in a sound and prudent manner.

Remuneration and Bonus System

In accordance with Article 7a, Paragraph 6 of the BA, banks and investment firms are required to establish a remuneration policy that aligns with the risk management framework. The policy must take into account the interests of the bank or investment firm as well as those of its clients.

  • The FMA has set out guidelines for the remuneration policy, including the requirement for bonuses to be performance-based and not to encourage excessive risk-taking.
  • The goal is to ensure that compensation structures do not create incentives for reckless behavior.

Resolution Authority

The Financial Market Authority (FMA) was appointed as Liechtenstein’s resolution authority in 2017. The authority is responsible for resolving failed banks and investment firms in a way that minimizes the impact on the financial system and protects public funds, covered deposits and investments, client funds and client assets.

Specific Fields of Business

Liechtenstein has taken steps to regulate new areas such as tokenized securities and blockchain technology. The Law on Token and Trustworthy Technology Service Providers entered into force in 2020 and provides for the registration and supervision of service providers in this sector.

  • The government has also adopted an Amendment to the Due Diligence Ordinance, which regulates know-your-customer, anti-money laundering and customer documentation requirements.
  • These regulations aim to ensure transparency and accountability in these emerging areas.

Key Takeaways

  • The board of directors is responsible for the overall direction, supervision, and control of banks and investment firms.
  • Banks and investment firms must establish a remuneration policy that aligns with the risk management framework.
  • The FMA was appointed as Liechtenstein’s resolution authority in 2017.
  • Liechtenstein has taken steps to regulate new areas such as tokenized securities and blockchain technology.

Conclusion

In conclusion, the board of directors and general management must guarantee proper monitoring of business conduct by ensuring that remuneration policies are aligned with risk management frameworks. The FMA plays a crucial role in resolving failed banks and investment firms and regulating new areas such as tokenized securities and blockchain technology.