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Outsourcing in Liechtenstein’s Financial Sector: Key Guidelines and Regulations

In the rapidly evolving financial landscape of Liechtenstein, banks and investment firms are increasingly turning to outsourcing as a means to streamline their operations and reduce costs. However, such arrangements must comply with strict guidelines and regulations set forth by the Financial Market Authority (FMA) to ensure the stability and integrity of the financial system.

Outsourcing Requirements

According to Article 14a of the Banking Act, banks may outsource certain processes, services, or activities to third-party providers. However, such arrangements must be in line with EU supervisory guidelines and subject to prior approval by the FMA for key functions defined under Article 35 of the Banking Act.

• The overall direction, supervision, and control of a bank’s operations cannot be outsourced, as this remains the responsibility of the board of directors and core management.
• Banks must exercise due diligence when selecting and instructing outsourcing providers and have appropriate resources in place to monitor their activities on an ongoing basis.

Capital Requirements

In addition to complying with outsourcing regulations, banks and investment firms must also meet strict capital requirements.

• The minimum initial capital for a bank is CHF 10 million or its equivalent in euros or US dollars.
• Investment firms require at least CHF 730,000 or its equivalent.
• The FMA has the power to reduce these amounts in certain cases, taking into account the nature and scope of the intended business activities.

Customer Relationships

The relationship between banks, customers, and other third parties is governed by general rules and provisions on contracts and legal transactions set forth in Liechtenstein’s Civil Code (Allgemeines Bürgerliches Gesetzbuch - “ABGB”).

• The contract of mandate is particularly relevant in the banking industry, with agents obliged to procure transactions diligently and honestly in accordance with their promise.

Cross-Border Banking Activities

Banks from EEA countries may operate in Liechtenstein on a passport basis, provided the competent authority of their home Member State has notified the FMA prior to their first-time activity. Banks from non-EEA countries must establish a branch in Liechtenstein and obtain a licence from the FMA.

Conciliation Board

In the event of disputes between customers and banks, an extrajudicial conciliation board is available to settle these issues through mediation.

• The conciliation board acts as a neutral third-party mediator to resolve complaints submitted by customers, but neither parties are bound to accept any generated solution.

Conclusion

As the financial landscape continues to evolve, it is essential for banks and investment firms in Liechtenstein to remain aware of the strict guidelines and regulations governing outsourcing, capital requirements, customer relationships, cross-border banking activities, and conciliation mechanisms. By doing so, they can ensure the stability and integrity of the financial system while providing high-quality services to their customers.